Zhuhai offers more ways to Delta bridge Infrastructure Page 2
Thursday, January 5 2017 Year V Nr. 1207 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong IPO
Automotive
Sinopec mandates six banks to advise on unit revamp ahead of IPO-IFR Page 9
Faraday Future claims Tesla-beating supercar Page 10
www.macaubusinessdaily.com
Gaming
Land
Analysts foresee revenue up-tick this year Page 7
Gov’t to take back five Seac Pai Van industrial plots Page 2
For A Few Dollars More Monetary
A cash declaration bill passed its first reading in the legislature yesterday. Protection of personal data. And impact upon the gaming industry. These were the focus of legislators. While Customs Director Alex Vong claimed the new scheme would not impact legal cash flows. The bill proposes a declaration threshold of MOP120,000. Page 4
Trial by repetition
The bribery trial of former Prosecutor-general Ho Chio Meng resumed yesterday. Repeating the same answer for each charge read out, the ex-official was accused of stalling for time. Justice Sam Hou Fai fenced with the defendant throughout the hearing.
Big traffic fines in force
Transport A significant increase in vehicle penalties. Effective January 1. Fanning controversy in society. The Transport Bureau speaks of calming local traffic. With fines high enough to discourage illegal parking - and the growth of vehicle numbers. Page 3
Staunching the flow
Court Page 5
HK Hang Seng Index January 4, 2016
22,134.47 -15.93 (-0.07%) Worst Performers
China Shenhua Energy Co
+3.28%
Cathay Pacific Airways Ltd
+1.15%
China Mengniu Dairy Co Ltd
-1.33%
Hang Seng Bank Ltd
-0.89%
Want Want China Holdings
+2.82%
Li & Fung Ltd
+1.13%
PetroChina Co Ltd
-1.21%
Henderson Land Develop-
-0.72%
Lenovo Group Ltd
+2.30%
Cheung Kong Property
-0.96%
CK Hutchison Holdings Ltd
-0.72%
Wharf Holdings Ltd/The
+2.23%
AAC Technologies Holdings
+1.28%
+1.04%
China Life Insurance Co Ltd
Hengan International Group
+1.03%
Hong Kong Exchanges &
-0.92%
Industrial & Commercial
-0.64%
Kunlun Energy Co Ltd
+0.86%
China Petroleum & Chemical
-0.90%
Sands China Ltd
-0.60%
19° 22° 19° 23° 19° 22° 17° 23° 17° 21° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
Currency China has studied several scenarios. For yuan and capital outflows this year. And is preparing contingency plans. Stress tests, models and field research are all in the mix. Along with higher scrutiny of citizens’ conversion quotas and stricter requirements for banks reporting cross-border transactions. Page 8
2 Business Daily Thursday, January 5 2017
Macau Real estate
Realtor licence opens online application
for the first time. In addition to the submission of application documents, Local real estate agents applicants can settle their and brokers can now apply for their licences online, starting payments through the online system. As at the end of 2016, from yesterday, according to there were 4,684 real estate a press release published by the Housing Bureau. The online brokers and 1,499 agents service is for agents and brokers with valid licences in the city, according to the Bureau. A.L. who apply for their licences
Land
Gov’t to reclaim five plots in Seac Pai Van industrial zone
T
he government announced the invalidity of land grants for five plots occupying a total of 16,210 square metres in the industrial zone of Seac Pai Van in yesterday’s Official Gazette. The five lots - named SA, SQ1, SG2, SF and SD - were granted to five different awardees for industrial use in 1989 and 1993. Secretary for Transport and Public Works Raimundo do Rosario said in the dispatches that these concessionaires had failed to fulfil the land use purpose of their plots. The awardee of lot SA was Fábrica de Plásticos e Borrachas, S.A.R.L, which was supposed to build an eight-storey industrial building, whilst the SQ1 plot was granted to a company currently named Ieng Four Limitada for constructing a twostorey building. The other three concessioners were Companhia de Desenvolvimento e Fomento Predial Hua Quan Lda, Lau Lu Yuen and Baía do Dragão Investimento Imobiliário Lda. Companhia de Desenvolvimento
and Mr. Lau both should have developed lots SG2 and SF into an eight-storey building, whilst Baía do Dragão Investimento was supposed to develop a nine-storey industrial building. The dispatches read that the
companies would have no right to compensation from the government. The land awardees can still file a judicial appeal to the Court of Second Instance within 30 days, as well as a notice of objection to Chief Executive Fernando Chui Sai On within 15 days.
The current Land Law mandates that no extensions are permitted for temporary or conditional land concessions carrying a validity of 25 years if developers fail to complete their projects within the land-use term. K.L.
Infrastructure
Business
More ways to the super bridge
Infinity Development profit drops
Zhuhai authorities said its border for the delta bridge would connect to more transportation facilities Zhuhai authorities have announced a detailed plan for the control of its border checkpoint for the Hong Kong-Zhuhai-Macau Bridge, providing more ways for travellers from the MSAR to get to the border for the super bridge. According to the Zhuhai Municipal Housing & Urban And Rural Planning & Construction Bureau, the Zhuhai border for the delta bridge will connect to the Mainland city’s water dock and underground tunnel railway that will link to the MSAR border in the future. The Mainland Bureau said the new connections aim to provide more
transport options for residents of the two regions to get to the bridge. In addition, the plan outlines the scope of the Zhuhai border on the artificial island - of which the east part will link to the delta bridge, the west to Zhuhai and the south to the MSAR border checkpoint. Of the total area of 107.3 hectares, 73.1 hectares of the artificial island will be used for Zhuhai’s border facilities, occupying 68.1 per cent of the total, whilst some 24.2 hectares will be reserved areas. Commercial facilities or other public facilities will occupy some 9.64 hectares and 0.57 hectares on the island, respectively. A.L.
Chemical product research, development, manufacturing and distribution company Infinity Development Holdings Company Limited saw a 24.4 per cent drop in profit for its 2016 fiscal year, according to the company’s filing with the Hong Kong Stock Exchange. The company - which operates in Macau, Hong Kong, the Mainland and throughout Southeast Asia - recorded a HK$37.1 million (US$4.7 million) profit for the year ended September 30, and generated revenue totalling HK$496.2 million for the period, a drop of 8.7 per cent year-on-year. Regarding the company’s local operations, it saw a 16.8 per cent reduction in its non-current assets in the MSAR year-on-year, falling from HK$105.3 million in fiscal-2015 to HK$87.6 million. According to the filing, over the course of the fiscal year the company generated HK$175.8 million and
HK$40.7 million in gross profit and profit before taxation, respectively, despite seeing declines in company sales in most regions it operates in, with the exception of Vietnam and Indonesia. Vietnam contributed the largest turnover of the company’s regional operations, at HK$255.6 million. The company was founded in Macau in 1987 by Iao Son Hong. Given the ongoing expansion of the group’s production facility in Vietnam, the company is expecting an average growth in results for the coming year due to the completion and commencement of operations. With the continued growth in global demand for footwear, and being a manufacturer and provider of adhesives and hardener for the footwear manufacturing industry, the company further stated in its filing that it anticipates stable growth next fiscal year. C.U.
Business Daily Thursday, January 5 2017 3
Macau Transport
DSAT: New fees to deter illegal parking The Bureau perceives the new transport charges will also help reduce growth in number of vehicles Nelson Moura nelson.moura@macaubusinessdaily.com
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he city’s latest transport fees adjustments are meant to act as “dissuasive measures” for preventing illegal parking and controlling the increase of vehicle numbers rather than to “make a profit”, said Director of the Transport Bureau (DSAT) Kelvin Lam Hin San yesterday. “The government has been [complained about] for setting such exorbitant fees but we made the adjustments based on international standards,” he said. “Transport fees haven’t been updated for the past 19 years while government expenses for removals of vehicles are considerably high.” The statements were made during a press conference held yesterday by the DSAT and the Public Security Police Force (PSP) in response to the controversy created by the new adjustment as well as the short period of time for the new adjustment to take effect. Announced on December 31 and implemented on January 1, the adjustment covers a wide range of penalties, with the fee for the removal of vehicles for illegal parking seeing the highest growth, rocketing between 400 per cent and 1,233 per cent to MOP750 (US$93) for motorcycles and
MOP1,500 for light vehicles vis-a-vis the previous MOP120 and MOP300.
Covering expenses
The transport official claimed yesterday that the new adjustment was made after taking into account administration expenses, inflation and other factors. According to the DSAT Director, the previous penalties were not high enough to dissuade infractions and cover the government’s removal costs, claiming the new adjustments are intended to “make the population ponder more before purchasing vehicles”. As of October, some 118,314 automobiles and 130,594 motorbikes were registered in the city. Mr. Lam pointed out that the government’s previous increases in transportation fee have helped narrow the growth of vehicles in the city, with 2016 being the first time the growth rate has been less than 1
per cent year-on-year. Asked by reporters how much in total the government had received in transport fines last year and how much the government is expected to reduce its expenses following the new adjustment, the official responded it would be “hard to calculate”, saying the government had handled a total of 900,000 fines for illegal parking in 2016. Meanwhile, according to Public Security Police Force (PSP) Chief Leong Man Cheong, since the new fees have been implemented, 44 vehicles have been fined for illegal parking.
Not taking it back
In fact, following implementation, legislators José Pereira Coutinho and Leong Veng Chai have announced the staging of a public protest this coming Sunday, urging the government to rescind the adjustment, complaining that the new regulations did not proceed with proper public consultation.
Yet, the DSAT head said yesterday that the government had analsed the transport fee adjustment since 2013 with due public consultation. He added that the reason the government only made the adjustment public on December 31 was to “prevent residents rushing and lining up to apply for valuable licence plate numbers” as new rules for getting a licence plate number in the city change from first come, first served to issuing a plate number to the highest bidder, with basic bidding prices set at MOP40,000 for light vehicles and MOP6,000 for motorbikes. Asked if the government would consider reducing the fee amounts or rescinding the regulations if the public was greatly against the new regulations, the DSAT representative only reiterated that the increase was “necessary” in order to reduce government expenses and that an evaluation of the new fees would be conducted “every six months”.
