Housing prices on Mainland shrink again Property Page 8
Thursday, February 23 2017 Year V Nr. 1240 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Regulator
Election
Beijing prepares new rules to corner shadow banking Page 9
Legislator candidates to declare event participation Page 2
www.macaubusinessdaily.com
LAND
Gov’t repossessing Canidrome’s dogbreeding plot in Coloane Page 2
Subsidies
Industrial & Commercial Fund disburses MOP42.3 mln in Q4 Page 6
Jail For Former HKSAR CE Politics
A mighty fall from grace. Hong Kong’s former Chief Executive Donald Tsang has been convicted of misconduct in office. And sentenced to 20 months behind bars. The presiding judge of Hong Kong’s High Court said the former leader of the city has breached the trust of his people. Page 9
All eyes on Japan
Up for grabs. Melco Crown boss Lawrence Ho says the company would spend “whatever it takes” to win a gaming concession in Japan. While Sheldon Adelson of Las Vegas Sands says Japan represents the “ultimate” opportunity. Hard Rock Café are also eager to invest in the market.
No coercion Politics Chief Executive Fernando Chui Sai On said the MSAR Gov’t will not kneel down to one particular industry. The gaming industry, of course. Stressing a final decision on smoking lounges would be made based upon the public benefit alone. Page 5
Budget for the people
Gaming Page 7
HK Hang Seng Index February 22, 2017
24,201.96 +238.33 (+0.99%) Worst Performers
China Resources Land Ltd
+5.01%
China Construction Bank
+2.38%
Belle International Holdings
-0.90%
Swire Pacific Ltd
-0.06%
Wharf Holdings Ltd/The
+3.98%
Li & Fung Ltd
+2.29%
China Mengniu Dairy Co Ltd
-0.26%
CLP Holdings Ltd
+0.00%
China Overseas Land &
+3.60%
Industrial & Commercial
+2.17%
Cathay Pacific Airways Ltd
-0.18%
AAC Technologies Holdings
+0.00%
New World Development Co
+3.49%
Hengan International Group
+1.97%
HSBC Holdings PLC
-0.15%
CITIC Ltd
+0.00%
Sino Land Co Ltd
+2.53%
Bank of Communications
+1.91%
AIA Group Ltd
-0.10%
Lenovo Group Ltd
+0.00%
13° 18° 12° 15° 12° 15° 14° 17° 16° 19° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
Hong Kong A bid to boost growth. Amid sluggish retail sales, soaring property prices and possible further interest rate increases. Hong Kong’s Financial Secretary Paul Chan announces measures to support infrastructure, senior citizens and salaried workers. Page 8
2 Business Daily Thursday, February 23 2017
Macau
AL Elections
Candidates required to declare event participation Candidates running for the election are required to inform the Electoral Commission of their participation in third-party events involving the distribution of gifts Cecilia U cecilia.u@macaubusinessdaily.com
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andidates for this year’s Legislative Assembly election are required to declare in advance their participation in third-party events held 15 days prior to or on Election Day when such events involve the distribution of gifts or other benefits, said Tong Hio Fong, the chairman of the Electoral Commission. The chairman, who is also a judge of the Court of Second Instance, indicated yesterday that it was necessary
for candidates to declare their participation in these events even if the events have nothing to do with the election. According to the judge, events such as dinners or travel tours will be covered in the scope of the declaration scheme if organisers distribute gifts during the activities. The chairman added that any legal person who is planning to hold an event prior to or on the day of election would also be required to make a declaration to the Commission, stating place, date, time and content of the event, while election
candidates will have to inform the Commission of the details of their campaign activities as well. In addition, the scheme requires candidates to declare information of the entities they have served in the past year.
Transparent election
“After receiving the information, we will timely post them on our website as to ensure the public is well [informed],” said the chairman. “The [new declaration] system will also ensure the supervision [of the electoral campaign].” Public departments such as the city’s corruption watchdog – the Commission Against Corruption (CCAC) – can perform inspections once the event is in progress, the chairman added. Candidates or legal persons can
make declarations of the events by either approaching the Commission office or via electronic channels such as Cloud, fax and emails. The Electoral Commission is planning to set up Cloud platforms with the aid of Macau Post and the Telecommunications Bureau, he said. According to the Electoral Law those failing to make a declaration will be subject to a penalty of between MOP10,000 and MOP100,000. Asked how long it would take for the Commission to reveal the declarations information, the chairman indicated that they will each be examined, adding that the declared details will be posted publicly as soon as possible. Meanwhile, the list of candidates can only be submitted once the Chief Executive confirms the date of the election, the chairman added. HKZM bridge
Switching lanes
Land
Gov’t to take back Canidrome’s dog-breeding plot Two other land concessions in Coloane have also been declared invalid Kam Leong kamleong@macaubusinessdaily.com
The MSAR Government has declared three more land grants in Coloane invalid, one of which was awarded to local greyhound racing track operator Macau (Yat Yuen) Canidrome Co. Ltd for dog breeding facilities. According to yesterday’s Official Gazette, the land plot, known as Lot SK1, occupied some 5,235 square metres in Seac Pai Van Industrial Zone. The parcel was granted to the company in 1989 for building two-storey buildings for breeding
purposes. The land concession for the plot, however, expired in November 2015 while the developer had not fulfilled its development of the parcel, a dispatch by the Secretary for Transport and Public Works Raimundo do Rosario claimed. In fact, the company is counting down the end of its business located in Fai Chi Kei on the Peninsula. The government has ordered the company to decide whether to move or shut down by July 21, 2018. Meanwhile, the other two land concession declared invalid were Lot SL in Seac Pai Van Industrial Zone and a parcel at the junction of Estrada da Barragem de Ká Hó and Estrada de Nossa Senhora de Ká Hó in Coloane, respectively granted to Sociedade Internacional de Indústria Pedreira Limitada and Companhia
de Investimento e Artesanato de Porcelana Novo Macau Limitada. Lot SL, occupying some 17,243 square metres, was designated for a complex for rock-cutting and polishing services, while the other plot in Ka Ho, occupying 4,509 square metres, was for developing a group of three-storey buildings for the manufacture of china. According to the new Land Law, no extension is allowed for a temporary or conditional land concession which carries a validity of 25 years if a developer fails to complete its projects on its site. Thus, such sites will be reclaimed by the government. Since November, the government has gradually declared the invalidity of a number of land concessions in Seac Pai Van Industrial Zone or Coloane. A group of land concessionaires from the related plots have published two statements in Chinese language newspaper Macao Daily this year, claiming that the non-development of their plots were not their fault.
Not only will vehicles from Hong Kong and Macau have to switch to driving on the opposite side of the road when using theHongKong-Zhuhai-MacauBridgebut it appears that public forms of transportation authorised for the bridge will not include taxis, according to a document produced by the Hong Kong Government for the Legislative Council Panel on Transport, referenced in regional media. The Council, comprising members from the neighbouring SAR’s Legislative Council, is charged with monitoring and examining government policies relating to transport, among other things. According to the proposal, while Hong Kong taxis were already going to be authorised to travel to the Hong Kong Boundary Crossing Facilities (HKBCF) of the bridge, located next to Chek Lap Kok, according to the official site of the bridge they will not be allowed on the bridge itself. ‘There will be a public transport interchange at the HKBCF. Visitors can take taxis to the HKBCF and interchange for shuttle buses to travel through the HZMB to Zhuhai or Macau,’ notes the proposal, to be discussed on Friday. Regarding the switch for Macau and Hong Kong drivers, who drive on the left side of the road, the proposal justifies the change as due to the need for drivers to switch between the ‘slow’ lane and the ‘fast lane’ when switching between the Hong Kong Link Road (HKLR) and the Main Bridge connecting the three cities. ‘The connection point of the Main Bridge and the HKLR (i.e.) the boundary of the Mainland and Hong Kong, is an expressway with a speed limit of 100 km per hour,’ notes the proposal, justifying that: ‘vehicles would need to change lanes while moving at high speed and hence posing road safety problems.’ The government proposed that the changes come into effect, following legislative procedure, by December 15 of this year. K.L.
Business Daily Thursday, February 23 2017 3
Macau
4 Business Daily Thursday, February 23 2017
Macau Opinion
Ashley Sutherland-Winch* Influencers going too far Influencers in digital media are some of the most powerful voices in the world. Commonly associated with social media celebrities, prominent bloggers and advocates, they help companies gain the all-important likes, shares, and comments on Instagram, Twitter and Facebook. Influencers also have a tendency to push the envelope but two major influencers went too far this week and the Internet fought back. Felix Kjellberg - alias ‘PewDiePie - is the most popular YouTube star on the planet. His videos have been viewed collectively more than 14 billion times. He has such a large audience that he became a social media influencer while also scoring lucrative advertising and business deals with YouTube and the Walt Disney Co. That was; however, until this week when Kjellberg’s PewDiePie blog showed two South Asian men holding up a placard proclaiming ‘Death to all Jews.’ The pair danced and laughed while on a separate screen Kjellberg, who had reportedly paid the men to hold up the sign via freelance employment site Fiverr, feigned disbelief. “I’m not anti-Semitic or whatever it’s called,” he said as he watched. “It was a funny meme, and I didn’t think it would work.” The Internet was absolutely outraged and following a major public backlash both YouTube and Disney ended their ties with Kjellberg. Another major influencer that suffered for going too far this week was right-wing provocateur and self-proclaimed “freespeech fundamentalist” from London, Milo Yiannopoulos. Publisher Simon & Schuster announced Monday that it has cancelled the Breitbart editor’s book deal, following outrage over a recording that appeared to show Yiannopoulos endorsing sex between “younger boys” and older men. The remarks were made during an Internet live stream and circulated via Twitter as an edited video. Prior to losing his book deal that was supposed to release this Summer Yiannopoulos was also uninvited to speak at the annual Conservative Political Action Conference for which he was previously scheduled. These influencers depend upon public support and when they choose to offend their fan base, they impact their entire brand. We enable influencers and give them platforms; PewDiePie, for instance, became famous for creating video game reviews. It says something when the public can turn an influencer into the one being influenced. Perhaps we may never sway their ideas and speech but certainly the public can affect the influencers’ income. Regardless of their intentions, influencers play a dangerous game with their words and actions and should know not to gamble with their livelihood by going too far.
*Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Ho Chio Meng trial
Witness observed wood-like pieces in Cheoc Van residence The former personal driver of the ex-Prosecutorgeneral said he had seen pieces that seemed to be agar wood taken by Ho Chio Meng from his Cheoc Van residence to the Hotline Building Kam Leong kamleong@macaubusinessdaily.com
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former d r i v e r o f ex-Prosecutor-general Ho Chio Meng testified yesterday that he had driven the latter to his official residence in Cheoc Van to pick up “what seemed like two pieces of wood wrapped in newspapers” which were later taken to the 16th floor of the Hotline Building. Witness Kuong Weng Kuai said the car journey happened on the same day that Mr. Ho was interrogated by the Commission Against Corruption (CCAC) in February 2015 after he was requested by the current Prosecutorgeneral Ip Son Sang to return some missing agar wood confiscated by the Macau Customs. The former top official is accused of one crime of destroying materials under government property [care] for having allegedly moved valuable agar wood confiscated by the Macau Customs between 2013 and 2014 to the Public Prosecutor’s Office. He is also accused of using the residence in Cheoc Van - rented by the Public Prosecutor’s Office - for personal use under false pretences that the residence was used to serve judiciary and political guests. According to previous statements by current Assistant Prosecutorgeneral Vong Vai Va in the top court, an investigation into illegal appropriation by Mr. Ho was initiated in 2015 when pieces of the agar wood were found missing from the Office’s storage room. At the request of current Prosecutorgeneral Ip Son Sang, Mr. Ho returned three pieces of agar wood, with the probe into Ho later dropped due to the lack of evidence. The former top official claims the pieces were moved to the storage room of the Public Prosecutor’s Office for “inspection purposes” and that the missing pieces were believed to be fake while the authentic ones had not been removed from the building at all. However, former employees of the Office who dealt with the
evidence have testified that Mr. Ho had requested the “best pieces” of agar wood to be moved from the storage room of the Office to the resting room of the 16th floor of the Hotline Building.
Escapades in Cheoc Van
During the afternoon trial session, the court heard that three former housekeepers and security guards had worked at Ho’s Cheoc Van residence during a period spanning 1998 to 2016, in addition to a maid who was responsible for taking care of Ho’s children. The witnesses all confirmed that the former Prosecutor had visited the residence with his family several times during the period. The employees said they had seen several people “dressed up and with bodyguards” visit the residence in the first few years accompanied by Mr. Ho for a short period of time, adding these kinds of visits were gradually reduced while there was no such visit at all between 2013 and 2016.
The witnesses also said that the former Prosecutor would visit the house with his wife and children on weekends and holidays, with an average frequency of two times a month. The duration of the visits were usually short and they claimed that they did not remember if anybody had stayed overnight in the residence. In particular, a security guard named Lam Sou Chai said he had thought the residence was “one of Mr. Ho’s private residences” before recently discovering that it was not based on news reports. The witnesses also confirmed that the residence was equipped with various amenities such as a sauna, a wine cave and security barriers for children on the stairs, while Ho’s personal belongings like personal photos and clothes of deceased relatives were also kept in the house. Mr. Ho argued yesterday that he would only take his family to the residence when he had official guests “for company”. The former official had said previously that the reason some of his personal belongings were in the residence was because he was moving house after finishing his term as Prosecutor-general, indicating his belongings were just kept in the house temporarily.
Corporate
Vida Rica presents molecular cuisine by Chef Ngan Ping Chow
Mandarin Oriental Macau welcomes Michelin-starred Chef Ngan Ping Chow to Vida Rica Restaurant from March 3 to 5. Chef Ping will offer an interactive dining experience showcasing his celebrated molecular cooking techniques during his three-day residency. There will be two sittings limited to 12 diners each per night, priced at MOP 1,880 per person including wine pairing.
Molecular cuisine is a modern style of cooking for which chefs take a scientific approach to transforming the taste and texture of food by experimenting with different physical and chemical processes, such as altering temperature and pressure. Originally from Hong Kong, Chef Ping oversaw the reinvention of Tapas Molecular Bar at Mandarin Oriental, Tokyo, where he won his first Michelin star in December 2014.
Business Daily Thursday, February 23 2017 5
Macau
Politics
CE: No final decision on smoking lounges The top official said the government would not bend to one particular industry Kam Leong kamleong@macaubusinessdaily.com
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hief Executive Fernando Chui Sai On stressed that the MSAR Government has not yet made a final decision on smoking lounges in local casinos. Speaking to reporters yesterday before departing for Fujian and Guangdong for a three-day official trip, he emphasised that the MSAR Government would make a decision based upon the benefits to the general public rather than one
industry. “I haven’t received a final decision [from the related departments]. There are varied opinions on the issue no matter inside the government or from other sectors,” the top official said. “But the government will put benefits of Macau residents as a priority [and not] kneel down to a certain industry. This is our responsibility.” Earlier this month, the Health Bureau made a u-turn on the city’s full-smoking ban bill for casinos, proposing to allow the establishment of smoking lounges in gaming venues as
long as the rooms met set standards. The Bureau’s proposed amendment to the bill was announced two days after the release of a survey conducted by the six local gaming operators claiming 60 per cent of the 14,301 interviewed casino employees agree with ‘solutions that allow smoking lounges’ in casinos. Having passed its first reading in 2015, the government-backed bill initially proposed banning smoking in all indoor areas of gaming venues, in addition to eliminating current smoking lounges. The bill is currently under Article-by-Article discussion by the second standing committee of the Legislative Assembly.
One Belt, One Road
According to the top official, he is meeting the provincial governments of Fuzhou and Guangzhou during the trip. The meetings, meanwhile, will
focus on the parties’ participation and co-ordination in the country’s ‘One Belt, One Road’ development. The Chief Executive added that the meetings also aim to strengthen the parties’ co-operation interests; in particular, in terms of trade investment as well as humanities and culture. He believes that the MSAR could develop its own advantages and speed up diversification of the economy via co-operation with the two provinces. On the other hand, the Chief Executive said he did not know that former Prosecutor-general Ho Chio Meng was being investigated by the Commission Against Corruption when he appointed Mr. Ho as co-ordinator of the Committee on Criminal and Legal Studies in 2015. He explained that the appointment was made based upon Mr. Ho’s working experiences, stressing a public servant being investigated does not necessarily mean he is already a defendant or a suspect.
6 Business Daily Thursday, February 23 2017
Macau Restaurants
Jade Dragon and Tasting Room named in Asia’s 50 Best
the region, while The Tasting Room, a French restaurant, is ranked 36th best. Meanwhile, Jade Dragon and The Tasting the chef of 8½ Otto e Mezzo Room by Galliot, both located BOMBANA in Galaxy Macau, Umberto Bombana, receives in City Of Dreams of Melco the Diners Club® Lifetime Crown Entertainment Ltd., Achievement Award. The list are the only two Macau restaurants listed in Asia’s 50 is created from the votes of Asia’s 50 Best Restaurants Best Restaurants 2017. Academy, a group of over New entries to the list, Jade 300 leaders in the restaurant Dragon, featuring Chinese cuisine, is ranked 32nd best in industry across Asia.. K.L.
Retail
Losing the shopping Esprit Despite opening a new store last year, contributing a 7.3 per cent year-on-year increase in the sales area of retailer Esprit, the group’s local operations saw a 18.4 per cent year-on-year drop in revenue from the MSAR for the last six months of 2016, according to the group’s filing with the Hong Kong Stock Exchange. With total revenue amounting to HK$45 million (US$5.6 million) contributing just 0.5 per cent of the group’s overall revenue - the group underwent a 10.6 per cent drop in its worldwide revenue, year-onyear, which hit HK$8.23 billion during the period. ‘From a macroeconomic perspective, the economic growth slowdown in China has dampened
consumption sentiment, resulting in reduced traffic to the malls across the region, including shopping and tourist destinations that are key for Esprit,’ notes the retailer. Both Hong Kong and Mainland China also saw drops in their overall revenue for the period, with a 21.3 per cent and a 28.7 per cent year-on-year drop for the regions, respectively. China slashed its total floor area by 38 per cent over the course of the six months, the first half of the group’s fiscal year, while Hong Kong saw a 10.7 per cent year-onyear reduction in the period. The group’s Asia Pacific revenue saw an 18.8 per cent reduction year-on-year during the same period. K.W.
Retail
SAR sales drive Bossini revenue Despite seeing a 12 per cent yearon-year drop in total revenue for last year, the Macau and Hong Kong stores for retailer Bossini International Holdings Ltd. propped up the group’s worldwide sales, according to its filing with the Hong Kong Stock Exchange yesterday. With total revenue amounting to HK$712 million (US$88.7 million) for the two SARs and operating profit from the segment totalling HK$49 million, the group singled out the cities, noting that they ‘continued to be the major source of revenue,’ for the group. Overall, Hong Kong and Macau contributed 69 per cent of the company’s total revenue despite ‘declining visitors, especially from Mainland China, with weak
retail sentiment still lingering’. Total revenue for the group in the year amounted to HK$1.02 billion, while profit for the company amounted to HK$16.9 million. Same-store sales in the two SARs saw a 6 per cent sales drop year-on-year, as compared to 2 per cent year-onyear drops seen in the Mainland and Taiwan, while Singapore’s dropped 8 per cent year-onyear. Overall same-store sales for the group fell 6 per cent compared to 2015. The group points to the decline in oil prices as paralleling a ‘similar decline’ in the group’s operating profit ‘as the export franchising business in the region slowed to a comparative crawl,’ notes the filing. K.W.
