Thu, 26 January 2017 | 6pm 8 pm | Terrazza, Galaxy Macau
Mainland firms shift to asset-backed securities Alternative funding Page 10
Thursday, January 12 2017 Year V Nr. 1212 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Oil industry
Growing diesel demands in Asia to push refineries profits in 2017 Page 11
Benefits
Wynn Macau hands out ‘winter bonus’ Page 6
www.macaubusinessdaily.com
Property
Gaming
New residential mortgages increase by 50pct in November Page 2
Investors want to know Packer’s next steps Page 7
Home sales on the rise Real estate
Realtor Ricacorp (Macau) Properties Ltd anticipates this year’s housing transactions could probably surpass 10,000 even though home prices may post an increase of up to 10 pct from last year. Local residents wanting to buy their own homes and more supply this year may be the reason why. Page 3
Three take the stand
The corruption trial of the former prosecutorgeneral saw its first batch of witnesses take the stand yesterday. Two of them – Wong Kuok Wai and Mak Yim Tai – attempted to postpone their testimonies, but failed. The other, Antonio Lai Kin Ian, the ex-office chief for Ho Chio Meng, was criticized by the top court judge for his lack of legal knowledge during his testimony.
An open letter to the gov’t
Land A group of land grantees of the Seac Pai Van Industrial Zone expressed their dissatisfaction with the gov’t decision to declare their land grants invalid. They claim they did not develop the land plots because there has been no issuance of planning conditions from the gov’t over the past 25 years at all. Page 5
Portugal’s Industry Secretary to visit MSAR again Politic exchanges Following his two visits in 2016, João Vasconcelos may soon return to the territory to make preparations for the Start-up and Innovation Center project. His return is in response to an invitation by Macau’s Secretary for Economy and Finance, Lionel Leong, Business Daily has learned. Page 4
Trade fights Ho Chio Meng trial Page 5
HK Hang Seng Index January 11, 2017
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Cheung Kong Property
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China Mengniu Dairy Co Ltd
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Cheung Kong Infrastructure
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China Merchants Port Hold-
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China Life Insurance Co Ltd
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China Resources Power
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Lenovo Group Ltd
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Protectionism China and the U.S. are increasingly showing their claws over trade disputes. While the U.S. placed protective measures on washers produced in the mainland on Tuesday, Beijing hit back in the cattle food area. Pages 9 & 10
2 Business Daily Thursday, January 12 2017
Macau Finance
Nine local banks and 17 foreign banks in MSAR
Banks headquartered outside the MSAR include Standard Chartered, DBS, HKBC, East Asia, Hang Seng, CITIC, BCP, A total of nine local banks and 17 banks headquartered outside of the MSAR are authorized to conduct their financial Wing Lung and China Construction Bank. activities in Macau for the 2017-year, according to a dispatch A total of two offshore financial institutions are based in the MSAR: Banco BPI and Portuguese bank Caixa Geral de in the Official Gazette made by the Monetary Authority of Depósitos. Macau and signed by its president Anselmo Tang Lin Seng. A total of 11 exchange offices are also authorized to operate The local banks include: Tai Fung, OCBC Weng Hang, Delta in the MSAR, aside from the six authorizations granted to Asia, Banco Industrial e Comercial da China (Maca), Luso International, Banco Comercial de Macau, the Macau Chinese the concessionaires and sub-concessionaires to operate exchange offices in their facilities. K.W. Bank, Novo Banco Asia and Banco Nacional Ultramarino.