4 Business Daily Thursday, January 5 2017
Macau Opinion
Ashley Sutherland-Winch* New Year, New Tech The New Year is upon us and that means it is time for the world’s largest technology convention - the Consumer Electronics Show (CES). The massive conference is held in Las Vegas this week. Around 200,000 people will travel to Sin City to share new innovations, learn about trends and gadgets, and view the showcase of new and updated technology for 2017. This year marks the show’s 50th anniversary and the event is sure to be jampacked with exciting new tech - from self-driving cars to voice-controlled personal assistants to drones. China may make the biggest impact at the event with more than 1,300 registered exhibitors as reported by the BBC. Xiaomi, a small Beijingbased company, is setting its sights globally by launching an all-new product at CES. LeEco, Hisense, TCL and more are Chinese companies that plan to unveil products at CES to further expand their brand’s reach beyond the Chinese market. The anticipated highlight of the show this year is said to be self-driving automobiles. A few years ago, Ford presented this technology and now CES will feature an entire conference hall for automakers and suppliers to present their latest technology. Uber recently rolled out self-driving cars in some American cities for people to try and tech blogs are buzzing with speculation that 2017 could be the year when self-driving car technology reaches the masses. Drone technology is another exciting piece on the CES agenda. This year, we may see drones optimised for flying indoors, used for high-speed racing, and even drones that can dive underwater. While they could be confused for a drone as they fly out of your ear canal during exercise, Apple finally released the much anticipated AirPod in December and CES is sure to offer many other competitors in the wireless ear phones market for consumers. Wires could be a thing of the past, if only consumers can keep track of their tiny devices. The New Year will bring new beginnings and new technology. Major trends to watch this year at CES and throughout the market are smart home technology, voice assistants, self-driving and electric cars, bigger and better televisions, new exciting laptop computers, and wearables. 2017 is going to be an exciting and innovative year in high-tech and it will be interesting to see the innovations unveiled this week in Vegas. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Legislation
New cash declaration system passes first reading Legislators questioned whether the government could properly protect personal information collected and whether the new system would affect the gaming industry Annie Lao annie.lao@macaubusinessdaily.com
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esterday, the Legislative Assembly (AL) passed a bill proposing a cash declaration scheme at local immigration checkpoints on its first reading. The new declaration system mandates visitors and residents carrying cash or negotiable instruments valued at or more than MOP120,000 (US$15,022) must declare and disclose the amount brought into the MSAR via a red declaration channel at local Immigration checkpoints. The bill seeks to combat money-laundering activities in the city and the finance of terrorism across the world. “Visitors and residents are also required to disclose the amount if asked by Customs officers at departure of the local territory,” said the Director-general of Macao Customs Services, Alex Vong Iao Lek, during yesterday’s plenary session. “Otherwise, if the person is found to be in breach of the declaration and disclosure obligation, he or she will be fined from MOP1,000 to MOP500,000, or equivalent to 1 per cent to 5 per cent of the amount required to be declared and disclosed,” he added. However, legislator José Coutinho
queried how the government could ensure the personal information collected through the new system is protected by Customs. The Customs official said all personal information would be protected and stored by Customs for reference only. In addition, legislator Fong Chi Keong argued the new declaration system may affect the city’s gaming industry given many visitors like bringing cash to Macau. “I think the new bill will have a negative impact upon the city’s gaming industry since most of our visitors are used to bringing a large amount of cash to Macau,” legislator Fong said. But Director Wong does not perceive the new system will cause any significant change to the habit of visitors. “The bill only requires visitors and residents to declare the amount to Customs. They don’t have to change their habits of carrying cash to the city. Thus, the legal flow of cash will not be hindered,” the official opined.
Reform civil services
In addition, the Assembly passed the first reading of a bill reforming the civil servant career system yesterday. Secretary for Administration and Justice Sonia Chan Hoi Fan said the first phase of the bill would revise the current salary rate for three
special positions of the Administration; namely, marine traffic controllers, topographic surveyors and hydrologists. The new bill also proposes regulating the requirements for the aforementioned positions, including academic qualification and work experience, in order to optimise the promotion process for such positions, the Secretary said. During the discussion, legislator Coutinho suggested the government establish measures to improve job retention rate of government departments in order to attract more local residents to apply for such positions. “A more detailed job description and educational requirements for such job positions should be outlined in order to avoid any unfair treatment of civil servants in the future,” the legislator said. “Also, a comprehensive study should be conducted on the less attractive positions such as marine traffic controllers, to find out the reason of the high manpower turnover in such positions.” Legislator Jose Chui Sai Peng also urged the government to make proper educational requirements [mandatory] for certain civil servant posts. Meanwhile, Secretary Chan said the government would continue to conduct a comprehensive review of the current civil servant system, saying: “A comprehensive review of both general and special positions will be conducted. The government will also collect different opinions through consultations in order to make a comprehensive reform.”
Business Daily Thursday, January 5 2017 5
Macau Ho Chio Meng trial
Top court says Ho stalling Top court judge Justice Sam Hou Fai has criticised the way the ex-Prosecutor-general defended himself in yesterday’s hearing, saying it was to delay the progress of the trial Cecilia U cecilia.u@macaubusinessdaily.com
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he President of the Court of Final Appeal, Justice Sam Hou Fai, yesterday criticised former Prosecutor-general Ho Chio Meng’s repetitions of the same denial over his bribery charges, complaining his intention was to drag his feet. “I never appointed any of my subordinates to enter contracts with any specific companies,” repeated Mr. Ho following every charge read by the judges during the first half of yesterday’s hearing. The ex-official also repeatedly emphasised that his signatures on the public contracts in question were due to his responsibilities as Prosecutor-general. However, following his repetitions, the top court President, the presiding judge in the case, declared that the defendant could only make one statement for a group of charges under one category from then on, considering the time needed for both prosecutors and defendants to provide proof and evidence in later sessions, as well as the summoning
of over 100 witnesses. The ex-Prosecutor general expressed his disagreement with the word ‘stalling’ used by the top court judge. He argued it was necessary for the court to hear the charges one by one due to the differences between the contracts. But he added that he respected the decision made by the court. The decision also led to an early halt of the trial yesterday afternoon in order to give adequate time for the ex-official to prepare a statement for each group of charges. Of those contracts in question in the morning, most were related to the purchase of computer software, computing facilities maintenance for the Prosecutor’s Offices, with the total contracted amount valued at MOP3.8 million (US$474,400) while Mr. Ho is suspected of obtaining MOP638,803. During fellow judge Song Man Lei’s reading of his accusations, the ex-official pointed out that suspect companies stating clear quotations of products and services to the Prosecutor’s Office should not be considered as shell companies, as they should have provided the requested products
and services in order to be able to list the prices.
Reasonable works for government residence
Meanwhile, the afternoon session of the trial primarily heard charges related to the contracts of maintenance, refurbishment and installment for the Prosecutor’s Office as well as Ho’s government residence. The former Prosecutor-general revealed his acknowledgement of the contracts related to the refurbishment and maintenance of the government residence on Penha Hill, admitting he had signed those contracts without detailed examination. Seven companies awarded maintenance contracts are suspected of being shell companies under Ho’s control. According to the accusation, the contracts granted to these seven companies were worth around MOP22 million, from which the former top prosecutor is suspected to have obtained MOP5 million. On the other hand, the defendant remarked that it was normal and reasonable for the Office to appoint one regular company for the works, presenting a previous government reply to one legislative enquiry indicating assigning one regular company for public contracts could ensure security and privacy. He affirmed that maintenance works at his government residence were definitely well performed and
completed during his residence there for over 15 years, claiming those projects were not via shell companies. Following Ho’s statement, Justice Sam questioned if Ho was aware of those companies. In response, the ex-official denied knowledge of those companies, saying he would approach Wong Kuok Wai – one of the prosecuted suspects - if anything needed to be fixed. He emphasised that he was not aware of Wong’s participation in any shell companies. For certain contracts worth less than MOP1,000, Mr. Ho claimed he doubted whether anyone would bother to defraud the government for just a few hundred patacas.
No public tenders
According to the accusation, a total of 252 contracts for maintenance and refurbishment works were granted by the former Prosecutor-general, of which 145 were directly contracted without enquiry. The top court president questioned the absence of quotations, to which Ho answered he knew nothing about the matter. Meanwhile, Mr. Ho requested the court categorise the contracts by types of project rather than the current chronological order. But the presiding judge rejected this request, stating that it was of no use since Ho claimed to have no knowledge of any of the contracts made.
Ho Chio Meng, former Prosecutor-general
Corporate
UM professor elected president of global translation association
The University of Macau (UM) saw its professor Li Defeng - Director of the Centre for Studies of Translation, Interpreting and Cognition of the Faculty of Arts and Humanities - elected president of the World Interpreter and Translator Training Association (WITTA)
Corporate at the organisation’s First Congress and Inaugural General Assembly held in Guangzhou. The newly founded WITTA is an international non-governmental and non-profit organisation dedicated to bringing together industrial and academic institutes to promote interpreter and translator training worldwide.
Galaxy awarded top fashionable tourist attraction
The Promenade Shops of Galaxy Macau have been awarded ‘Asian Top Fashionable Tourist Attraction of the Year – Macau’ in the Fashion Asia Awards 2016. The Fashion Asia Awards are renowned as the Oscars of the Asian fashion industry. “We are extremely proud to receive this award in
recognition of the fashionable shopping, dining and leisure opportunities on offer at The Promenade Shops at Galaxy Macau,” said Amy Lee, Assistant Senior Vice President, Retail Marketing Services of the company. The Promenade Shops, launched in May 2015, features over 200 luxury and lifestyle brands, including flagship stores alongside designer boutiques and high street favourites.
6 Business Daily Thursday, January 5 2017
Macau Development
European Commission appoints SPI for Beijing research house The Portuguese consultancy firm, who has a branch in the MSAR, will develop a European research and innovation centre in the Chinese capital city Nelson Moura* nelson.moura@macaubusinessdaily.com
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he European Commission (EC) has appointed Portuguese consulting firm SPI to develop a European research and innovation centre in Beijing. The centre’s services will include ‘organizing events to increase exchanges between Chinese and
European researchers’ and ‘producing reports on China’s evolution in the field of technology,’ the company said in a statement. “The purpose is to create a centre capable of supporting researchers, entrepreneurs, and European startups and SMEs in their first steps in entering the Chinese market,” said SPI administrator Sara Medina. Operations are slated to start in 2019 as part of the European Research
and Innovation Centre of Excellence in China (ERICENA), a 48-month initiative implemented by eight European and five Chinese partners with a 3 million euro (MOP25 million/ US$3.1 million) budget for promoting science and technology innovation in China. The initiative is also part of the country’s transition strategy for the Chinese economic model, aiming for greater preponderance of services and technology, to the detriment of the manufacturing sector. ERICENA will be financed through Horizon 2020, the largest European Union Research and Innovation programme, with nearly 80 billion
euros available in funding until 2020. The Portuguese consultancy firm will co-operate with different European entities and the Ministry of Science and Technology of the People’s Republic of China for the project. Founded in 1997, SPI is a private consultancy firm with headquarters in Porto, Portugal, focusing on science and technology innovation, territorial development, promoting companies internationally and divulging innovation knowledge. Since its founding, SPI has opened branches in Europe, the United States, Singapore and Macau, with 65 fulltime consultants currently working for the group. *with Lusa
Money laundering
Sun Yee On leader arrested for money laundering The money reportedly involves illegal loan sharking in Macau Hong Kong triad group leader Lee Yuk-tim was arrested by Hong Kong police on Tuesday for laundering HK$267 million (US$33.2 million), which reportedly involves illegal loan sharking activities in Macau casinos. According to Hong Kong media reports, the suspect and his wife were arrested in a police action named ‘Hardfrost’ on Tuesday.
The two were suspected to have laundered the money via seven different bank accounts between August 2007 and October 2014. Mr. Lee – a.k.a ‘Ghost Tim’ and a former president of the Hong Kong Muay Thai Association has been recognised as one of the leaders of Hong Kong triad gang Sun Yee On. In 1996, Lee was arrested in Macau
for several offences following his flight from Hong Kong for several years. He was later jailed
in his home city for eight months, according to South China Morning Post.