Subsidies
Subsidies
Industrial and Commercial Fund disburses MOP42.3 mln The city’s Industrial and Commercial Fund disbursed total subsidies of MOP42.3 million (US$5.3 million) to over a thousand individuals and institutions in the fourth quarter of 2016, according to the latest data released in the Official Gazette. The largest beneficiary was Transferência Electrónica de Dados - Macau EDI VAN, S.A. - a government-owned company which received MOP4.2 million in financial support. The Young Entrepreneurs Association of Macau, meanwhile, collected MOP2.58 million in subsidies for
expenses on advertising and promotion plans for a service platform consecrated for small and medium enterprises (SME). Other big beneficiaries in the final quarter of 2016 include the Organization of the World Union of Chinese Entrepreneurs, which received a MOP2 million grant for their organization of the 13th Conference of Chinese Entrepreneurs in the World. Meanwhile, the Association of Retailers and Tourism Services of Macau picked up MOP1.52 million for the expenses of the organization of Macau Shopping Festival 2016. s.z.
Tourism Fund splashes out MOP6.7 mln in Q4 The MSAR’s Tourism Fund disbursed some MOP6.69 million (US$836,300) to dozens of individuals and local associations during the fourth quarter of 2016, some ten times more than the MOP621,000 awarded by the same fund in the third quarter of 2016. According to yesterday’s Official Gazette, the Association of Retailers and Tourism Services of Macau received the largest subsidy from the Fund for organising Macau Shopping Festival 2016, in the amount of MOP4.5 million. Meanwhile, all other beneficiaries were allocated subsidies of less than MOP1 million.
Among them, the United Association of Food and Beverage Merchants of Macao received a total MOP499,800 for its two training courses for the industry. The General Union of Neighbourhood Associations of Macau, also known as Kai Fong, received two different subsidies - of MOP100,357 and MOP124,857 - for two activities from the Fund. The majority of beneficiaries, in fact, were Chinese Opera associations. Other beneficiaries include associations for sports, music, photography, retailers, and electronic games. They primarily each received MOP3,000 from the Fund in the quarter. S.Z.
Business Daily Thursday, February 23 2017 7
GAMING
Investment
Melco pledges to spend ‘whatever it takes’ on Japan casino Melco Crown CEO Lawrence Ho said the company’s investment amount will depend upon the casino’s host city for the casino Jason Clenfield and Grace Huang
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elco Crown Entertainment Ltd. has upped the ante against its casino rivals to win the chance to build a casino resort in Japan, declaring there’s no limit on how much the company is prepared to invest. “This opportunity is priceless and we’ll spend whatever it takes to win,” Chief Executive Officer Lawrence Ho Yau Lung said in a briefing held Wednesday at a CLSA Ltd. conference in Tokyo. The billionaire said the investment amount will depend on the host city, and his top choice for a casino resort is in the city of Osaka,
Sands’ Adelson: Japan an ultimate business opportunity
Japan is the ultimate business opportunity for Las Vegas Sands Corp., said its billionaire chairman as he envisions an integrated resort that would attract convention tourism and boast a record number of slot machines. “Singapore was a warm-up to this,” Sheldon Adelson, who’s also chief executive officer, said in Tokyo Tuesday. The resort in Japan, which passed a bill to legalize casinos in December, would feature 10,000 slot machines, the 83-year-old gambling tycoon said, the most of the Las Vegas-based operator’s properties anywhere, and four times
where Melco has done more planning. Ho’s comments followed those of fellow casino tycoon Sheldon Adelson, who declared Japan as the ultimate business opportunity for his Las Vegas Sands Corp., and where he could spend as much as US$10 billion (MOP1.25 billion) building an integrated resort. Japan legalized casinos in December, drawing the interest of global gaming operators to a market CLSA predicts could be worth as much as US$25 billion. Ho, whose father Stanley Ho is a local gaming legend who held the city’s casino monopoly for decades, also took a dig at the design choices of operators in Las Vegas and in Macau, where four of Melco’s properties are
more than in Singapore. Sands, the world’s largest casino operator, is eyeing new growth areas even as its main market in Macau recovers from a two-year gambling slump. A Sands Japan project, similar to the company’s integrated resorts worldwide, would see gambling take up less than 5 per cent of its floor space, with the rest of the property focused on meetings, incentives, conferences and exhibitions, known as MICE, Adelson said. “It’s the ultimate of business opportunities,” he said. “I can offer an emphasis on the exhibition market. It’ll be a wonderful place for MICE and gaming.”
Investment
Hard Rock seeks up to 60 pct in Japanese casino Thomas Wilson and Emi Emoto
Malaysian police arrested a woman carrying Vietnamese travel documents who is suspected of involvement in the murder of North Korean dictator Kim Jong Un’s half-brother. Doan Thi Huong, 28, was arrested on Wednesday morning at Kuala Lumpur International Airport 2, according to a statement by Malaysian police Inspector General Khalid Bin Abu Bakar. The suspect was positively identified from closed-circuit television footage and was alone at the time, he said. The murder has triggered questions about the stability of Kim’s regime as he accelerates plans to build nuclear weapons that threaten the U.S., South
Korea and Japan. South Korean analysts and government officials have speculated that Kim was behind the killing of his half-brother, a critic of his leadership who lived outside the country for years. South Korea believes the deceased man was Kim Jong Nam based on closed-circuit television footage and the photo on his North Korean passport, Lee said. Malaysian authorities released a statement identifying him as Kim Chol, 46, who was born in Pyongyang. Abdul Samah Mat, the police chief of Selangor state which takes in the airport, said earlier that an autopsy is underway at Kuala Lumpur Hospital. He declined to give further details. Reuters
located. Those won’t be a good fit for Japan, he said. “If you put up some of the tacky buildings that you have in Las Vegas or Macau here it would look out of place. Can you imagine the Venetian here?” he said in a speech to investors at the CLSA conference. Sands, the world’s biggest gaming operator, has casinos in both cities that are named the Venetian. Melco shares have gained 5.5 per cent this year in New York trading, compared with the 0.5 per cent drop in Bloomberg Intelligence’s index of Macau gaming stocks. Hong Kong-based Melco would ideally want to own a majority stake in any tie-up with local partners, but the company would keep an open
mind on the structure, the 40-yearold Ho said. “It’s important we work with government authorities,” he said. “Ultimately what makes an integrated resort successful is how we work with communities.” Osaka “really has that fun element” and fits the entertainment profile that Melco is keen on, said Ho, whose company operates the US$3.2 billion Hollywood-themed Studio City resort that opened in Macau in 2015. Melco sees its role as helping expand Japan’s tourism, Ho said, adding that he’s “shocked” that the country attracts only about 20 million tourists a year. That’s compared with the 30 million who visit Macau, the Chinese city that’s also the world’s largest gambling hub. Bloomberg
8    Business Daily Thursday, February 23 2017
Greater china In Brief
Sectorial decline
Profits of brokerages shrink Fifteen Chinese listed brokerages have estimated profit declines for the last year as thin stock trading dragged down their incomes in commission fees. Those brokerages, accounting for more than half of the country's publicly traded securities firms, reported combined net profits of RMB53.66 billion (US$7.8 billion) in their preliminary earnings estimates for 2016, only half of the figure seen in 2015, according to RoyalFlush Information, a financial information service provider. Their total revenues declined nearly 40 per cent to RMB164.87 billion, mainly weighed on by substantial drops in commission fees. Tourism
Mainland calls on Taiwan to improve safety A Chinese mainland spokesperson yesterday called on Taiwan to reflect on multiple recent tourism accidents and take effective measures to enhance safety management and remove safety hazards. "We are deeply concerned about the string of tourism accidents in Taiwan," said An Fengshan, spokesperson for the State Council Taiwan Affairs Office, at a press conference. Taiwan should ensure the safety and property of tourists and provide them better travelling conditions, An added. Banks
More loans to agriculture, small firms Chinese banks strengthened financial support for agriculture, small-and-micro enterprises and affordable housing projects last year. Outstanding agriculture-related loans stood at RMB28.2 trillion (about US$4.1 trillion) at the end of 2016, up 7.1 per cent year on year, according to a statement posted on the website of the China Banking Regulatory Commission. Outstanding loans to smalland-micro firms hit RMB26.7 trillion, up 13.8 per cent. Lending to affordable housing projects surged 58.7 per cent from a year ago, well above the average loan growth of 12.8 per cent. China has channelled more energy into fostering agricultural development and small businesses. Brunei
JV starts running container terminal A joint venture between China's Guangxi Beibu Gulf Port Group and a government-linked Brunei investment company started running Brunei's largest container terminal on Tuesday, Xinhua said. The move is the latest in a series of steps taken to further China's "One Belt, One Road" scheme to promote infrastructure projects along historical land and sea trading routes as a way to bolster the country's slowing growth. Muara Port Company Sdn Bhd, a joint venture between Guangxi Beibu and Brunei's Darussalam Assets, will manage operate, maintain and develop the Muara Container Terminal in Brunei, on the north coast of Borneo.
Real estate
Home price growth cools for 4th straight month Banks in some big cities such as Beijing have started lowering discounts on lending rates for first-time homebuyers
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hina's home price growth slowed for the fourth straight month as demand cooled further in its biggest cities, a welcome sign for policymakers as they seek to defuse bubbles in the world's second-largest economy amid an explosive growth in debt. Over the past year, authorities have slapped curbs on China's property sector - a major contributor to the broader economy - as the concentration of price surges in the country's wealthiest cities stoked fears of a nasty crash. The January data released by the National Bureau of Statistics (NBS) suggests regulators are making steady progress in keeping the riskier speculative investors off the property market, with average new home prices in China's 70 major cities up 0.2 per cent month-onmonth, slowing a touch from December's 0.3 per cent rise. That marked the fourth month of slowing monthly growth, with analysts expecting further falls in the
year ahead. "I think home prices have basically peaked. Considering the yearly growth is still strong, prices are likely to keep falling this year," said Zhou Hao, a Singapore-based economist at Commerzbank. Compared with a year ago, home prices still rose 12.2 per cent, just off December's 12.4 per cent gain. In China's biggest cities, Shenzhen, Shanghai and Beijing prices rose 18.2 per cent, 23.8 per cent and 24.7 per cent, respectively, from a year earlier, but Shanghai and Shenzhen's monthly pace slowed as local governments' tightening measures knocked demand. All the same, a more subdued housing market may mean China will be even more reliant on infrastructure spending to boost economic growth. That may pose challenges as a closer look at China's only shrinking provincial economy reveals increasingly diminishing returns from such a state-driven policy highly reliant on borrowing.