Property
New housing mortgages jump by 50 pct in November
N
ew approvals of residential mortgage loans surged by 57.1 per cent month-to-month in November 2016, amounting to MOP4.5 billion (US$565,500), according to the latest official data released yesterday by the Monetary Authority of Macau (AMCM). Of the total new home mortgages, those to residents accounted for 78.2 per cent or MOP3.5 billion, an increase of 25.5 per cent month-on-month, while those to non-residents soared by 1,505.6 per cent to MOP983 million. AMCM explained the surging increase in new approvals to non-residents was mainly attributed to larger
loan sizes recorded for a number of approvals to enterprises. Meanwhile, new residential mortgages collateralised by uncompleted units (i.e. equitable mortgage) decreased by 4.4 per cent from the preceding month to MOP257.7 million. On a year-on-year comparison, newly approved housing mortgages in the month represent a growth of 84.9 per cent. On the other hand, new approvals of commercial real estate loans shrank by 67.1 per cent month-onmonth to MOP2 billion during the same period. Of the total, those made to residents decreased by 67.9 per cent to MOP1.99 billion, accounting
for 97.7 per cent of the total. However, new approvals for commercial loans to non-residents soared by 1,457 per cent month-on-month, due to a lower comparison base in October. On an annual basis, new approvals of commercial loans went down by 51.1 per cent. As at the end of November, the outstanding value of residential mortgage loans was MOP179.6 billion, an increase of 0.6 per cent month-onmonth, while that of commercial loans amounted to MOP173.1 billion, up by 0.9 per cent month-to-month. In addition, the delinquency ratio for housing mortgages was 0.17 per
cent as at the end of the month, up by 0.02 percentage points monthon-month, whereas that for commercial loans also increased by 0.02 percentage points month-on-month to 0.11 per cent. K.L.
opposition to the policy during yesterday’s TDM Radio programme ‘Macau Forum’. The deputy head of the association claimed that the new measure has caused inconvenience for the local tourism industry, since visitors now have to spend double the time getting on the tourist buses from the Ruins of St. Paul’s. “Coupled with the insufficient facilities in Rua Da Horta da Companhia that may underlie certain dangers for visitors to walk by, this could increase pressures on the city’s tourism industry,” Mr. Lo said. The introduction of the measure followed a serious traffic accident that saw a tour bus carrying mainland tourists crash into a residential building on the street last August, injuring 32. However, Kou Kun Pang, a committee member for the Traffic Affairs Consultative Committee expressed his support for the new measure, saying there were about 100 tour
buses driving along Rua Da Horta da Companhia in the past. “In fact, the new measure has reduced the number of tourist buses by half and the traffic in the district has greatly improved,” Mr. Kou claimed. In addition, Mr. Kou pointed out that the new measure has boosted the use of tour bus parking spaces under Tap Seac Square. He claimed that the number of buses parking in the underground car park has increased to over 40 daily, up from 20 in the past, reaching around 90 during peak hours. Meanwhile, Lam U Tou, a member of the government’s Central District Advisory Committee for Community Services, suggested the government should continue to combat low cost or “zero-fee” package tours in the city and attract more high quality visitors, in order to reduce the negative impact on the daily lives of local residents by the visitation of a large numbers of tourists in their neighbourhoods. A.L.
theme park in Macau to attract further tourism is ‘quite ill-considered’, ‘impractical and not feasible’, according to some of the responses received, which point out nearby Chimelong Ocean Kingdom as well as Hong Kong Disneyland. Disneyland’s price increase now makes it 42 per cent more expensive
than the newly opened Disney Shanghai on non-public holidays, and 5.6 per cent more on public holidays, notes the South China Morning Post, who quoted Dr. Markus Schuckert – assistant professor at the Polytechnic University in the city - as saying: “Tourism is not booming. Is it really necessary to do it right now?” K.W.
Tourism
Tour bus parking sparks debate A trial measure mandating that local tour buses can only drop off passengers on Rua Da Horta da Companhia near the Ruins of St. Paul’s, has now
been extended on a permanent basis. However, Lo Seak Meng, Deputy Director of the Macau Tour Guide Promotion Association expressed
Infrastructure
Bridging the entertainment gap HKZM bridge could cause Disneyland to steal non-gaming tourists from MSAR Hong Kong’s Chief Executive Leung Chung-ying, more commonly known as CY Leung, is confident that the completion of the Hong Kong-Zhuhai-Macau bridge will funnel more visitors from the Pearl River Delta and Southeast Asia region into Hong Kong, boosting not only the city’s tourism sector, but also the controversial Disneyland expansion. The comments came at the opening of the park’s first Marvel-themed ride, the Iron Man Experience, just weeks after the park announced a 9 per cent hike in ticket prices to help finance a polemic expansion of the complex - set to cost a total of HK$10.9 billion (US$1.36 million), of which HK$5.8 billion will come from taxpayers, if the company’s request to the Legislative Council is approved, as noted by the South China Morning Post.