Business Daily Thursday, January 5 2017 7
Gaming In Brief Poker
Local poker player earns third most worldwide
Gaming
Continuing up-tick forecast January gross gaming revenue is expected to increase anywhere from 6 pct to 14 pct y-o-y, with overall 2017 results predicted to increase 5.5 pct y-o-y Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com
A
lthough coming off D ec e m b e r w i th l ess positive results than expected by some analysts, in particular in spite of the new openings on the Cotai Strip, positive expectations are set for 2017 results, with a stronger VIP presence heralding continued growth for the year. Predictions by Aegis Capital Corp. see gross gaming revenue for the first month of the year increasing 6 per cent to 9 per cent year-on-year, with analysts noting that the start of Chinese New Year, January 28, should be ‘critical to the monthly result’. The uptick driven by the holiday is also factored into estimates by analysts at Wells Fargo who note that they ‘account for strength in the last week of the month’, predicting a 10 per cent to 14 per cent year-onyear increase for the month. Both groups note that January traditionally tracks down monthto-month; however, this year revenues should be positively boosted by the beginning of the
holiday. Nevertheless, analysts at Aegis point out that Chinese New Year trade has proven “choppy” in the last five years. When taking an overall view, analysts at Telsey are confident that the signs all point to an overall recovery, with predictions for the full 2017 placing gross gaming revenue up 5.5 per cent year-onyear, as compared to 2016’s 3.3 per cent year-on-year decline, the third consecutive yearly decline yet drastically slowed from 2015’s 34 per cent year-on-year freefall. ‘ Pa r t i c u l a r f o c u s o n th e sustainability of the recovery of the VIP business’ has surprised the analysts, who note they had expected business to decline in 2017. Current estimates are for a 1.5 per cent contraction in VIP, a 14.5 per cent growth in mass, and a 2.9 per cent increase in slot gross gaming revenue, note the Telsey analysts in their whole-year estimates.
On the horizon
A n a l y sts at W e l l s Fa rg o a r e still hedging their bets, noting ‘the Chinese economy remains challenged’, in particular regarding
the anti-corruption campaign, which it expects ‘is likely to remain in place’. In addition, despite the recent stabilization seen in the MSAR’s gaming revenues, the group notes that ‘some market growth has been driven by Chinese monetary stimulus and the re-inflation of the Chinese housing bubble – influences we think won’t drive prolonged, above-trend growth’. Analysts at Telsey also point to the ‘significant spike in VIP business’, noting that ‘it is not clear whether it is sustainable’. Despite analysts at Aegis opining that new property openings, namely Wynn Palace and The Parisian, ‘are seemingly not sparking significant market expansion’ – a sentiment echoed by Telsey, noting ‘the expected impact […] has been less than anticipated for all operators’. Telsey analysts believe this sets the scene for 2017, observing ‘the context for the new properties is […] more positive than expected’. The group notes that MGM ‘may be the most compellingly priced Macau name,’ while also remarking that ‘current levels are attractive entry points’ for both shares in Wynn and Las Vegas Sands. However, the group describes Wynn Palace’s opening as ‘lukewarm’ compared to Sands’ performance, with ‘strong volumes at all its Macau properties since The Parisian opening’.
M&A
Landing now wholly owns Jeju Shinhwa World Chinese real estate developer Landing International Development Ltd. announced that it is now the sole owner of casino-resort project Jeju Shinhwa World on Jeju Island of South Korea, according to its filing with Hong Kong Stock Exchange on Tuesday evening. The project, previously known as
Myths and History Park, was halfowned by Landing and Singaporean gaming operator Genting Singapore PLC. I n N o v e m b e r, G e n t i n g a n nounced to the Singapore Exchange that it was to dispose of the company’s shares in its joint ventures for the development of
the Jeju casino-resort project. A Landing filing at that time indicated the total consideration of the deal was US$381 million (MOP3 billion). The Chinese developer also said in the filing that the deal would enhance its ‘flexibility in the development of the Jeju Project’. K.L.
MSAR resident Chun Lei Zhou generated US$748,018 (MOP5.98 million) in online poker live cash games last year, which is the third highest in the world, according to poker website HighStakes Database. The local poker player, whose online name is SamRostan, also registered the highest number of poker hands played among members in the ranking. Russian player Alexander Kostritsyn, also known as Joiso, topped the ranking with earnings of some US$1.5 million for last year, and is also the only poker player to earn more than US$1 million. N.M Project
Sochi Casino and Resort opens doors today Sochi Casino and Resort is slated to open today in Krasnaya Polyana, a 165,000 square metre gaming zone in Russia’s Black Sea city of Sochi. The venue of the 5-star complex, situated in the mountain ski resort of Gorky Gorod, is the reconstruction of an Olympic media centre. The four billion ruble (MOP523.54 billion) casino is owned by Domain LLC, the sole operator of the Sochi gaming zone. The establishment of the gaming zone in Sochi was signed by Russia’s Prime Minister, Dmitry Medvedev, in late August 2016. Gaming has been banned from major Russian cities since 2009 except for four designated areas: the Primorsky Territory in Russia’s Far East, the Kaliningrad Oblast, Altai Krai, and Azov-City, while Sochi is to become the fifth area to welcome casino gaming development in the country. S.Z. Investment
Beijing firm mulls Russian Far East Beijing-based tourism and hotel developer Guo Wei Group is mulling gaming development opportunities in the Primorye Krai Integrated Entertainment Zone in the Far East of Russia. According to Russian Gaming Week, the company met representatives from Russia’s Primorsky Territory last month, proposing the development of a casino with a 1,000-room hotel, a recreational park and a yacht club. The Chinese investors reportedly toured casino–resort Tigre de Cristal owned by Macau gaming mogul Lawrence Ho Yau Lung in addition to land plots in the area. Tigre de Cristal was the first integrated resort and is currently the only one to open in the area, offering some 25 VIP tables and 40 mass tables. The Russian Government has so far granted four licences for the development of casino resorts in the gaming zone. Cambodian casino operator NagaCorp Ltd. is expected to be the second one to open a casino-resort there. S.Z.
8 Business Daily Thursday, January 5 2017
Greater China Currency outflow
Mainland said to consider options to back Yuan, curb outflows Capital outflows from the country accelerated in recent months as the yuan suffered its worst year of losses against the U.S. dollar since 1994
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hina has studied possible scenarios for the yuan and capital outflows this year and is preparing contingency plans, according to people familiar with the matter. The authorities have used stress tests, models and field research, said the people who asked not to be identified as the studies haven’t been made public yet. Financial regulators have already encouraged some state-owned enterprises to sell foreign currency and may order them to temporarily convert some holdings into yuan under the current account if necessary, they added. The State Administration of Foreign Exchange didn’t immediately reply to a fax seeking comment. The reported plans come amid increasing pressure on the yuan from a resurgent dollar, rising capital outflows and concern that U.S. President-elect Donald Trump may make good on his threats to take punitive measures on China’s exports. Policy makers in Beijing have recently taken a slew of measures to tighten control of the currency market, including placing higher scrutiny on citizens’ conversion quotas and stricter requirements for banks reporting cross-border transactions. “China has been challenged by capital outflows and declining foreign-exchange reserves, and policy makers are taking measures to solve the problem,” said Eddie Cheung, a Hong Kong-based foreign-exchange strategist at Standard Chartered Plc, the most accurate forecaster for Asian emerging-market currencies
according to a Bloomberg ranking. “Funds will continue to exit in the first half due to individuals’ purchases of the dollar and on concerns of U.S. political uncertainty.”
Seeking stability
China may also further sell U.S. Treasuries in 2017 if needed to keep the yuan’s exchange rate stable, the people said, adding that the size of
the reduction will depend on capital outflows and market intervention. The nation’s holdings of Treasuries declined to the lowest in more than six years in October as the world’s second-largest economy used its currency reserves to support the yuan. China’s currency stockpile has probably shrunk further after hitting a five-year low of US$3.05 trillion in November, according to the median estimate in a Bloomberg survey before data due as early as this week. Capital outflows from China accelerated in recent months as the yuan suffered its worst year of losses against the U.S. dollar since 1994,
declining 6.5 percent. About US$760 billion left the country in the first 11 months of 2016, according to a Bloomberg Intelligence gauge. “The policies, if implemented, can help increase foreign-exchange supply in the onshore market, and hence help defend the yuan in the short term,” said Carol Pang, vice president for fixed income, currency and commodities at Zhongtai International Holdings Ltd. in Hong Kong. “However, it won’t change market expectation of further depreciation. Companies will continue to behave based on their judgment of the market direction.” Bloomberg News
Energy
Try breathing in Beijing, then weigh the nuclear option Mainland’s current 2020 target of 58 gigawatts of nuclear capacity is below the 70 gigawatts to 80 gigawatts forecast before the Fukushima disaster David Fickling
When the temperature drops to freezing in a country of almost 1.4 billion people, the power needed to keep the population warm soars. That’s one of the main reasons China’s northern cities have spent much of the past month choking on smoggy, toxic air. Particulate concentrations in areas north of Shanghai that once qualified for state heating subsidies and retain a legacy of coal generation tend to be about 55 per cent higher than in areas to the south, according to a 2013 study - enough to reduce lifespans by about five-and-a-half years. While China’s headlong construction of new renewable generation capacity may be taking the edge off this, its effect is felt least in the winter when reservoirs run low, skies darken, wind speeds fall, and smog settles in. While improvements to the country’s electricity grid may ameliorate the situation by allowing China’s northern cities to feed on more of the power generated from the country’s vast western hydro, wind and solar installations, that’s unlikely to be enough to stop the smog. Even measured in terms of total generation, there’s a lack of
renewable electricity supply available during the coldest months. One glaring gap in the country’s energy mix is nuclear power. While nuclear is more costly than renewable energy - and far more costly when astronomical decommissioning expenses are included - it has the advantage that availability isn’t contingent on the weather. China’s best route to a lower-carbon future will involve reducing coal’s
three-quarters share of the electricity mix. That will involve a host of factors, including improved insulation, a massive increase in renewables capacity, and more natural gas to meet winter heating needs. But it also ought to involve a bigger share of nuclear to displace coal generation year-round. And there, the country is failing.
Trailed by Japan
Among major energy consumers, only Japan has a smaller share of nuclear generation than China’s 2.4 per cent, and the figure was north of 10 per cent before 2011’s Fukushima Daiichi accident shut down most of
the country’s capacity. This pattern is changing rapidly. China, with 35 nuclear plants in operation, has a further 21 under construction and more on the drawing boards, according to the World Nuclear Association. The nation only reached its first 20 gigawatts of generating capacity in 2015; it should add the same amount again by 2020.