Debt risks
Some analysts caution that downward home prices are likely to have a negative impact on producer prices, which is at near six-year highs thanks to record prices in raw materials, affecting firms' ability to service their mounting debt. Such a scenario could spur a vicious cycle of low property investing feeding into a slowdown in demand across the economy, which grew 6.7 per cent in 2016 - the slowest rate in just over a quarter of a century. The government has been fretting over fast-rising leverage and the risk of asset bubbles in an economy that has recently shifted to a lower gear, prompting a raft of restrictions on purchases and lending in more than 20 cities since October. Banks in some big cities such as Beijing have started lowering discounts on lending rates for fist-time home buyers since this year, joining recent steps to curb financial risks stemming from loose credit conditions. That mirrors moves by the People's Bank of China (PBOC) since late January to a tightening policy bias over the coming year as it tries to curb risks from the ballooning debt. Reuters
Stimuli
Hong Kong hands out generous budget as growth view brightens The package of one-off economic hand-outs and stimulus measures include reducing salaries tax and profits tax James Pomfret and Donny Kwok
Hong Kong handed out billions in tax cuts and poverty relief yesterday, to stimulate its economy that is expected to grow more strongly than expected at 2 to 3 per cent this year despite headwinds from rising global trade protectionism Financial Secretary Paul Chan said in his maiden annual budget address that stronger exports and jobs, rising wages and construction projects worth nearly HK$87 billion this year, had bolstered consumer confidence and domestic demand that would feed into the local economy. He warned, however, that the city's astronomical property prices continued to be an issue. While the financial hub's economy was projected to grow faster than the 1.3 per cent expansion forecast by six economists surveyed by Reuters, Chan cautioned risks remained. "The uncertain external environment and interest rate trend may trigger abrupt shifts in capital flows and heighten volatility in local asset prices, with repercussions on consumption and investment sentiments and on macro-economic stability," Chan told lawmakers.
Credit Rating Agency Moody's said in a research note that the budget was relatively balanced and fiscally prudent but doubted Hong Kong would meet its bullish GDP forecast. "We do not expect a material rebound in global trade which will weigh on Hong Kong's exports, while growth in domestic demand will be somewhat dampened by higher interest rates," Moody's wrote. "We expect three to four interest rate increases by the U.S. Federal Reserve this year which will push interest rates up in Hong Kong." On the property market, which Chan called exuberant and "out of tune with the local economy" despite a raft of cooling measures, he said the government would "substantially" increase residential flat supply in the next few years.
Sharing the wealth
Hong Kong's provisional budget surplus was a much higher than expected HK$92.8 billion (US$11.96 billion) for the 2016/17 financial year, far in excess of the HK$11 billion last year, with fiscal reserves of HK$935.7 billion. The government said some HK$61 billion would be ploughed into elderly services, sports development, youth development and developing the high technology sector.
Chan said Hong Kong could afford to be more proactive with its spending and his measures to "share the fruits of economic development" would help stimulate domestic demand, stabilise the economy and help the job market. The populist-leaning budget comes at a time of flux for Hong Kong amid rising political tensions and as the city in July marks the 20th anniversary of its handover from British to Chinese rule in 1997. The city will also usher in a new leader in a March 26 election involving a 1,200-member election committee stacked with Beijing loyalists. Chan's predecessor, longstanding former financial secretary John Tsang, is one of several candidates eyeing the top job. The package of one-off economic hand-outs and stimulus measures include reducing salaries tax and profits tax up to a ceiling of HK$20,000 per individual or firm, that would cost the government some HK$18.3 billion, as well as extra social welfare hand-outs for the elderly and disabled. Total expenditure would increase to more than HK$490 billion in 201718 from HK$380 billion in 2012-13, Chan said. Sectors such as tourism and catering that have struggled from a slump in visitors from China would receive help such as from waiving of licence fees for travel agents, guesthouses and restaurants, and pumping more money into tourism promotion. Reuters
Business Daily Thursday, February 23 2017 9
Greater China
Legislation
Regulators set new rules for asset managers Chinese investors have poured trillions of yuan into lightly regulated WMPs Julie Zhu and Elzio Barreto
China's financial regulators have circulated a draft framework of new rules aimed at curbing risks in the country's booming asset management industry, according to several Chinese news outlets and details of the draft seen by Reuters. The rules, formulated by the central bank in conjunction with China's securities, banking and insurance regulators, were the latest effort by the authorities to bolster their oversight of financial assets, including wealth management products (WMPs), amid concerns about growing debt in the economy. De-leveraging and the prevention of financial risks are two major goals for China's financial regulators this year. The proposed new rules aim to
Key Points Draft rules from regulators aim to reduce leverage and risk Proposal aims to unify oversight of asset management industry Outlines restrictions on wealth management products
unify the regulation of the asset management industry under leadership of the central bank in order to improve oversight of the sector. The draft rules would standardise leverage ratio limits and require sellers of asset management products to put aside risk reserve funds equal to 10 per cent of product management fees, among other requirements.
Asset management products include bank WMPs, mutual funds, private investment funds, trust plans, and other asset management products issued by securities firms, fund companies, fund subsidiary companies, futures firms as well as insurance asset management companies. Chinese investors, lured by high yields and expectations of implicit guarantees by the banks or other financial institutions, have poured trillions of yuan into lightly regulated WMPs, the biggest component of socalled "shadow banking" in China. There was no immediate comment on the draft regulation from the People's Bank of China, the China Securities Regulatory Commission, the China Banking Regulatory Commission or the China Insurance Regulatory Commission. WMPs are typically kept off banks' balance sheets, making it difficult for regulators to assess the stability of
a banking sector reliant upon them for growth. And just as in the global financial crisis of 2008, banks' interconnectedness amplifies the risks. Banks are increasingly buying each others' wealth management products, with interbank WMPs hitting RMB4 trillion (US$581 billion) in June, doubling from two years ago. "The goals of the guidance are very clear – to prevent financial institutions from adding multi-layers of leverage in order to expand scale," analysts at Minsheng Securities said in a note, adding the rules would also make it harder for banks to move loan-like assets off their balance sheets using asset management products. Under the rules it would be a violation to promise a guaranteed return for asset management products, which has been common practice for many bank WMPs and other products. It was not clear when the rules would be finalized. Reuters
Verdict
Ex-Hong Kong leader Tsang jailed for misconduct The sentence comes about a month before a committee of political insiders picks the city’s leader for the next five years Crystal Tse and David Tweed
Hong Kong’s former chief executive, Donald Tsang, was sentenced to 20 months in prison for misconduct in office, capping a stunning downfall for an official who helped steer the former British colony through a series of financial shocks. Tsang, 72, had breached the trust of Hong Kong’s people, High Court Justice Andrew Chan said while handing down the punishment. On Friday, Tsang was convicted of misconduct for failing to disclose a conflict of interest that arose when he was negotiating rent for a luxury apartment with a landlord who was applying for a broadcasting license before the city.
“Today is a very dark day,” his wife, Selina Tsang, told reporters after the verdict. The family was “disappointed” about the result and plans to appeal the conviction, she said. Tsa n g, w h o s e rv e d as chi ef executive from 2005 to 2012, is the financial hub’s first former leader convicted of a criminal charge. The sentence comes about a month before a committee of political insiders picks the city’s leader for the next five years, with residents increasingly concerned about a growing wealth gap in a city that routinely ranks among the world’s most corruption-free places in surveys.
Big fall
“Clearly the rule of law prevails and is very much alive and kicking in Hong Kong,” said Alan Leong, a former leader of the pro-democracy Civic Party who ran against Tsang in the 2007 chief executive race. “The takeaway is that those who occupy public office -- especially high office -- ought to be whiter than white.” Wearing his trademark bow tie in the courtroom, a weary-looking Tsang coughed frequently while sitting in a glass box during the sentencing. After the judge finished, his wife rushed up and spoke with him briefly before officers took him away. “Never have I in my judicial career seen a man fallen from so high,” Chan said ahead of the sentencing. The Independent Commission Against Corruption’s case against Tsang revolved around whether he failed
Selina Tsang Pou Siu-mei, (C), wife of former Hong Kong Chief Executive Donald Tsang, prepares to address the media outside the High Court in Hong Kong yesterday. Lusa
to disclose the apartment between 2010 and 2012. The rental deal for the three-story apartment in the adjacent Chinese city of Shenzhen involved Bill Wong, a major shareholder in Digital Broadcasting Corp., which at the time was applying for a broadcast license, according to prosecutors.
“Clearly the rule of law prevails and is very much alive and kicking in Hong Kong” Alan Leong, a former leader of the prodemocracy Civic Party who ran against Tsang in the 2007 chief executive race
Luxury apartment
The jury found him not guilty of misconduct for failing to disclose his relationship with an interior designer who refurbished the apartment, whom Tsang later supported for a top city honour. It failed to reach a verdict on a third charge that he accepted a bribe related to the HK$3.35 million refurbishment. The judge has granted a retrial on that charge. Tsang joined the colonial government in 1967, rose to financial secretary under the last British governor and was knighted for his service. The devout Roman Catholic won widespread praise for his stewardship of the economy during the Asian financial crisis, leading a US$15 billion defence of the Hong Kong dollar. The ICAC is currently investigating whether outgoing Chief Executive Leung Chun-ying failed to disclose a HK$50 million payment from an Australian construction company relating to a business deal before he took office, which he says wasn’t covered by disclosure requirements. Bloomberg News
10 Business Daily Thursday, February 23 2017
Greater China
An aerial picture of Shenyang, the capital city of Liaoning Province.Economic Forum meeting. Lusa
Reforms
How one Mainland region shows risks of relying upon heavy borrowing Liaoning's economy shrank 2.5 per cent in 2016, the only Chinese province to contract David Stanway
A
flurry of construction in the Chinese city of Shenyang belies a regional economy in crisis, a striking example of the increasingly diminishing returns from a policy of investing heavily in infrastructure to prop up economic activity. A new exhibition centre has just opened its doors in the city, the capital of Liaoning province in north-eastern China, and the skyline is dotted with cranes working on high-end shopping malls and apartments. But beyond Shenyang's building sites, the real Liaoning is different. After years of investment in infrastructure, some of it encouraged by the central government, Liaoning is China's only shrinking provincial economy, its population is in decline and its debt is almost three times annual revenues. Liaoning highlights the risks of relying on repeated borrowing to invest in infrastructure and fuel economic activity - a regular fallback policy China has used when GDP risks missing annual targets, including in 2016. It also points to the urgency for China to move away from a reliance on state firms, which for decades provided China’s economic backbone. Most other provinces have reduced their reliance on state-firms to a much greater extent than Liaoning and its neighbours, Heilongjiang and Jilin. But they still wield considerable influence nationwide. T ra d i t i o n a l l y , s t a t e - ra i s e d investment funds have been channelled through state-owned enterprises (SOEs) because they are big tax payers and employers. This has
provided a life support mechanism for many dying state industries while crowding out the private sector on which China is staking its future. Some local authorities have provided all sorts of preferential support to state firms, said Han Liang, a section-chief in the Liaoning government pricing bureau, “over protecting them and making them lose their motivation to innovate.” Liaoning's provincial government, and its local development and reform commission, declined repeated requests for comment.
Hopes rest on government Key Points Liaoning is China's only province with shrinking economy Population is falling, debt is almost three times state revenues State firms still dominate economy, despite heavy investment
spending
Nowhere are Liaoning's challenges more evident than in Benxi, a city 46 km from Shenyang and dominated by a single SOE: the struggling Benxi Iron and Steel Group (Bengang). Like Liaoning, Bengang is well past its economic heyday. Its chimneys, smelters and stockyards stretch nearly a mile along the banks of the Taizi river flowing through Benxi. It provides around 60,000 jobs and most tax income for the city government, but it is struggling to compete with coastal plants because they have better access to markets and cheaper foreign feedstock. In
2015, it reported its first net loss since the global financial crisis in 2009. The firm is being squeezed by central government efforts to reduce steel production nationwide and so has branched out into real estate investment, in turn crowding out private players. General manager Chen Jizhuang said in a pep talk delivered at a meeting with company employees in December that its “indomitable, evergreen genes” would enable it to overcome all its difficulties. But the firm appears to be resting its hopes on yet another round of government spending. “The year 2017 is a new round of the central government’s Rejuvenate the Northeast projects and it is also a key year for Bengang to set off on a new road and seize new opportunities,” Chen told staff, according to the firm's website. Bengang declined several requests seeking interviews with senior officials.
Legacy
Liaoning, Heilongjiang and Jilin were once powerful industrial bases responsible for much of the coal, steel and heavy industry that underpinned China's economy in the 1960s and 1970s. That legacy keeps the investment flowing into the region today under a programme called Rejuvenate the Northeast –originally designed to head off unrest after punishing national economic restructuring almost two decades ago laid off millions of workers and sparked strikes, protests and a surge in organised crime. "We have to consider historical context," Zhou Jianping, a senior government official at the state planning agency in charge of the Rejuvenate the Northeast project, told Reuters in an interview. "Northeast China made big contributions to China's economic development." But the provinces have struggled to
adapt to another central government push - reducing the influence of heavy state industry and provide room for private firms to thrive. "What does the government want Liaoning to do?" asked the manager of a joint venture manufacturer in Shenyang, who declined to be identified because he was not authorised to talk with the media. "It's all very well pumping money into the economy but if you're not pumping it into the right places, it is just good money after bad," he said. Liaoning's economy shrank 2.5 per cent in 2016, the only Chinese province to contract, while growth nationwide hit 6.7 per cent. While the decline was partly attributed to corrections in 2015 data following a crackdown on statistical fraud, the province remains riddled with debt and dependent on the sluggish state sector. Liaoning government debts are 287 per cent of revenues. State-owned firms in the northeast provinces hold around half of the industrial assets, compared to a 10 per cent national average, the China Institute for Reform and Development said. The result is a region dependent on "big but weak" state firms, said Li Kai, vice-president of the Northeast Rejuvenation Research Institute, a government think-tank. Nicholas Zhu, a senior analyst at Moody’s Investors Service, provides a bleaker assessment. "It's a vicious circle just like Detroit," he said, referring to the U.S. city that filed for bankruptcy in 2013 following a long-term economic and population decline. "Detroit defaulted not because of short-term events but because 2030 years ago people started leaving, corporations started leaving, and then there is hollowing out. Eventually you get to the point where they couldn't finance themselves." Reuters
Business Daily Thursday, February 23 2017    11
Asia Monetary outlook
Australia's central bank sees danger in high household debt Data out yesterday showed annual pay rises were stuck at an all-time low Swati Pandey and Wayne Cole
T
he head of Australia's central bank gave the clearest signal yet yesterday that further cuts in interest rates would not be in the national interest as the danger of a debt-fuelled boom and bust was just too severe. The Reserve Bank of Australia (RBA) has kept interest rates at a record low 1.50 per cent since last easing in August, and Governor Philip Lowe hopes the current setting will
Key Points
Lowe held out the hope that wage growth had finally bottomed, although the RBA's liaison with firms suggested an upturn was not imminent. A high and rising unemployment rate might add to the case for more stimulus, Lowe said, yet the bank was satisfied that the labour market was heading in the right direction. "Trends in the labour market are the one to watch in 2017 rather than the inflation prints," said Gareth Aird, an economist at Commonwealth Bank. "We expect core inflation to continue to print below the Bank's target but that won't be enough for Lowe to cut the cash rate."
The futures market has almost priced out a chance of a rate cut this year, with some investors even toying with the idea of a rate hike by early 2018.
Balancing risks
Lowe, who took over the reins at the RBA last September, has repeatedly stressed about the diminishing returns to the economy from lowering interest rates further, largely due to ballooning household indebtedness. The ratio of household debt to disposable income is at an all-time peak around 180 per cent, while the saving rate has fallen. Mortgage debt stands at A$1.7 trillion, larger than the country's annual economic output. "We have been seeking to balance the risks from having inflation low
for a longer period against the risks from attempting to increase inflation more quickly, which would partly occur through encouraging more borrowing," said Lowe. While there was a danger that low inflation could lead to a self-fulfilling decline in inflation expectations, he did not see "a particularly high risk" of this in Australia. However, he did see danger in spurring more debt. "At some point in the future, households having decided that they had borrowed too much, might cut back consumption sharply, hurting the overall economy and employment," he warned. "It is difficult to quantify this risk, but it is one that is difficult to ignore." Australia's economy shrank in the third quarter of last year as businesses, consumers and government all cut back on spending, but Lowe said earlier this month that it looked to have bounced back to "reasonable growth". Reuters
RBA signals daunting hurdle for another cut to interest rates Record high household debt, low wages leading to slow spending Q4 wage growth at all-time low of 1.9 pct a year be enough to deliver balanced economic growth. "We set out to choose the path that, in our judgement, best promotes the welfare of the Australian people," he said in a speech in Sydney, leaving little doubt that encouraging yet more borrowing would not meet that standard. Lowe noted that high levels of debt combined with subdued wage growth were already making households wary of spending freely, a drag that was only set to get worse. Data out yesterday showed annual pay rises were stuck at an all-time low of 1.9 per cent, with on-going weakness in private sector wages.