2.4 per cent Nuclear’s share of total generation
Still, that trajectory is a reversal from the more ambitious plans that were in place before Fukushima. China’s current 2020 target of 58 gigawatts of nuclear capacity is below the 70 gigawatts to 80 gigawatts forecast before the disaster, and ambitions for generation by 2050 are some 210 gigawatts, or 47 per cent, lower. China’s pullback on nuclear installations was probably a good idea, given the well-founded fears about the safety of its first generation of power stations. By continuing to hold off, though, the country is guaranteeing itself a future with a larger share of coal in its winter heating mix. Anyone trying to breathe Beijing’s choking air this month might wonder whether that’s the right bargain to be making. Bloomberg/Gadfly
Business Daily Thursday, January 5 2017 9
Greater China In Brief Weather
Heavy fog closes down China expressways, airport
IPO
Sinopec mandates 6 banks to advise on unit revamp ahead of IPO-IFR The advisers will help the unit transition from a limited liability company into a corporation that can have a multitude of investors and a board of directors China Petroleum and Chemical Corp (Sinopec) has mandated six banks to advise it on a restructuring of its fuels distribution unit ahead of a planned initial public offering in Hong Kong, IFR reported on Wednesday, citing people close to the deal. Sinopec tapped China International Capital Corp Ltd (CICC) , China Merchants Securities Co Ltd, CITIC Securities Co Ltd , Citigroup, Goldman Sachs and Morgan Stanley for the financial advisory role, added IFR, a Thomson Reuters publication. The company had invited 14 banks to pitch for the role, people close to the deal previously told Reuters.
The advisers will help the unit, Sinopec Marketing Co Ltd, transition from a limited liability company, which has less than 50 shareholders, into a corporation that can have a multitude of investors and a board of directors, among other things, one person said. The IPO could raise about US$12 billion, a separate person said, though the value is subject to market conditions at the time of the listing. China Merchants Securities, CICC, Citigroup and Goldman declined to comment, while Sinopec, CITIC Securities and Morgan Stanley did not reply to a Reuters request for
comment on the advisory role and restructuring of Sinopec Marketing. Sinopec Marketing was valued at about US$58 billion when it sold a 30 per cent stake to a group of 25 investors for US$17.5 billion in 2014 in what was hailed at the time as the country’s biggest privatisation since President Xi Jinping came to power.
Key Points Fuels distribution unit to restructure ahead of IPO Six banks to advise on Sinopec Marketing revamp-IFR Listing could raise US$12 bln, depending on markets The company operates fuel stations and more than 23,000 convenience stores around the country. Reuters
Stocks
Tencent shares losing US$35bln shows depth of Mainland’s gloom The company, which has more buy ratings than any other in Hong Kong, is a victim of fund redemption pressures Kana Nishizawa
The Shenzhen-based technology giant has tumbled 13 per cent from its September record, wiping US$35 billion off the value of its shares, as overseas funds pulled money from Hong Kong and Chinese equities. The company’s large weighting on the Hang Seng Index -- at 10 per cent -- helped make Hong Kong’s benchmark stock gauge one of the world’s worst performers last quarter. The company, which has more buy ratings than any other in Hong Kong, is a victim of fund redemption pressures, according to Asset Management One Singapore Pte. Investors pulled about US$409 million from exchange-traded funds that buy Chinese and Hong Kong stocks in the week through Dec. 21 as concern grew over a weakening yuan and tighter liquidity. “If there are fund redemptions, it’s hard to avoid selling Tencent because its weighting is so big,” said Toshihiko Takamoto, a Singapore-based portfolio manager at Asset Management One. The stock was the second-largest drag on the Hang Seng Index in the fourth quarter, after AIA Group Ltd. The Hang Seng Index tumbled 5.6 per cent in the period as China’s currency plumbed lows not seen since 2008 against the dollar and concern about
rising money market rates spurred a record meltdown in the nation’s sovereign debt.
Exodus
Such has been the exodus that the top U.S. ETF focusing on China suffered the biggest outflows among emerging markets, sending total assets to the lowest level in a decade. U.S. Federal Reserve officials last month increased their projections for interest-rate increases this year, triggering a surge in the dollar and Treasury yields. Higher U.S. bond yields will cause outflows from emerging markets and Hong Kong, Australia & New Zealand Banking Group Ltd. has warned. The selloff hasn’t shaken analysts’ faith in the stock. Tencent has 43 buy ratings, 2 neutral recommendations
and zero sells, according to analysts tracked by Bloomberg. The average 12-month target price implies a 26 per cent advance over the next 12 months. Analysts have their reasons to be optimistic. Tencent shares have rebounded after each selloff to make new highs during its 12-year listing, while the stock is the best performer on the Hang Seng Index in the past five years with a 500 per cent gain. The company reported a 43 per cent jump in its third-quarter net income as its ability to attract Chinese gamers and social media helped fuel advertising growth. Profit is expected to continue growing for at least three more years, according to data compiled by Bloomberg. There are signs investors are turning less bearish. The stock gained 5.6 per cent last week, its first weekly advance since late October, and rebounding from a five-month low. “If you focus only on its fundamentals, the stock is still a buy,” Takamoto said. Bloomberg
Heavy fog continued to shroud north and central China on Wednesday, leaving expressways closed down and flights delayed. As of yesterday morning traffic police in Beijing had closed several sections of expressways, including roads linking the capital with Harbin in the northeast, Shanghai in the east, and neighboring Tianjin Municipality. In central China’s Henan Province, the visibility at Zhengzhou Xinzheng International Airport was only 50 meters on Wednesday morning, delaying flights. Some 180 flights at the airport were canceled over the past two days. Many regions in China have been under heavy smog since Friday, disrupting traffic. Beijing on Sunday extended its orange alert for heavy air pollution until midnight on Wednesday. Tourism
Tibet receives 23 million tourists in 2016 More than 23 million tourists visited southwest China’s Tibet Autonomous Region in 2016, up 15 per cent year on year, according to the regional tourism development commission. The commission said key festivals had provided a major boost for tourism in the region, highlighting Tibetan New Year, the annual Shoton (Yoghurt) Festival, and the Tibet Tourism and Culture Expo, which all attracted tourists last year. So far, about 320,000 people in Tibet work in tourism, 97,000 being farmers and herdsmen. The regional government aims to receive over 30 million tourists in 2020, with an annual tourism revenue of over RMB55 billion (US$7.9 billion). Credit
China credit engine is running out of gas as debt risk rises The People’s Bank of China faces a reckoning after revving its credit engine for years. Three conditions suggest traditional financing and shadow banking are due to cool: Restrictions on property markets are poised to start weighing on mortgage issuance; bond market turbulence has spurred widespread cancellation of new corporate issues; and banks face more curbs on selling wealth-management products amid a regulatory tightening. With economic expansion on pace to meet the government’s objective and inflation pressure rising, leaders are signalling tighter monetary policy as they seek to reduce risks. The PBOC also cut language from its last quarterly statement saying it would reduce lending costs. President Xi Jinping and his top economic lieutenants last month pledged prudent and neutral monetary policy and proactive fiscal support for 2017 along with sharper focus on avoiding financial risks and asset bubbles. Meanwhile, the PBOC has been allowing a steady increase in money-market rates to squeeze leverage in the bond market, prompting firms to cancel or postpone bond selling of more than RMB100 billion (US$14 billion).
10 Business Daily Thursday, January 5 2017
Greater China Automotive
Gone in 2.39 seconds: Faraday claims Tesla-beating supercar Billionaire Jia Yueting has invested more than US$300 million of his own money in Faraday, one of three electric car ventures he’s invested in Alex Webb and Tian Ying
F
araday Future staked its claim to the world’s fastest electric car with its FF91 production model, showing footage of it outracing Tesla Motors Inc.’s Model S in a glitzy event in Las Vegas. The startup electric-car maker backed by Chinese billionaire Jia Yueting is counting on its debut offering to drum up support from investors, many of whom had been invited to the Las Vegas presentation. The FF91 can go from zero to 60 miles per hour in 2.39 seconds, according to the company. That compares with 2.5 seconds for Tesla’s Model S P100D in its fastest ‘ Ludicrous’ mode.
“I’m willing to devote everything to my dream. Even my life” Chinese billionaire Jia Yueting, backer of Faraday Future The 1,050-horsepower FF91 can travel in excess of 378 miles of adjusted EPA range, “enough to travel from L.A. to Silicon Valley with miles to spare,” Peter Savagian, Faraday Future’s vice president of propulsion engineering, said in the presentation. The car will also feature a personalized interface for every passenger and be able to find available parking space on its own. “We are not just building a vehicle but a globally shared internet mobility
ecosystem,” said Jia, who’s also the founder of tech company LeEco. “I’m willing to devote everything to my dream. Even my life.” Jia is working to salvage a tech-focused empire that touches everything from smartphones and electric cars to organic food and movie productions. Leshi Internet Information & Technology Co., the Chinese video-streaming service also backed by Jia, said it’s in talks to raise more than RMB10 billion (US$1.4 billion) from a group of undisclosed strategic investors.
Cash flow
The LeEco group has reiterated that it won’t give up on its electric car dreams despite restructuring at a subsidiary due to cash flow problems. Jia has invested more than US$300 million of his own money in Faraday, said Winston Cheng, a former Bank of America Corp. investment banker who now runs corporate finance for the LeEco group’s companies. Faraday Future is one of three electric car ventures Jia has invested in. He set up LeCar in 2014 and the company aims to manufacture its first car this year. LeEco is also one of the investors in Lucid Motors Inc., which was earlier known as Atieva and was established in 2007 to make battery packs for electric buses in China. In November, Lucid said it has selected Arizona as the home for a US$700 million facility that will manufacture luxury cars. In December, Jia reassured investors that LeEco’s fundraising plans were going smoothly and it wasn’t planning to give up on its supercar dream. The company broke ground on its car plant in eastern China’s
Zhejiang province on Dec. 28 and reiterated its commitment of investing about RMB11 billion for the initial phase of construction. Recent measures by China to tighten controls on currency outflows has affected his ability to invest overseas, Jia said on the side-lines of the Las Vegas event.
2018 deliveries
The FF91 can be reserved for US$5,000 and first deliveries will take place in 2018, according to the company, which didn’t reveal the final retail price. Faraday Future’s plant in Nevada will start production this year and the company will be able to pay its suppliers, said Nick Sampson, the carmaker’s research and development chief. Company officials laid out the Faraday Future vision at the presentation, vowing to “reformat the future of mobility” that will ma pollution, congestion and traffic accidents obsolete. The company is working to create a “new species” that will “truly change the game,” Sampson said. “It’s very impressive,” Christoph Stuermer, an automotive analyst at
PricewaterhouseCoopers, said of the presentation. “My question is, how are they going to make money?”
‘We’ll persist’
Faraday Future acknowledged the scepticism surrounding the company’s efforts. “Despite all the naysayers and the sceptics, we will persist,” Sampson said. One such glitch was on prominent display during the event. The driverless valet function that the company touted as solving the headache of finding parking space failed to engage on stage when Jia was invited to activate it, prompting Sampson to say that the car “was a little bashful” and “as a new baby she is often very, very timid.” He later explained that the building’s steel structure inhibited some of the signals that the car needed to drive itself. The company did an outdoors demonstration via video link earlier in the presentation that showed the FF91 seeking out an empty lot and reversing into it. “We will carry on to make the impossible possible,” Sampson said. Bloomberg
Pension funds
Shaanxi opts for scheme letting pensions invest in stocks The region was among six Chinese provinces that had an annual pension deficit in 2015 Yawen Chen and Kevin Yao
Shaanxi is set to be one of the first Chinese provinces to participate in a pension investment scheme that allows them to invest in financial markets for the first time, Shaanxi Daily, a newspaper in the northwestern province, reported on Wednesday. With many provinces under severe pressure to meet pension repayments, Beijing has promised to push forward an investment plan for idle local pension funds, holding an estimated US$290 billion, that will seek higher returns through alternative investment channels for higher returns.
Shaanxi was among six Chinese provinces that had an annual pension deficit in 2015, with funds estimated to be only sufficient for repayments for up to 10 months, a report by the Ministry of Human Resources and Social Security showed. In August last year China said
it would, for the first time, allow pension funds, whose investments has hitherto been limited to lowyielding bank deposits and treasuries, to invest in stocks and other assets. Since then, China has selected four banks as custodians of its pension insurance fund, and 21 investment
management institutions for the fund. In an announcement on Dec. 29, the National Council for Social Security Fund said it had received written confirmation from the first batch of provincial governments that had opted to participate in the new investment plan. Reuters
Business Daily Thursday, January 5 2017 11
Asia Electricity
Power-to-people link seen costing India US$10bln a year The country lacks sufficient transmission infrastructure to link its increasing generation capacity to areas of burgeoning consumption Saket Sundria
I
ndia will spend US$10 billion annually on new power transmission lines to satisfy growing demand in under-served areas, according to the country’s largest private power-grid operator. The country lacks sufficient transmission infrastructure to link its increasing generation capacity to areas of burgeoning consumption, said Pratik Agarwal, chief executive officer at Sterlite Power Transmission Ltd. The central government may spend about US$6 billion annually, with the rest coming from the nation’s states, he said. “India should see far bigger growth of electricity consumption than it has seen for the last three to four years,” Agarwal said. “If you want to make a dent in the energy industry, it is no longer about generation, it’s about delivery.” Demand for transmission infrastructure is being driven by Prime Minister Narendra Modi’s goal of supplying affordable, continuous power to the whole country by 2019. India’s peak electricity demand is expected to rise by more than 53 per cent to 235 gigawatts during the six years to March 2022, according to the country’s Central Electricity Authority.
The government’s rural electrification plans will drive demand for investment across the electricity value chain, according to Agarwal. Linking millions of people in villages to the grid will require more power lines to bring electricity from different parts of the country, he said. “We need to spend a huge amount of money on transmission,” said Anuj Upadhyay, an analyst at Emkay Global Financial Services Ltd. “In spite of having so much generation capacity, the flow of power is still not happening in many areas because of transmission constraints.” Agarwal’s estimates for transmission spending outpace recent forecasts by the government. The Central Electricity Authority expects 2.6 trillion rupee to be spent in the five years to March 2022 - about US$7.6 billion a year - to add 100,000 circuit kilometres (62,137 miles) of transmission lines and 200,000 mega volt ampere of transformation capacity, according to a draft National Electricity Plan released last week.
projects are operational. The company is looking to raise about 26.5 billion rupees (US$390 million) by listing two of its operational transmission projects through an infrastructure investment trust named India Grid Trust. Funds from this would be primarily used to repay loans. The trust will also have a first right to acquire the remaining eight projects of Sterlite. The government’s increasing focus on renewable power is another factor that will drive transmission demand, said Agarwal. The intermittent nature of renewable power will require grids
to be smarter, he said. “Grids around the world are designed for stable flow of energy.” Agarwal said. “Renewable is exactly the opposite. Most people in the world haven’t budgeted for this.” India plans to invest 10.3 trillion rupees to add nearly 188 gigawatts of generation capacity in the five years through March 2022, most of which will be renewable. In the year ended March, India’s per capita consumption increased 6.4 per cent from a year earlier to 1,075 kilowatt hours, according to the Central Electricity Authority. Bloomberg
Renewable focus
Sterlite Power has 10 inter-state power transmission projects with a total network of 29 power transmission lines of about 6,767 circuit kilometres and seven substations. Four of these
Banking
APEC
S.Korean banks to tighten lending standards in Q1: survey
APEC 2018 budgeted for: Papua New Guinea
The lending attitude index for mortgage loans to households tumbled to minus 30 South Korean banks are expected to tighten lending standards in the first three months on the expected worsening of corporate earnings and the already massive household debts, a central bank survey showed on Wednesday. The lending attitude index, which reflects banks’ attitude toward lending to households and companies, came in at minus 19 in the January-March quarter, according to the Bank of Korea (BOK). The reading below zero means more banks are willing to tighten loan standards rather than ease. It is based on a survey conducted between Nov. 28 and Dec. 9 of a combined 199 financial institutions including banks. The lending attitude stayed below zero since the fourth quarter of 2015 as concerns spread about the worsening of debt-servicing capability among households due to economic slowdown and fast-rising mortgage loans.
The household debts kept a recordbreaking trend and rose at a fast clip as the BOK cut its benchmark rate from 3.25 per cent in July 2014 to an all-time low of 1.25 per cent in June 2016. The government eased regulations on mortgage financing, speeding up an increase in the home-backed loans. It fuelled worry about the bubble forming in the real estate market. As the U.S. Federal Reserve heralded three rate hikes this year, lending rates in South Korea would be put under upward pressures, resulting in heavier debt-servicing burden for households. The lending attitude index for mortgage loans to households tumbled to minus 30, with the index for credit loans to households standing at minus 10. The reading for corporate loans came to minus 13 for the first quarter on the expected fall in corporate earnings and the lingering economic uncertainties at home and abroad. The credit risk index for households surged to 37 in the first quarter from 13 in the previous quarter, indicating that banks see a higher probability for households to go bankrupt. Xinhua
PNG is in the depths of its second worse recession in history Papua New Guinea (PNG) has insisted that APEC 2018 is budgeted for despite lingering questions over its ability after suffering a significant economic downturn. PNG chief secretary and ambassador Isaac Lupari said in an emailed statement on Wednesday provisions for APEC have been budgeted since 2013 to ensure infrastructure is in place. “We are also collaborating with the private sector for accommodation and we are collaborating with the National Capital District Commission in making sure that Ela Beach is part of the development,” Lupari said. “We have had people involved since day one, in terms of protocol, in terms of logistical assistance, so since 2013, the government has been investing strategically in preparation for APEC 2018.” PNG’s Prime Minister Peter O’Neill has previously vowed the leaders summit will go ahead as a “truly Pacific APEC” that will be the “most cost effective in the history of the forum”. However, questions remain over their ability giving the nation’s on-going governance and security
APEC 2016
issues while suffering a significant economic downturn.
Recession
PNG is in the depths of its second worse recession in history with growth at just 2 per cent in 2016 originally forecasted at 4.3 per cent in the 2016 budget - though economic activity will pick up to 2.8 per cent in 2017, according to the November budget. When it was named to host the APEC 2018 summit, PNG was growing at 13.3 per cent, the fastest in the world. PNG’s 2017 budget includes a 250 million Kina provision for APEC, Lupari said, while it’s also partnering with major petrochemical corporations such as Oil Search to build key infrastructure for tax credits. Lupari thus dismissed questions over PNG’s ability to host APEC - and carry out the national elections due in July - being about the central government’s economic woes to instead place the burden on the underperforming public service sector. “The Public Service continuous to be the major obstacle to implementation and delivery of the government policies and programs,” Lupari said. “It is important that every public servant in the country reflect on our performance in 2016 and start 2017 with a change in attitude and take greater ownership.” Xinhua
12 Business Daily Thursday, January 5 2017
Asia Industry
Swim or sink outlook prompts Asia shipping to face mergers An overly optimistic outlook of trade recovery following the 2008-2009 global financial crisis prompted shipping companies to order ever-larger vessels Kyunghee Park
F
aced with a prolonged trade slowdown and depressed freight rates, the region’s container lines are set for further consolidation after a year that’s seen the collapse of South Korea’s Hanjin Shipping Co., a mega merger among Japanese rivals and the sale of Singapore’s shipping flagship. With capacity in excess, firms will continue joining forces to cut costs and improve efficiency, according to the heads of A.P. Moller-Maersk A/S and Hyundai Merchant Marine Co. “It will be another difficult year,” Hyundai Merchant Chief Executive Officer Yoo Chang-keun said in his New Year’s speech to employees. “Global shipping companies are preparing for the long battle in the shipping industry through M&As and government support.” An overly optimistic outlook of trade recovery following the 2008-2009 global financial crisis prompted shipping companies to order ever-larger vessels, with
some stretching longer than the Eiffel Tower. As capacity piled up, the companies tried to under-bid each other on freight rates to lure clients, causing levies to drop to unprofitable levels and sinking the global container-shipping industry into losses. “The old model of growth through acquiring new capacity, building new ships is not working any longer,” Soren Skou, chief executive officer of Copenhagen-based market leader Maersk, said in a Bloomberg Television interview in December. “There are a number of players in our industry that have not been profitable for a long stretch. So I see consolidation continuing.”
Mergers
Pointing to an imbalance in supply and demand that has destabilized the industry and created an environment which is “adverse to container line profitability,” Nippon Yusen KK, Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd., Japan’s biggest shipping companies, agreed in October to combine their
container-moving businesses, with the joint operation targeted to begin in April 2018. CMA CGM SA, the world’s hird-largest container-shipping company, bought Singapore’s Neptune Orient Lines Ltd. in early 2016. China merged its two shipping groups - China Ocean Shipping Group and China Shipping Group - in late 2015, forming China Cosco Shipping Corp., Asia’s biggest container line.
“The old model of growth through acquiring new capacity, building new ships is not working any longer” Soren Skou, chief executive officer of Maersk
Hanjin, once the world’s seventh-biggest container-shipping company, sought court receivership last year after creditors ended all funding support and the government decided not to intervene. Korean rival Hyundai Merchant was taken over by lender-banks as part of a creditor-led restructuring. Topping a year of mega mergers, Maersk agreed in December to buy Hamburg Sud. Maersk will focus on integrating the German company before looking at other deals, CEO Skou said at the time. Industry spotlight will turn to a possible merger between Taiwanese shipping companies such as Evergreen Marine Corp. and Yang Ming Marine Transport Corp., or a buyout of Hyundai Merchant, according to Kim Tae-il, a research analyst at the Korea Maritime Institute. “Hanjin’s demise brought forth the
urgent need for industry restructuring,” Kim said. “Through mergers and acquisitions, there will be fewer players and they can stop trying to undercut each other.” Hyundai Merchant will focus on improving competitiveness of its existing operations, a spokesman at the Seoul-based company said in comments requested for this story. Evergreen adopts a strategy of organic growth and has no plan for mergers or acquisitions, the company said in an e-mailed response to Bloomberg News. There are no plans to merge with Evergreen, Yang Ming Executive Vice President Winsor Huang said by phone. The company, which gained shareholder approval in December to cancel some stock and sell new shares, is working hard to improve its finances, cut costs and enhance efficiency, he said.