Bank of Japan
Governor sees little chance of more rate cuts for now A Reuters poll showed economists were largely divided on the central bank’s next policy move Leika Kihara
B
ank of Japan Governor Haruhiko Kuroda said yesterday the chance the central bank will deepen negative interest rates is low for now, backing market expectations that no additional monetary easing is forthcoming in the near future. Kuroda said Japan's economic growth was accelerating and keeping inflation on track to hit the BOJ's 2 per cent target during the fiscal year ending in March 2019, in line with its latest quarterly forecasts made in November. "The BOJ of course stands ready to ease further if needed to achieve its 2 per cent inflation target," the central bank chief told parliament. " Wi t h e c o n o m i c g r o w t h
Key Points BOJ ready to ease more if needed - Kuroda Adds inflation on track to hit target in FY2018 Global yield rises won't trigger BOJ rate hike accelerating, however, the chance of deepening negative rates is low," he said, when asked about the pain the BOJ's policy is inflicting on regional banks' profits. Kuroda also dismissed the view that the BOJ could raise its yield targets if Japanese long-term rates their global counterparts higher, driven by expectations of steady rate hikes by the U.S. Federal Reserve. "There's still some distance to our 2 per cent inflation target, so it's necessary to maintain powerful monetary easing to achieve the target at the earliest date possible," he said. A Reuters poll showed economists were largely split on the BOJ's next
Bank of Japan Governor Haruhiko Kuroda during the last World Economic Forum meeting. Lusa
policy move as fewer of them now expect more monetary stimulus in Japan, signalling a possible turning point in expectations for its easing cycle. The BOJ revamped its policy framework in September last year to one better suited for a long-term battle with deflation, after three years of aggressive asset purchases failed to accelerate inflation to 2 per cent. Under the current framework, the central bank pledges to guide shortterm interest rates at minus 0.1 per cent and the 10-year government
bond yield around zero per cent. The negative rate policy and the BOJ's aggressive money printing have drawn criticism from financial institutions for narrowing their margins and drying up bond market liquidity. While the BOJ already holds roughly 40 per cent of the entire Japanese government bond market, Kuroda said he saw no signs market liquidity was diminishing. "I don't think we will face difficulty buying bonds to achieve our yield curve control policy," he said. Reuters
12 Business Daily Thursday, February 23 2017
Asia In Brief S.Korea
Household debts post biggest growth in the year South Korea’s household debts posted the biggest growth in 2016 on eased regulation on mortgage financing and record-low borrowing costs, central bank report showed yesterday. The Bank of Korea (BOK), said in a report to the National Assembly that household debts reached 1,154.6 trillion won (US$1.01 trillion) as of end-2016, up 124 trillion won from a year earlier. It was the biggest yearly expansion, surpassing the previous high of a 110.1 trillion-won increase tallied in 2015. Debts owed by households to banks grew at a slower pace, while those from non-bank institutions grew faster. Consumption
Singapore retail sales rise Singapore’s retail sales in December rose from a year earlier, helped by a surge in sales of medical goods and toiletries, data showed yesterday. Total retail sales rose 0.4 per cent from a year earlier, after increasing by a revised 0.7 per cent in November, according to data from the Singapore Department of Statistics. On a month-on-month and seasonally adjusted basis, total retail sales fell 1.9 per cent in December after a revised flat growth in November. Auto industry
Australia’s new vehicle sales rise Australian sales of new vehicles rose for a second month in January as consumers continued their long love affair with sport utilities. Yesterday’s data from the Australian Bureau of Statistics showed sales rose 0.6 per cent in January, from December when they edged up 0.1 per cent. Sales of 97,636 were still down 0.9 per cent on January last year. All the strength was again in SUVs where sales jumped 6.3 per cent from December to the highest in three months. Sales for all of 2016 had reached an all-time high of 1.18 million, with SUVs taking a record share of 37 per cent of the market.
Real estate
Singapore says factors backing property demand to stay Residential property curbs are set to stay in place for at least another year Pooja Thakur
S
ingapore’s property demand remains "very resilient," supported by factors including low interest rates and a stable economy, National Development Minister Lawrence Wong said. “Our economy is still growing, so I think demand is still healthy and our assessment is these factors will remain for some time,” Wong, who’s also the second finance minister, said in a Bloomberg Television interview with Haslinda Amin. Singapore home prices fell 3 per cent in 2016, with prices declining for the 13th straight quarter in the last three months of the year for the longest streak since data was first published in 1975. Still, Singapore house sales last year topped 2015’s tally as a third straight year of price declines stoked pent-up demand from home buyers. Singapore’s government has been
steadfast in its commitment to cool the housing market, maintaining real estate curbs rolled out since 2009, with some of the strictest measures implemented in 2013. The government has repeatedly signalled it is reluctant to ease property curbs, including capping debt repayments at 60 per cent of a borrower’s income and higher stamp duties, as it wants to avoid overheating the market again. The cooling measures “have helped to achieve a soft landing in the property market,” Wong said. Asked whether there would be any moves on property curbs this year, he said: "You have to wait and see." Singapore’s residential property curbs are set to stay in place for at least another year amid signs the city’s housing market is stabilizing, the chief executive officer of CapitaLand Ltd., Southeast Asia’s biggest developer said in an interview earlier this month. “We see volume picking up and the price declines have slowed,” Lim Ming Yan, the president and
Forex
S.Korea lower forward positions hint at less intervention South Korean foreign exchange authorities say they conduct market smoothing activities against extreme one-sidedness or herd behaviour in the market
Trade
S. Korean official expects exports to beat Jan data South Korea’s deputy finance minister said yesterday he expects export figures to improve in February from last month on a number of factors, including the low base a year earlier. In a news briefing held in Sejong, south of Seoul, Lee Chan-woo said “although there are fewer working days in February (this year) from a year earlier, it will still be better than January exports.” February 2016 had 18 working days but January 2017 had 20 working days because of the timing of the Lunar New Year. The February export data is due on March 1.
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CEO of CapitaLand, said on Feb. 15. “We see this trend continuing for 2017. There is no compelling reason for the government at this point to make major changes” to property curbs, he said. CapitaLand has pared its exposure to Singapore residential developments. Its inventory units were valued at S$1.7 billion (US$1.2 billion) at the end of 2016, or 4 per cent of estimated total assets, according to a Bloomberg Intelligence report led by senior industry analyst Patrick Wong. Singapore, which outlined its annual budget Monday, is studying measures to boost revenue, including higher taxes, to help ease pressure on the budget as spending increases, Wong said in the interview. Wong also said that he doesn’t anticipate a China-U.S. trade war, but the risk of one is “real” and Singapore should be prepared for the eventuality and its aftermath. “The impact would be very significant, not just for us but for countries around Asia,” he said. Trade accounts for more than three times Singapore’s gross domestic product. Reuters
Last year, the won fell 3 per cent against the surging dollar, its third South Korea's central bank held the straight year of depreciation versus smallest amount of foreign exchange the greenback. But so far this currency forward year it has gained positions last year nearly 6 per cent, since end-2012, as emerging mardata from the Interket currencies national Monetary get a boost from Fund showed, in a billion sign the bank may 2016 Korean foreign exchange reserves a pause in the dollar. have intervened The data is usuless to weaken the ally used by analysts and traders to won for trade competitiveness. According to the IMF data, South try and calculate how much the Bank Korea's long positions in forwards of Korea intervenes in the foreign in foreign currencies in regard to the exchange market. Foreign exchange reserves, which won stood at US$39.71 billion at the can also be a gauge of intervention, end of 2016. This was the smallest since end- rose US$3.14 billion in 2016 to a record 2012 and down US$11.89 billion from US$371.10 billion, after a US$4.37 billion rise in 2015. US$51.68 billion seen at end-2015. Pooja Thakur
US$371.10
The central bank does not disclose details or confirm traders' suspicions of intervention. But South Korean foreign exchange authorities say they conduct market smoothing activities against extreme one-sidedness or herd behaviour in the market. The data, updated monthly, also showed the forwards positions declined considerably over the course of November and December, coinciding with the election of U.S. President Donald Trump and his taking office. The Bank of Korea declined to comment on the data or whether it had intervened, while a foreign exchange official said it was "too hasty" to give meaning to recent movement in the positions. South Korean officials, including the finance minister, have been vehement that the country will not be named as a currency manipulator in the U.S. Treasury's report on foreign exchange policies of major trading partners expected in April. Reuters
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 Thursday, February 23 2017    13
Asia
Financial sector
Indonesia's big banks told to submit plans for coping with a crisis The banking industry has sound capital levels with average capital adequacy ratio of 22.7 per cent as of December Indonesia's biggest banks must write up plans for recovering from potential insolvency, a measure to ensure that authorities do not have to bail them out, the chairman of the banking regulator said yesterday. Muliaman Hadad, chairman of the Financial Services Authority (OJK) told a parliamentary hearing that all "systemically important banks" - which he did not define - had to file internal recovery plans to his agency by year-end. He declined a request to provide a list of what banks are deemed
"systemically important". For the banks approached to submit recovery plans, their chief executive, main commissioner and controlling shareholder must sign the document to show their commitment to it, Hadad said. "Shareholders must participate as early as possible in all problems that may arise," Hadad said, adding that there should be a recovery task force set up in every big bank. Indonesia's parliament last year passed a law that lays out rigid, stepby-step protocols on how authorities
"Shareholders must participate as early as possible in all problems that may arise" Muliaman Hadad, chairman of the Indonesian Financial Services Authority should handle a financial crisis. The law does not allow the use of state budget as a potential source of support for a troubled bank, although it gives authority to the president to make a decision on a bank rescue in times of crisis.
Big banks in Southeast Asia largest economy are already required to set aside more capital under an OJK regulation for a "capital surcharge", the size of which depends on how important the institutions are judged. Indonesia's biggest banks by assets are Bank Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia, which are state-controlled, and Bank Central Asia. The banking industry has sound capital levels with average capital adequacy ratio of 22.7 per cent as of December, but some banks have been facing rising bad debts. During and after the 1997/98 Asian financial crisis, Indonesian authorities took over scores of collapsing banks, many of which were shut and others merged into new or surviving institutions. At the end of 2016, Indonesia had 116 banks, including sharia ones. In December 1996, there were 239 commercial banks. Reuters
14 Business Daily Thursday, February 23 2017
International In Brief Survey
German Ifo business morale brightens German business morale brightened unexpectedly in February, matching December's 33-month high, a survey showed yesterday, suggesting company executives are more upbeat about the growth prospects of Europe's largest economy. The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of some 7,000 firms, rose to 111.0 from a upwardly revised reading of 109.9 in January. The reading came in far stronger than a Reuters consensus forecast for a value of 109.6. "After making a cautious start to the year, the German economy is back on track," Ifo chief Clemens Fuest said in a statement. GDP
British economy grows 0.7 per cent Britain's economy grew by a better-than-expected 0.7 per cent in the final three months of last year, official revised data showed yesterday as the country prepares for Brexit. For 2016 as a whole, however, the British economy grew by a lower-than-forecast 1.8 per cent, the Office for National Statistics said in a statement. Initial readings given last month by the ONS had put fourth-quarter gross domestic product growth at 0.6 per cent and annual GDP at 2.0 per cent. Environment
US automakers urge to withdraw fuel-efficiency rules A trade association representing General Motors Co, Toyota Motor Corp, Volkswagen AG and nine other automakers on Tuesday asked new Environmental Protection Agency chief Scott Pruitt to withdraw an Obama administration decision to lock in vehicle emission rules through 2025. On Jan. 13, then-EPA Administrator Gina McCarthy finalized a determination that landmark fuel efficiency rules instituted by President Barack Obama should be finalized through 2025, a bid to maintain a key part of his administration's climate legacy. Automakers have argued that the rules could result in the loss of up to 1 million jobs. Bank conspiracy
U.S. judge dismisses most of Euribor-rigging lawsuit A U.S. judge on Tuesday dismissed most of an investor lawsuit accusing several major banks of conspiring to manipulate the benchmark European Interbank Offered Rate, or Euribor, and related derivatives. In a 100-page decision, U.S. District Judge Kevin Castel in Manhattan said several claims in the proposed class action must fail because of a lack of evidence that the defendants conspired to restrain trade or because they involved foreign conduct. He also said only two of the six plaintiffs had antitrust standing.