Continual fall
Spot prices to transport a 20-foot container to Europe from Asia continued their annual declines, falling 5 per cent in 2016, Shanghai Shipping Exchange data showed. A reduction in the number of container lines could help the companies push up freight rates, said Jason Chiang, a Singapore-based director at Ocean Shipping Consultants. Global shipping lines are projected to report a loss of US$5.2 billion in earnings before interest and taxes in 2016, the worst since 2011, according to Drewry Financial Research Services Inc. The International Monetary Fund estimates that world trade will climb 3.8 per cent in 2017 after expanding last year at the slowest pace since the global financial crisis. “There will be a lot of changes in the global shipping industry as challenging times continue,” Hyundai Merchant CEO Yoo said in his Jan. 2 speech. “While we could see some improvements, it’s not easy to predict when there will be any meaningful recovery.” Bloomberg
Threat
S.Korea vows to maintain pressure, sanctions on DPRK in 2017 Top DPRK leader Kim Jong Un said in his New Year’s address that his country had entered a final stage in preparation for the test-launch of an intercontinental ballistic rocket in the near future South Korea vowed Wednesday to maintain its hard-line policy of pressure and sanctions on the Democratic People’s Republic of Korea (DPRK), while making diplomatic efforts to isolate the DPRK further. Seoul’s unification ministry in charge of inter-Korean affairs said in its annual plan report to Prime Minister Hwang Kyo-ahn, who is serving as acting president, that its hard-line policy will be maintained in 2017 to denuclearize the Korean Peninsula and cause a right change in the northern neighbour. The foreign ministry said in its separate report that it will put diplomatic pressures on the DPRK from all sides by cutting off the source of funds, deepening a diplomatic isolation further and cooperating with major
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countries to implement UN Security Council resolutions. Hwang said in the reporting session of security and foreign affairs that this year can be an inflection point for the DPRK’s nuclear issue, noting that the issue is the biggest challenge to security and the biggest obstacle to peace and reunification of the two Koreas. Despite all-out efforts to resolve the issue under current and previous governments, Hwang said, Pyongyang just continued nuclear detonations in response. The reports indicated the government’s adherence to the stance on the DPRK’s nuclear issue, tainted by intensive nuclear tests by Pyongyang in the past decade under conservative presidents Lee Myung-bak and Park Geun-hye.
The two South Korean leaders stick to the “strategic patience,” offering a conditional dialogue with Pyongyang. During the decade-long deadlock, Pyongyang’s nuclear and missile capabilities advanced at a faster speed.
Volatile
The DPRK detonated its second and third atomic devices in May 2009 and February 2013 respectively under the Lee Myung-bak administration. The fourth and fifth nuclear tests were carried out in January and September 2016 each under the impeached president. Pyongyang, the reports forecast, will continue to pursue its ambition for a nuclear state position, while seeking to alter the current phase of anti-DPRK sanctions. Top DPRK leader Kim Jong Un said in his new year address that his country entered a final stage in preparations for the test-launch of an intercontinental ballistic rocket in near future.
The DPRK’s 2016 moves entailed tougher-than-ever sanctions from the international community, but some South Korean experts predicted additional nuclear and missile tests this year to increase its bargaining power with new governments both in the United States and South Korea. The Trump administration is set to be launched later this month, while an early presidential election is forecast to be held in South Korea, possibly in the first half given that President Park was impeached on Dec. 9. Expectations are running high in South Korea for the transfer of presidential power from the hawkish conservative bloc to the liberal camp, which usually argues for rapprochement approach to the DPRK. Key presidential contenders of the biggest opposition Minjoo Party have called for the resumption of long-stalled talks with the DPRK to help defuse tensions in Northeast Asia. Xinhua
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Business Daily Thursday, January 5 2017 13
Asia Stock exchange
In Brief
KFC’s return to Malaysian bourse heralds rebound in deal volumes Any revival in listings will be supported by Malaysia’s abundant domestic liquidity Elffie Chew
Fundraising from Malaysian initial public offerings is poised to rebound from the lowest in 16 years, led by a planned relisting of the local KFC operator, as receding uncertainty and commodity price gains help rekindle demand for riskier assets. First-time share sales in Malaysia, Southeast Asia’s top destination for new listings less than five years ago, fell to US$305 million in 2016, according to data compiled by Bloomberg. The figure was the lowest level since 2000 and trailed other regional exchanges including Singapore, which hosted US$1.7 billion of IPOs, and Thailand, where US$1.5 billion was raised, the data show. While a volatile ringgit and slower economic growth hurt IPO volumes last year, fundraising could jump to at least US$2 billion in 2017, according to CIMB Group Holdings Bhd., Malaysia’s top IPO arranger. QSR Brands (M) Holdings Sdn., the fast-food franchisee backed by CVC Capital Partners, is preparing a US$500 million share sale, people with knowledge of the matter said earlier. Property developer Eco World International Bhd. said in October it plans to seek more than 2 billion ringgit (US$444 million) in an IPO. “Large IPOs planned for 2017 are expected to reignite investor interest,” Kong Sooi Lin, chief executive officer of CIMB’s investment-banking arm, said in an interview. “If postIPO performances listings are strong,
we could see a rub-off effect where more private companies may decide to go public.”
Rising prices
QSR Brands, which runs more than 730 KFC outlets and 390 Pizza Hut eateries in Southeast Asia, is returning to the Malaysian stock market after being taken private in 2013 by CVC, Employees Provident Fund and Johor Corp. The company picked Citigroup Inc., Credit Suisse Group AG and Malayan Banking Bhd. to lead its IPO, people with knowledge of the matter said in October. Malaysia, the only net oil exporter in Asia and the world’s second-biggest palm oil producer, saw its currency weaken more than 4 per cent in 2016. Brent crude oil prices, which hit a decade low last January, rallied more than 50 per cent to about US$57 per barrel and could rise further in 2017 as the Organization of Petroleum Exporting Countries vows to trim output. Benchmark palm prices in Malaysia climbed 22 per cent last year. The recovery could provide a boost to Serba Dinamik Holdings Bhd., an oil and gas services provider that’s taking orders for an IPO of as much as 584.1 million ringgit. Edra Global Energy Bhd., Malaysia’s second-biggest independent power producer, is considering a US$400 million firsttime share sale as soon as this year, people familiar with the matter said in October. Listings that have been delayed
could return in 2017 as confidence in the market increases, Ramesh Manimekalanandan, head of Malaysia equity capital markets at Maybank Investment Bank Bhd., said in an interview. Lotte Group shelved plans to list its Malaysian petrochemicals business, which could have raised more than US$500 million, people with knowledge of the matter said in June.
Domestic liquidity
Other companies that have postponed share sales include Weststar Aviation Services Bhd., a provider of helicopter transport backed by KKR & Co. that was planning to seek at least US$300 million in a 2015 IPO, and Sime Darby Bhd.’s car dealership unit, which was aiming to raise as much as US$900 million that year, according to people with knowledge of the matter. Iskandar Waterfront Holdings Sdn., a real estate developer, is considering reviving an IPO this year, Lim Kang Hoo, executive vice chairman, said in an Oct. 7 interview. The company may pursue a dual listing in Malaysia and Hong Kong or Singapore as it seeks to monetize some of its assets valued at more than 30 billion ringgit, he said. Robert Huray, head of investment banking at RHB Bank Bhd., said investors have greater confidence about 2017 since the U.S. presidential election has passed and oil prices have stabilized. Companies that have been waiting for better market conditions may decide to proceed with listing plans now to raise needed funds, as borrowing costs are rising, according to James Lau, a Kuala Lumpur-based investment director at Pheim Asset Management Sdn. Any revival in listings will be supported by Malaysia’s abundant domestic liquidity, said Steve Clayton, senior country officer at JPMorgan Chase & Co. The nation’s top two pension funds, Employees Provident Fund and Kumpulan Wang Persaraan (Diperbadankan), manage more than US$180 billion of assets and have more than 70 per cent of their investments in Malaysia, according to their websites. “The local IPO market is set to rebound because there’s a greater degree of predictability in 2017, now that most of the uncertainties that we have seen in 2016 are fading,” said Danny Wong Teck Meng, chief executive officer of Areca Capital Sdn. in Kuala Lumpur. “There’s light at the end of tunnel.” Bloomberg
PMI plunge adds to evidence India cash ban is hurting growth A continued slowdown will strip India of its position as one of the world’s fastest-growing major economies
India’s dominant services sector is set to contract for a second straight month, adding to evidence that Prime Minister Narendra Modi’s surprise ban on cash will trigger a sharp slowdown in Asia’s No. 3 economy. Th e Ni k k e i I n d i a S e r v i c e s Purchasing Managers’ Index was at 46.8 in December, a report showed on Wednesday, little changed from 46.7 a month earlier. A number below 50 indicates a contraction. The data follows a similar survey Monday, which showed the manufacturing sector will shrink for the first time in a year, dragging down the composite PMI to 47.6, the lowest since at least 2013. The PMI data sets the tone for the government’s first growth estimate for the year through March, due Friday. Private economists have
Container vessel collision causes oil spill on Singapore-Malaysia border Nearly 300 tonnes of oil spilled into the narrow strait separating Singapore and Malaysia after a collision between two container vessels, the Singapore Marine Port Authority (MPA) said on Wednesday. There were no reports of injuries and 12 anti-pollution craft had been sent to clean up the mid-sized oil spill, the MPA said in a statement. “Traffic in the East Johor Straits and Singapore’s port operations remains unaffected”, it said, adding that the spill had been contained off the western side of Singapore’s Pulau Ubin island. The spill was caused by damage to the fuel tank of the container vessel APL Denver after a collision with the WAN HAI 301 off Pasir Gudang Port in Johor, Malaysia late on Tuesday. Banks
Vietnam’s central bank to handle 5 weak banks this year The State Bank of Vietnam, the country’s central bank, announced on Wednesday that five poorly-performing commercial banks will be handled definitively in 2017. The five weak banks are VNCB, OceanBank, GPBank, DongA Bank, and Sacombank. The central bank has already bought back three of them, including VNCB, OceanBank, and GPBank, the central bank’s deputy chief inspector Nguyen Van Hung told reporters. In 2015, the central bank took over all shares from the three troubled lenders due to their management weakness, serious risks, and failure to find partners or devise feasible reform plans. Credit institutions in Vietnam saw lending growth of over 18.7 per cent in 2016 against 2015, while their capital mobilization grew nearly 18.4 per cent, which helped the country curb its inflation rate at over 4.7 per cent last year, said the central bank. Currency
Economy
Anirban Nag
Oil spill
slashed forecasts for OctoberD e c e m b e r, a n d a c o n t i n u e d slowdown will strip India of its position as one of the world’s fastestgrowing major economies and risk a political backlash against Modi. “Panel members widely blamed the deterioration in economic conditions on the rupee demonetization, with
concerns towards the speed of the recovery weighing heavily on sentiment,” economist Pollyanna De Lima wrote in the IHS Markit report. “Meanwhile, input costs rose further, but efforts to boost demand led some firms to lower their charges.” India’s economy will grow 6.9 per cent in the year through March, according to the median estimate in a Bloomberg survey published late last month. That’s slower than the 7.3 per cent predicted by a survey in November and the previous year’s 7.6 per cent actual expansion. Bloomberg
Boom time for Philippines spells more hardship for laggard Peso Southeast Asia’s worst-performing currency of 2016 is in for another tough year with President Rodrigo Duterte’s spending plans seen boosting imports just as rising U.S. interest rates spur capital outflows. The peso is forecast to be collateral damage as an economy growing faster than 7 per cent and the government’s infrastructure program drive demand for inward shipments. This year will be the first in about a decade when the amount of money Filipinos send home from overseas will be lower than the trade deficit, estimates ING Groep NV. “It’s a challenging situation for the peso for the next couple of years,” said Joey Cuyegkeng, an economist at the Dutch lender in Manila. “A very strong domestic sector requires imports of both consumer goods and durable equipment as the economy expands and moves into investment-driven growth.”
14 Business Daily Thursday, January 5 2017
International In Brief Shipping
Maersk, Alibaba team up to offer online booking service for ship space The world’s largest container shipping line Maersk has teamed up with Alibaba to allow shippers of goods to reserve space on its vessels through the Chinese e-commerce giant, in a move that bypasses traditional middleman freight forwarders. Maersk, a unit of Denmark’s A.P. Moller-Maersk, began offering the service to Chinese shippers on Alibaba’s OneTouch booking website on Dec. 22, a spokeswoman for the shipping line said on Wednesday. Shippers traditionally go through freight forwarders to book space on container ships, but shipping lines like Maersk are allowing cargo owners to directly book shipments via the internet. CPI
Inflation rate in Germany hits 41-month high The inflation rate in Germany as measured by the consumer price index is expected to be 1.7 per cent in December 2016, the highest level since July 2013, official data showed on Tuesday. According to the provisional results of the federal statistical office Destatis, the inflation rates in October and November were respectively 0.8 per cent. The main reason for the increase of consumer prices in December is the rise of household energy and motor fuels costs, which are 2.5 per cent more expensive than in December 2015. On average, the inflation rate in 2016 is expected to be 0.5 per cent, 0.2 per cent more than the index in 2015, Destatis reported, based on the results available so far. Tourism
Total guests in Malta slightly up in first ten months of 2016 Total guests in Malta during the first ten months of 2016 amounted to 1.39 million, an increase of 0.2 per cent year-onyear, according to Maltese government statistics. While there was a slight increase in the number of guests over the first 10 months of 2016, total nights spent went down by 0.7 per cent, reaching nearly 7.9 million. Total guests and nights spent in collective accommodation establishments during October 2016 advanced by 0.9 per cent and 0.4 per cent respectively yearon-year. In October 2016 there were 151,823 guests recorded, indicating an increase of 1.1 per cent over October 2015. Additionally, an increase of 0.6 per cent was recorded in the number of nights spent. The data revealed that the average length of stay stood at 5.6 nights, indicating no change over the previous year. The net occupancy rate advanced from 70.1 per cent to 70.7 per cent.
Economy
Euro-area economy ended year with fastest growth since 2011 Strength in both the manufacturing and service sectors was due in part to a weaker euro Carolynn Look
T
he euro-area economy finished 2016 with the strongest momentum in more than 5 1/2 years, bolstering the region as it heads into a year of political uncertainty. A composite Purchasing Managers’ Index climbed to 54.4 in December from 53.9 in November, IHS Markit said on Wednesday. That’s the highest in 67 months and above a Dec. 15 estimate. Strength in both the manufacturing and service sectors was due in part to a weaker euro, London-based Markit said in a statement. Economic expansion was signalled across the “big-four” nations, with Spain leading the way, followed closely by Germany. Signs of faster growth could provide solid ground to the 19-nation economy as it heads into another year of potentially tumultuous politics. The European Central Bank decided in December to prolong its asset-purchase program through the end of 2017 amid lacklustre underlying
inflation and uncertainty from looming national elections and beginning negotiations on the terms of the U.K.’s exit from the European Union. Since that decision, price pressures have risen alongside a surge in the cost of energy. Germany on Tuesday reported an inflation rate of 1.7 per cent for December, above economist estimates and close to the ECB’s target. Markit said input costs for the euro-area surged last month to the highest level since mid-2011. “The final PMI data signal an even stronger end to 2016 than the
preliminary flash numbers, though whether this provides a much-needed springboard for the euro area’s recovery to gain further momentum in 2017 remains very uncertain,” said Chris Williamson, chief business economist at IHS Markit. “ Much depends on political events over the course of the next year.” The euro rose after French and German data were published and extended gains following the euro-area report. A gauge for services activity slipped less than initially reported in December, Markit said. A PMI for manufacturing jumped to the highest level since April 2011, according to a Jan. 2 report. Bloomberg
M&A
Competition watchdog concerned about MasterCard’s VocaLink deal The companies have until Jan. 11 to address the CMA’s concerns Britain’s competition watchdog said it has concerns with MasterCard Inc’s acquisition of UK payment processing company VocaLink Holdings, following a review of the ownership and competitiveness of companies supporting those systems. “A number of industry participants have raised concerns with the transaction,” the Competition and Markets Authority said in a statement on Wednesday. The companies are two of the three most credible providers of
infrastructure services to the LINK network of automated teller machines, the CMA said, meaning the US$920 million merger could reduce LINK’s negotiating power with those providers if they combined. A spokesman for MasterCard said it would address the watchdog’s concern, adding that the CMA had said it had no other worries about the deal. “We’re pleased to have the opportunity to address their one concern, regarding the LINK ATM scheme, in the timeframe provided,” the spokesman said in an email. MasterCard said in July it would buy a 92.4 per cent stake in London-based VocaLink Holdings Ltd for about US$920 million. The companies have until Jan. 11 to
address the CMA’s concern. The LINK network connects over 70,000 cash machines, nearly every single one in the United Kingdom, and is one of three major payment systems in the UK. The network allows customers of banks and building societies connected to LINK to withdraw cash from any of those machines. The CMA said it found the deal would not impact the other two networks since they had many credible potential bidders for service contracts. “The companies can avoid the merger being referred for an indepth investigation if they can offer a remedy to address the competition concerns identified,” the CMA said. Britain’s finance minister Philip Hammond in July hailed MasterCard’s planned takeover of VocaLink as a sign of foreign investors’ continued confidence after Britain’s decision to leave the European Union. Reuters
Economy
UAE non-oil growth picks up as exports rebound Another rise in input costs was registered but competitive measures and promotional offers decreased output prices The non-oil economy of the United Arab Emirates (UAE) strengthened as output rose at a sharper pace in the developing new export business, Dubai’s Emirates NBD bank said Wednesday in a statement. Increased new orders, improved economic conditions and marketing campaigns all contributed to output growth, said the lender. The composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy, the seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI), increased to 55.0 in Dec. from 54.2 in November. Emirates NBD said this signals a significant healthy monthly improvement in the non-oil private sector, “and one that was the strongest since July,” said Khatija Haque, Head of MENA Research at Emirates NBD. “The Emirates NBD PMI indicates
a solid expansion in the non-oil private sector in Q4 of 2016. Strong gains in output and new orders have been hard-won however, with firms continuing to offer discounts and
Dubai, United Arab Emirates
promotions in order to secure orders,” added Haque. As for prices, another rise in input costs was registered but competitive measures and promotional offers decreased output prices. The UAE’s dirham currency is currently pegged in a fixed position against the U.S. dollar, hence the price of UAE goods increased for importers in the UK, Eurozone, China and elsewhere. In November 2016 the greenback rose to the highest external value compared with major currencies since 2003. China is major importer of chemical products from the Gulf states in particular. “The Yuan devaluation in China has rendered imports more expensive. On the surface it could potentially lead to a decrease in affordability and therefore, a drop in imports,” said Andrew Allan, Associate Director and analyst at the Standard and Poor Global Platts firm in December 2016. During the first 10 months of 2016, China’s overall imports of polymers decreased by about 5.4 per cent yearon-year, Allan added. Since 2014, China has been Dubai’s biggest foreign trade partner. Xinhua
Business Daily Thursday, January 5 2017 15
Opinion Business Wires
The Jakarta Post Indonesia Stock Exchange (IDX) president director Tito Sulistio said on Tuesday during the opening of the first day of trading in 2017 that it expected to see 30 companies go public this year, following an improved economic situation and higher demand for stocks in the market. “As the [Bank Indonesia rate] drops, pension funds and insurance companies cannot just depend on fixed income [investment instruments]. They will reallocate their investments to stocks,” he said. As many as fourteen firms — subsidiaries of state-owned enterprises (SOEs) — are looking to go public this year, with some firms engaged in the infrastructure sector.
The abandonment of progress
M Straits Times The cost of doing business remains a top concern among bosses of small and medium-sized enterprises (SMEs) in Singapore. But in a twist, a recent survey by the SBF showed that many firms in Singapore feel challenged by the high amount of compliance and regulatory costs, more so than manpower costs - a traditional bugbear for SMEs. The Singapore Business Federation (SBF)’s committee on SMEs is urging the Government to study, review and streamline compliance and regulatoryrelated costs for firms here. The SME Committee also urged the Government to hold back any planned increases in foreign worker levies across all sectors for 36 months, and repeated its call for government landlords to take the lead in adopting a fair tenancy framework to give renters some relief, among other things.
argaret Thatcher and Ronald Reagan are remembered for the laissezfaire revolution they launched in the early 1980s. They campaigned and won on the promise that free-market capitalism would unleash growth and boost prosperity. In 2016, Nigel Farage, the then-leader of the UK Independence Party (UKIP) who masterminded Brexit, and U.S. Presidentelect Donald Trump campaigned and won on a very different basis: nostalgia. Tellingly, their promises were to “take back control” and “make America great again” – in other words, to turn back the clock. As Columbia University’s Mark Lilla has observed, the United Kingdom and the U.S. are not alone in experiencing a reactionary revival. In many advanced and emerging countries, the past suddenly seems to have much more appeal than the future. In France, Marine Le Pen, the nationalist right’s candidate in the upcoming presidential election, explicitly appeals to the era when the French government controlled the borders, protected industry, and managed the currency. Such solutions worked in the 1960s, the National Front leader claims, so implementing them now would bring back prosperity. Obviously, such appeals have struck a chord with electorates throughout the West. The main factor underlying this shift in public attitudes is that many citizens have lost faith in progress. They no longer believe that the future will bring them material improvement and that their children will have a better life than their own. They look backward because they are afraid to look ahead. Progress has lost its shine for several reasons. The first is a decade of dismal economic performance: for anyone below the age of 30, especially in Europe, the new normal is recession and stagnation. The toll taken by the financial crisis has been heavy. Furthermore, the pace of productivity gains in the advanced countries (and to a large extent in emerging countries) remains disappointingly low. As a result, there is very little in the way of income gains to distribute – and even less in aging societies where fewer people are at work and those out of work live longer. This grim reality may not last (not all economists agree that it will); but citizens can be forgiven for taking reality at face value. The second reason progress has lost credibility is that the digital revolution risks undermining the middle class that formed the backbone of the post-war societies of the world’s advanced economies. As long as technological progress was destroying unskilled jobs, the straightforward policy response was education. Robotization and artificial intelligence are destroying mediumskilled jobs, leading to a polarized labour market, with jobs created at the two ends of the wage distribution. For those whose skills have lost value and whose jobs are threatened by automation, this hardly counts as “progress.” A third, related, reason is the massively skewed distribution of national income gains that prevails in many countries. Social progress rested on the promise that the benefits of technological and economic advancement would be shared. But recent path-breaking research by Raj Chetty and
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Philstar Recent research by flexible workspace provider Regus revealed that co-working is now considered a long-term solution for businesses. Sharing an office space used to be seen as more of a temporary solution for budget-conscious startups or self-employed individuals who are seeking an office environment. But of the almost 40,000 survey respondents, nearly two-thirds or 67 per cent said they are seeing more firms integrate coworking into their long-term business strategy. For businesses, co-working helps not only with their cash flow but also by remaining agile and responsive to sudden market changes that are rife in the volatile global economy. Business people reported that firms are renewing existing co-working arrangements or making new contracts because they offer scalability and shorter terms than fixed leases, and help grow the business sustainably. Other findings showed that 61 per cent of co-working space users are small to medium enterprises. But it seems that the flexible work arrangement also appeals to more large businesses now with nearly half of the respondents saying how corporations turn to coworking more frequently than before.