M&A
UK minister plays down German claim to stock exchange "crown jewels" criticised the merger and said Britain stood to lose out if executive power shifted from London to Frankfurt. He said keeping the LSE headquartered in London was a matter of national interest and the British government must dig in. "It's not a normal commercial operation. This is much more about the acquisition of the crown jewels," Cash, who chairs the House of Commons' European Scrutiny Committee, told Reuters ahead of the debate in a telephone interview. "That's a matter of national interest. There is no conceivable reason why it
a collision course with Berlin and potentially torpedo the merger. The location of what will be Europe's biggest stock exchange has symbolic and operational significance, with regulators keen for oversight of its derivatives processing business. Advisers and company executives are divided about whether London's status as the main headquarters can be changed. Some people involved argue it could require a new vote by shareholders of both exchanges, which could upset the deal. LSE chief executive Xavier Rolet recently insisted that "the deal is set". Deutsche Boerse chief Kengeter described the question of a move only as "speculative". However, Britain's departure from the
Under the terms of a merger deal struck before Britain voted to leave the European Union, Deutsche Boerse Chief Executive Carsten Kengeter is due to head the combined group, with Deutsche Boerse trading floor London the home of the main holding company and its joint board. can be in our national interest to have But a number of German politicians it transferred to Frankfurt," he said. have made it clear they now want Cash said he hoped the debate would the headquarters to be in Frankfurt to trigger wider discussion about an isback the US$27 billion merger, which sue that has received little attention would create the biggest stock market from the British media or the governin Europe. ment so far as preparations for divorce Kirby said the deal that was agreed talks with the European Union hog named London as the headquarters the headlines. and that this could not be changed The meeting itself, attended by a without the backing of 75 per cent of small group, was overshadowed by a shareholders, adding that British regu- larger discussion in the House of Lords, lators also had to approve the merger. the upper house of the British parlia"We are following it closely and we ment, on a bill that will formally begin are in touch with the regulators," he said. divorce talks with the EU next month. If the British authorities, including the Bank of England, were to firmly National interest During the debate, Bill Cash, a Eu- oppose moving the LSE headquarters rosceptic Conservative lawmaker, to Frankfurt, it would put London on
European Union may isolate London as Europe's financial centre and that has turned the tables in favour of Frankfurt. "The reasons for the headquarters being in Frankfurt are crystal clear," Thomas Schaefer, the finance minister of the state of Hesse, home to Frankfurt and Deutsche Boerse, told Reuters earlier this month. One of the chief concerns for EU regulators is that London-based LCH Clearnet, majority owned by the London Stock Exchange, clears more than half of all interest rate swaps traded around the world, many of which are in euros. That means as soon as Britain leaves the European Union, the clearing and regulation of euro transactions will be outside the bloc. Reuters
Britain's departure from the European Union may isolate London as Europe's financial centre John O'Donnell and Andreas Kröner
B
ritain's government played down suggestions the London Stock Exchange's headquarters could move to Frankfurt after merging with Deutsche Boerse, but cautioned it was watching the deal closely. "We are not complacent about the position of UK financial services companies," Simon Kirby, the minister responsible for the City of London, told lawmakers on Tuesday during a parliamentary debate about the stock exchange's future.
Key Points US$27 bln deal in balance as German politicians demand HQ UK City minister says deal agreed has London HQ Kirby says government following deal closely
Results
AccorHotels 2016 profit beats forecasts The group, which competes with InterContinental, Marriott and Starwood, is undergoing a reorganisation Dominique Vidalon
AccorHotels, Europe's largest hotelier, reported a forecast-beating 3.8 per cent rise in operating profit for last year, helped by restructuring efforts and robust demand in most markets. The French company said earnings for its core, domestic market had been impacted as a result of weak demand following a spate of deadly, Islamist militant attacks in France, although the French market had started to recover in the fourth quarter. AccorHotels, which has more than 4,000 hotels ranging from the budget Ibis to the luxury Sofitel brand, also recruited former French President Nicolas Sarkozy as a board member to chair an international strategy committee. The group, which competes with InterContinental, Marriott and Starwood, is undergoing a reorganisation under Chief Executive Sebastien Bazin, who took over in August 2013.
The overhaul has entailed cutting costs, expanding in China and strengthening its presence in the luxury hotels market, with the acquisition of FRHI Holdings, owner of prestigious hotels such as London's
Key Points Operating profit beats forecasts Appoints ex-President Sarkozy to board French market under pressure but some signs of recovery
Savoy and New York's Plaza. AccorHotels has also struck several deals in order to strengthen its online and Internet offerings. Earnings before interest and taxes (EBIT) rose to 696 million euros (US$732 million) in 2016. This compared with Accor's own guidance
for EBIT between 670-690 million euros, while analysts polled by Financial Inquiry for Reuters expected 676 million. Revenues also rose 2.2 per cent on a like-for-like basis to 5.631 billion euros for 2016. In France, which makes 30 per cent of group profit, revenues fell 2.8 per cent while EBIT also declined 13 per cent on a like-for-like basis. Business was very challenging in Paris where a key measure of revenue per available room (REvPar) fell 13.2 per cent, although hotel demand outside the French capital was stronger. In the Paris region alone, hotel owners welcomed 1.5 million fewer tourists in 2016 compared to 2015, costing local tourism 1.3 billion euros in lost revenue, the regional tourism committee said this week. In July, AccorHotels announced a plan to turn property unit HotelInvest - whose assets are worth 6.6 billion euros - into a subsidiary in 2017 ahead of then selling the majority of its capital to institutional investors. AccorHotels reiterated yesterday that the plan would give it significant headroom for expansion. Reuters
Business Daily Thursday, February 23 2017 15
Opinion Business Wires
Bangkok Post Plans for special SIM cards for tourists have finally been scrapped by the national telecom regulator after facing strong opposition from the government, which says the idea would do more harm than good. The plan also drew heavy criticism at the first public hearing from participants who said it could lead to a potential threat to travellers' privacy. The National Broadcasting and Telecommunications Commission initially approved in principle a requirement that foreign visitors to Thailand use special SIM cards in their phones that could be tracked by the authorities in the interest of national security.
Putting Asia’s savings to work in Asia
F Philstar The Bangko Sentral ng Pilipinas (BSP) has vowed to guard against disruptive and excessive movements in the foreign exchange market as the peso continued to fall to its weakest level against the dollar in more than a decade. BSP Governor Amando Tetangco Jr. said the demand to service legitimate dollar requirement is moving the foreign exchange market. “Our surveillance shows there is market demand to service legitimate dollar requirement and that’s moving the market. There is also market positioning as some participants have a view on the dollar,” Tetangco said.
The Straits Times Two former foreign exchange traders who used the names of family members to set up trading accounts, which were then used to cheat their respective banks with bogus trades, were yesterday sentenced to jail. Former HSBC senior dealer Ivan Chng Kian Wee, 48, was jailed 15 weeks while former Deutsche Bank spot trader Toh Hway Khuan, 51, was jailed eight weeks. Prosecutors had sought six months for Chng and three months for Toh while their lawyers had asked for a fine. Both cases are unrelated. The trades involved took place in November 2009.
The Korea Herald South Korean credit appraisers award far more favourable ratings to large domestic corporations than Moody's Investors Service and other global players, a market tracker said Wednesday. The country's three major ratings agencies -NICE Investors Service, Korea Investors Service and Korea Ratings -- granted an average credit rating of AA+ to 51 local big businesses from 2014 to 2016, according to CEO Score. In contrast, Moody's Investors Service, Standard & Poor's and Fitch Ratings awarded an average rating of A to the companies over the cited period.