Jean Pisani-Ferry Professor at the Hertie School of Governance (Berlin) and Sciences Po (Paris)
his colleagues shows that whereas 90 per cent of U.S. adults born in the early 1940s earned more than their parents, this proportion has steadily declined ever since, to 50 per cent for those born in the mid-1980s. Only one-quarter of this decline is due to slower economic growth; the remainder is attributable to an increasingly unequal distribution of income. When inequality reaches such proportions, it erodes the very basis of the social contract. It is impossible to speak of overall progress when children have an even chance of being worse off than their parents. Fourth, the new inequality has a politically salient spatial dimension. Educated, professionally successful people increasingly marry and live close to one another, mostly in large, prosperous metropolitan areas. Those left out also marry and live close to one another, mostly in depressed areas or small towns. The result, reckon the Brookings Institution’s Mark Muro and Sifan Liu, is that U.S. counties won by Trump account for just 36 per cent of GDP, whereas won by Hillary Clinton account for 64 per cent. Massive spatial inequality creates large communities of people with no future, where the prevailing aspiration can only be to turn back the clock. Faith in progress was a key provision of the political and social contract of the post-war decades. It was always a part of the left’s DNA; but the right embraced it as well. After what happened in 2016, support for a concept forged in the Enlightenment can no longer be taken for granted. For anyone who believes that progress should remain the compass guiding societies in the twenty-first century, the priority is to redefine it in today’s context and to spell out the corresponding policy agenda. Ev e n l eav i n g a s i d e o t h e r important dimensions of the issue – such as fear of globalization, growing ethical doubts about contemporary technologies, and concerns about the environmental consequences of growth – redefining progress is a challenge of daunting magnitude. This is partly because a sensible agenda must simultaneously address its macroeconomic, educational, distributional, and spatial dimensions. It is also because yesterday’s solutions belong to the past: a social compact designed for an environment of high-growth, equalizing technological progress won’t help address the problems of a low-growth world of divisive technological innovation. In short, social justice is not a matter only for fair-weather environments. For several decades, growth has served as a substitute for sensible social cohesion policies. What advanced societies need now are social compacts that are resilient to demographic shifts, technological disruptions, and economic shocks. In 2008, U.S. President Barack Obama campaigned on “hope” and “change we can believe in.” The substantive response to the reactionary revival must be to give content to this largely unfulfilled promise.
What advanced societies need now are social compacts that are resilient to demographic shifts, technological disruptions, and economic shocks.
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16 Business Daily Thursday, January 5 2017
Closing Trading
Mainland goes on US$26 tln commodity binge as shortages foreseen
charged into markets several times in 2016 and bought everything from iron ore to cotton, driving up prices and Chinese investors traded a record volume of commodity stoking fears of a bubble. Authorities introduced curbs futures last year as speculators poured in and out of the on excessive speculation to quell the mania. “With the hope that supply-side reform will successfully market on bets that shortages are looming. reduce overcapacity in China, especially in the country’s Combined aggregate trading volume on the Shanghai coal and steel sectors, some commodities futures Futures Exchange, Dalian Commodity Exchange and surged amid a trading frenzy last year,” says Jia Zheng, Zhengzhou Commodity Exchange jumped 27 per trader at Shanghai Minhong Investment Management. cent from 2015 levels to 4.1 billion contracts, according “Price volatility increased too because of low inventories to data e-mailed by the China Futures Association. Turnover across the bourses rose 30 per cent to a record following low prices in the past.” In terms of turnover, the Chinese bourses probably still RMB177.4 trillion (US$25.5 trillion), the data show. lag behind international rivals. The notional value of the Chinese investors, flush with credit and hunting for returns, piled into commodities futures last year, spurred commodity futures and options traded on CME Group’s exchanges in 2015 was US$41.15 trillion, according to the by bets that the government’s efforts to cut industrial capacity would lead to shortages of raw materials. They World Federation of Exchanges. Bloomberg
M&A
Ford, Toyota form telematics bloc to stymie Google and Apple The non-profit group’s goal is to promote more choice in how smartphones get connected to in-vehicle technologies John Lippert
F
ord Motor Co. and Toyota Motor Corp. have formed a consortium with four medium-size automakers to speed development of auto-industry standards for in-vehicle apps, a step toward preventing Apple Inc. and Google from controlling how drivers connect smartphones to their cars and trucks. Ford and Toyota said that Mazda Motor Corp., PSA Group, Fuji Heavy Industries Ltd. and Suzuki Motor Corp. joined their SmartDeviceLink Consortium. The non-profit group’s goal is to promote more choice in how smartphones get connected to in-vehicle technologies like dashboard displays and voice recognition, and in other programming, Ford and Toyota said in a joint statement Wednesday.
developers can use as an alternative to those of Google and Apple. “Encouraging innovation is at the centre of Ford’s decision,’’ said Doug VanDagens, global director of Ford
Connected Vehicles and Services. Suppliers Elektrobit Automotive GmbH, Luxoft Holding Inc., and Xevo Inc. also joined the consortium, according to the statement. Honda Motor Co. had contemplated the move but wasn’t mentioned in Wednesday’s announcement. Carmakers, auto industry suppliers and technology companies such as cloud computing specialists are
2011 deal
Toyota first agreed to collaborate with Ford on car telematics systems in 2011. The automakers worry that if CarPlay and Android Auto establish themselves as must-have options, the influence of Apple and Google over the industry will grow. Ford’s version of the SmartDeviceLink technology is already available on 5 million vehicles globally, and provides drivers with popular apps like Pandora, Spotify, iHeartRadio, and AccuWeather. By enlarging the consortium, the automakers hope to maintain control over how much access infotainment apps have to vehicle data, according to the statement. “We are excited to collaborate with many auto manufacturers who share our view,’’ said Shigeki Tomoyama, president of Toyota’s Connected Company. Bloomberg
Innovation
Toyota has resisted offering Apple’s CarPlay and Google’s Android Auto in its vehicles, citing concern that doing so would diminish safety and security. Ford offers them on all its 2017 model vehicles. But the No. 2 U.S. automaker still wants an opensource software platform that all app
Transportation
forming a range of partnerships to develop autonomous cars and vehicles that can communicate over the Internet. On Wednesday, Peugeot-maker PSA, communications-equipment manufacturer Ericsson AB and French phone company Orange SA said they’ve agreed to try using 5G wireless technology to improve self-driving features and road safety. Updating Internet access is crucial in helping autonomous cars gather and exchange information about street conditions and traffic.
Music
Labour
Tencent, Warburg lead USUS$215 mln Thai PM releases self-penned funding for China’s Mobike song for cabinet
Swedish six-hour workday runs into trouble: it’s too costly
Tencent Holdings Ltd. and Warburg Pincus led a US$215 million round of funding for year-old Beijing startup Mobike, ratcheting up the competition in China’s burgeoning urban bicycle-sharing scene. The round brought in a clutch of new, influential names including private equity firm TPG Capital, Chinese travel service Ctrip.com International Ltd., and Huazhu Hotels Group. Existing backers Hillhouse Capital, Sequoia Capital also took part in the financing, Mobike said in a statement. They will work together to help travelers get around Chinese cities, the startup added. The industry is drawing hundreds of millions of dollars from investors betting that bicycles offer a more traditional alternative to the car-hailing that prevails in urban centres. One of Mobike’s largest rivals, ofo, is said to be valued at US$500 million after attracting investment from Xiaomi Corp. founder Lei Jun and Didi Chuxing, which ran Uber Technologies Inc. out of China in 2016. Formally known as Beijing Mobike Technology Co., the startup has said it operates about 30,000 bicycles spread across the major cities of Beijing, Shanghai, Guangzhou and Shenzhen, which together house more than 74 million people. It aims to stock at least 100,000 bikes in each city and expand to other cities. Ofo says it has more than 85,000 bikes, mostly on university campuses, and expects to take its service to other Chinese locales. Bloomberg News
According to the preliminary results of a two-year experiment carried out in Gothenburg, Sweden, the costs of the short workday outweigh the benefits. Working hours were shortened to 6 for the 68 nurses at the Svartedalen old people’s home, who got to keep the same salary level. To cover for the reduction, the city had to hire 17 extra staff at a cost of about 12 million kronor (US$1.3 million) for the duration of the project. The study showed that employees at Svartedalen residential home felt healthier, which reduced sickleave absence, and that patient care improved. But the city won’t push ahead to make the plan permanent. The Gothenburg experiment is just the latest in a series of shorter working day trials carried out in Sweden, a country that prides itself on its generous welfare state. The trial has been closely watched globally, with labour activists touting progressive Sweden as a role model in shortening working hours. While historical data shows that the length of average working days has fallen in Sweden over the past century, there are currently no plans to establish six-hour working days at a national level. Still, the added hiring by the municipality has helped the coffers of the national government by reducing unemployment costs by 4.7 million kronor during the first 18 months of the trial due to new jobs, according to the interim report. Bloomberg
Thai Prime Minister Prayut Chan-o-cha released on Wednesday his self-penned single, “Bridge”, the latest of a serious of songs penned by him after he took power in 2014. “I’m ready to be the bridge for you to cross, I’ll take you to the destination you’re dreaming of, like I intend to,” sang the ballad filled with such metaphors. The song is to encourage his cabinet and government workers in the new year, asking them to work together for a stable, prosperous and sustainable Thailand. According to Thai media Khaosod, the junta leader is famous for being a self-published songsmith. One of his most recognizable singles is “Returning Happiness to the People,” a song released after the Prayut took power in a coup in 2014, singing “Today the country is facing problems, please let me stand in to bring love and happiness back to people”. He also wrote a song as a new year present for Thais in December 2015, named “Because You’re Thailand”, and released “Hope and Faith” in last October to cheer Thais up after the death of revered late King Bhumibol Adulyadej. “Bridge”, latest song penned by Prayut himself, is composed by Wichian Tantipimolapan, arranged by Maj. Surachai Tawinphrai and sung by Sgt. Maj. Pongsathorn Porchit. Xinhua