or more than three decades, Asia has experienced faster economic growth than any other region. As it has developed, Asia has been exporting its savings, through a trade surplus with the United States, and re-importing them, in the form of direct and portfolio investment via New York and London – a process that has created severe, though largely overlooked, financial tensions. At the end of 2015, the combined net asset position of China, Hong Kong, Japan, Korea, Singapore, and Taiwan amounted to US$7.3 trillion – almost exactly equivalent to the net international investment liability of the US. And this imbalance is not likely to go away any time soon. In fact, the US’s net liabilities have grown lately – to US$7.8 trillion at the end of September 2016 – owing largely to its continuing current-account deficit and stronger exchangerate effects. Why don’t Asian countries invest their savings within their own region? An obvious reason is that the US dominates global finance, particularly in the capital and currency markets. In a 2005 paper, Pierre-Olivier Gourinchas and Hélène Rey argued that the US, once the world’s banker, had become its venture capitalist, investing internationally, especially in Asia, instead of just borrowing and lending. But that doesn’t mean that Asian countries are better off investing in the West – not least because of the carry trade that took root after the 2008 financial crisis. As Hyun Shin and other economists at the Bank for International Settlements have argued, low developed-country interest rates and a weak dollar drove financial markets, led by the New York and London hubs, to borrow money in lowinterest-rate currencies and invest in higherinterest-rate currencies. This financial game has had a far-reaching impact. While the conventional view is that trade imbalances drive exchange rates and capital flows, financial accounting in Japan, for example, tells a different story. From 2010 to 2015, the cumulative external surplus accounted for just 44 per cent of the net change in Japan’s investment position. Financial-account transactions caused 32 per cent of that change, while valuation changes relating to exchange and interest rates accounted for the rest. Japan’s persistent current-account surpluses should have strengthened its net international asset positions. But, thanks to the appreciation of foreign holdings of Japanese equities, the country’s net international asset position actually deteriorated, from a peak of US$3.8 trillion at the end of 2012 to US$2.8 trillion at the end of 2015. As Bank of Japan economists point out, Japanese holdings of foreign assets are less profitable than foreign holdings of Japanese assets. What Japan should be doing is investing more in highgrowth Asia. At the end of 2015, only 10.1 per cent of ¥574.8 trillion (US$4.8 trillion) in gross outward investment remained in Asia, with 70 per cent going to North America, Europe, and Oceania. The composition of Japan’s portfolio investments, which comprised 73.6 per cent of the country’s total outward investment at the end of 2015, is even more uneven, with only 3.5 per cent invested in Asia and 72.4 per cent invested in North America, Europe, and Oceania. Even Central and Latin America received onethird more Japanese portfolio investment than Asia. This preference for investing outside Asia is shared
“
Andrew Sheng a Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance Xiao Geng President of the Hong Kong Institution for International Finance, is a professor at the University of Hong Kong
by the region’s other major savers – namely, China, Hong Kong, South Korea, Taiwan, and Singapore – even though returns within Asia are generally higher than elsewhere. As a result, the region has been made hostage to volatility in capital flows, exchange rates, and interest rates. The problem is that, two decades after the Asian financial crisis, there has been little progress in institutionalizing Asian financial intermediaries that will channel savings to high-return projects within the region. In India, for example, the top ten investment banks are from the US and Europe. The situation is not much different in Hong Kong and Singapore. Even in China, where local investment institutions are growing rapidly, the ability to channel funds to the high-return real sector remains limited. Now that US and European banks – driven by capital and regulatory constraints, as well as the prospects of higher US interest rates and a strengthening dollar – are beginning to move away from Asia, the pressure to remedy the situation is stronger than ever. But, instead o f s u p p o rti n g Asi a n financial institutions’ capacity to take over the intermediation of the region’s savings, Asian financial regulators are focused on adopting the new global financial regulatory standards being pushed by their American and European counterparts – standards that American and European politicians are threatening to unwind. The imperative to change this approach is magnified by US President Donald Trump’s “America first” credo, which is almost certain to translate into protectionist policies. Such policies will push Asian investment further into the dollar trap, because Asian savings will be used to chase speculative dollardenominated assets outside the region, instead of to meet Asia’s own needs. To be sure, in the longer term, China’s “one belt, one road” initiative, together with the internationalization of the renminbi, will help to weaken the dollar’s grip on Asia. But that remains a distant prospect. In the meantime, the central banks of leading Asian surplus economies (particularly China and Japan) need to work with other major central banks (especially the European Central Bank and the Bank of England) to change how excess savings in highgrowth regions are used. The goal should be to ensure that savings in surplus countries – including, say, Germany, which has a larger current-account surplus than China and Japan – are used wisely, to help sustain growth throughout the world economy. Trump’s plan to put America first may sound straightforward. But it fails to recognize that, if the emerging economies falter, everyone will lose. With Trump seemingly unwilling to rethink his approach, it is up to Asia and its international partners to gird themselves – and the entire global economy. ProjectSyndicate
In the longer term, China’s 'one belt, one road' initiative, together with the internationalization of the renminbi, will help to weaken the dollar’s grip on Asia
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16 Business Daily Thursday, February 23 2017
Closing Criminal offences
Forex price rigging to be prosecuted in S.Korea
If, however, the targeted asset's value multiplied by three exceeds 500 million won, the guilty party can be fined up to three times the targeted value, according to Collusion, price-fixing and disseminating false news the regulations. in the foreign exchange market will be punishable by For example, if a guilty party's targeted asset was worth criminal law in South Korea for the first time starting 500 million won, he or she could face a fine of 1.5 billion later this year as the government toughens up won. regulation. The courts will decide whether to define targeted assets In enforcement regulations set out in an amendment on foreign exchange trading laws issued yesterday, the as profits made after a criminal act or as assets used finance ministry said a person found guilty of disturbing in the process of a crime, finance ministry officials told Reuters. order in foreign exchange trading for personal profit could be fined up to 500 million won (US$438,000) or The amendment will be enforced from July 18 this year. Reuters face up to five years in prison.
Insurance
China watchdog vows to severely punish speculators The regulator has since last year tightened curbs on investment-type policies and restricted insurers’ acquisitions of listed companies
T
he chairman of China’s top insurance regulator vowed to impose “stringent” rules and “severely” punish short-term speculation by insurers, the latest sign of tightening controls on the nation’s industry. The watchdog will also curb “ agg r essi v e ” p ri ci n g a n d th e “unreasonably” high returns of some insurance products, Xiang Junbo, Chairman of the China
Insurance Regulatory Commission (CIRC), told reporters in Beijing yesterday. Insurers shouldn’t attempt to interfere in the management of listed companies, Xiang said. The CIRC “will never allow insurance to become a rich man’s club, let alone allow financial crocodiles to use insurance as their channel or hideout,” Xiang said. Any insurer that “challenges the regulatory bottom line, tarnishes the industry’s image or harms the
people’s interest” will be driven out of the market, he said. The regulator since last year has tightened curbs on investment-type policies and restricted insurers’ acquisitions of listed companies, seeking to rein in systemic risk. Rapid sales of such products, typically short-term, in recent years have heightened liquidity risks, and some smaller insurers used the proceeds to embark on a buying binge in the stock market, embroiling developer China Vanke Co. in a tussle for control.
Foresea suspended
The regulator in December suspended Foresea Life Insurance Co.,
The regulator "will never allow insurance to become a rich man’s club" Xiang Junbo, Chairman of the China Insurance Regulatory Commission which was involved in the fight at China Vanke, from selling new universal-life policies and froze new
stock purchases by Evergrande Life Insurance Co., after the nation’s top securities official slammed leveraged stock acquirers as “robbers.” The watchdog then released a draft rule that would cap a single shareholder’s ownership in an insurance company at 33 percent, down from 51 percent currently. In January, the CIRC issued new rules banning insurers from jointly acquiring listed companies with investors from other industries. When acquiring control of public companies, insurers also need to seek regulatory pre-approval, use their own money, and limit targets to the financial industry or insurance-related businesses with stable cash-flow expectations, according to the new rules. Even as it clamps dow n on risky industry practices, China is considering easing limits o n f o r ei g n o w n e rshi p i n l i f e insurers, people familiar with the matter said earlier this week. The government may raise the long-standing 50 percent ceiling on an overseas life insurer’s stake in their local joint venture or let them wholly own a local unit, the people said, declining to be named as the discussions are not public. No final decision has been made, they said. Bloomberg News
Embezzlement
Logistics
Going public
ABB uncovers fraud at S. Korean subsidiary
JD.com to build world's first drone delivery network
IPO's 543 per cent surge halted by Hong Kong regulators
E-commerce giant JD.com has teamed up with the government of northwest China's Shaanxi Province to build the world's first drone delivery network. An air base will be built for large- and medium-sized drones that can deliver multiple tonnes of cargo to a range of over 300 kilometres, according to a strategic cooperation agreement signed on Tuesday. Serving the whole province, it will be the world's first aviation logistics network for low-altitude unmanned aerial vehicles (UAVs) on a large scale. Many global logistics giants including Amazon and DHL have tried unmanned planes, but most tests were on a small scale and within a short range. Shaanxi, the start of the ancient Silk Road, is in the process of reinventing itself as one of northwestern China's key logistics centres. The new drone service will boost regional growth and improve delivery services across rural Shaanxi. It is expected that the network will create more than 10,000 jobs and attract enterprises with a combined turnover of more than 100 billion yuan when the network took shape in 2020. Xinhua
Hong Kong’s securities regulator suspended trading in a company’s stock after it rose 543 percent on its public market debut. Shares of GME Group Holdings Ltd., a tunnel excavating subcontractor, were suspended from 1 p.m. local time yesterday by the Securities and Futures Commission (SFC). The shares were trading for the first time on the city’s exchange for small companies, called the Growth Enterprise Market. GME Group started trading at HK$0.54, and had risen to HK$3.47 by the time of the halt, according to data compiled by Bloomberg. More than 20 million shares changed hands in the morning session, the data show. The halt comes a month after the regulator and GEM’s parent Hong Kong Exchanges & Clearing Ltd. (HKEX) warned listings applicants and their sponsors on the bourse to follow rules that ensure a fair market. Half of the 10 best first-day gainers in 2015 saw their share prices plunge by more than 90 percent from their peak within a month, HKEX and the SFC said in a joint statement. Many GEM stocks have highly concentrated shareholdings and a small shareholder base, they said. Several GEM placements, including clothing firm My Heart Bodibra, pulled their listings after the statement. Bloomberg News
Swiss-Swedish engineering giant ABB said Wednesday that it had uncovered significant embezzlement at its South Korean subsidiary, which it warned would heavily impact its 2016 earnings. The company said it had discovered "a sophisticated criminal scheme related to a significant embezzlement and misappropriation of funds" at the South Korean unit. ABB, a top player in the global electrical engineering sector, warned that the fraud would cut into the unaudited results it announced earlier this month with a pre-tax charge of about US$100 million. "ABB has initiated mitigating actions to reduce the impact of this criminal activity on its results significantly including recovery of misappropriated funds, legal claims and insurances," the company said. ABB said the treasurer at its South Korean subsidiary had gone missing on February 7, and the company had subsequently discovered the individual had been "forging documentation and colluding with third parties to steal from the company." It said it had immediately launched a full investigation and was working with local police and Interpol to resolve the matter. The company said it had checked and reconfirmed the balance of its global bank accounts and had determined that the embezzlement was limited to South Korea. AFP