“The expansion, together with the completion of major cross-boundary infrastructure in the next few years, including one of the longest bridges in the world, the Hong Kong-Macau-Zhuhai bridge that will provide a fixed road link between Lantau Island [where Disneyland is located], and the west bank of the Pearl River Delta area, will bring in more visitors from the Mainland of China, Southeast Asia and the world beyond,” stated the HKSAR Chief Executive, as quoted by publication 7th Space. “The government will, as always, support the development of Hong Kong Disneyland and the tourism sector,” commented the official. Meanwhile, the results of public opinion consultations on tourism carried out by the Macau Government Tourism Office were published yesterday, and show that building a
Business Daily Thursday, January 12 2017 3
Macau Property
Ricacorp: home prices to jump up to 10 pct this year The property agency expects this year’s housing market will perform better than last year Annie Lao annie.lao@macaubusinessdaily.com
L
ocal property agency Ricacorp (Macau) Properties Ltd predicts the city’s housing market will be able to achieve over 10,000 transactions this year, with a growth of some five to 10 per cent in home prices. Jane Liu, the managing director of the agency, said in a press briefing yesterday that the city’s housing market is expected to perform slightly better than last year, for which some 9,900 home transactions are expected to have been recorded, an increase of 72 per cent year-on-year. “But we still hold a cautiously optimistic outlook for the city’s housing market,” said Ms. Liu. The realtor expects the implementation of the free yacht travel scheme, the ability of Macau-licensed cars to drive in Hengqin, as well as the future opening of the Hong Kong-Zhuhai-Macau Bridge this year, will help stimulate the local home market. But she added there might be some factors impacting negatively on the property market this year, such as the global economy possibly being affected by the inauguration of new U.S. president Donald J. Trump, China’s regulations on restricting property purchases in
the Mainland, as well as the depreciation of the renminbi. Nevertheless, Franky Fong, a regional director of the agency, added that the recent increase in U.S. interest rates would only have a mild impact on the local property market, given that the increase is minimal. “The increase in interest rates in the U.S. is small and will not have much negative impact on the mortgage payments by local property buyers to the banks,” Mr. Fong said.
Demand for car parks
Asked about the impact of the recent increased transport fees on the car park market, Mr. Fong said some lessors of private parking spaces may be planning to slightly raise rental prices, but the increase will not happen in the short term. “Since the leasing contracts usually last for at least one year, in the short term, general increases [in parking space prices] will not happen. But in the long term, when the current contracts end, the lessors may slightly increase the rents,” the agent claimed. The agency said that they have started to receive more enquiries regarding car park leasing this month, following the implementation of the new transport fees. According to the data provided by the agency, car park leases in Hac Sa Wan are the most expensive,
costing some MOP3,000 (US$375) per month on average, with selling prices amounting to some MOP2 million. Meanwhile, the average rental price for parking spaces in Taipa is around MOP2,200 per month, with selling prices at MOP1.6 million.
More supply needed
In general, Jennifer Un, a senior district director of the agency, claimed the performance of new property
sales was good last year, adding there are still many local residents desiring to buy a new residential property this year. But she indicated that new supply of large-size home units has decreased due to the gaming revenue slump lasting for a long period of time. The agent, however, added that the city will start to see more launches of new home sales after Chinese New year at the end of this month.
4 Business Daily Thursday, January 12 2017
Macau In Brief Labour affairs
Workers pursue unpaid wages from Leighton A group of some ten workers protested outside Wynn Palace on Tuesday, urging the contractor of the casino-project, Leighton Contractors (Asia), to give them their back pay. The construction workers claim the contractor owes them a total of MOP2.5 million (US$312,500) for the hotel renovation and external wall works of Wynn Palace, done between September and October last year. The workers claim the amount involves salaries of some 70 to 80 workers. Representatives of the Labour Affairs Bureau also went to the site to assist the related workers to discuss the matter with the contractor. A.L. Finance
Haitong Securities net profit RMB60 mln in December Financial services company Haitong Securities Company Limited announced that its net profit for the month of December 2016 amounted to RMB59.8 million (US$8.63 million/HK$66.92 million), according to its filing on the Hong Kong Stock Exchange. The group made RMB11.07 million from its main company, which drew in an operating income of RMB923.3 million. The group’s subsidiary, Haitong Asset Management Company saw over nearly four times the main company’s net profit, at RMB48.7 million, off an operating income for the month of RMB134.11 million. As at the end of the year, the group held a total of RMB101 billion in net assets via its main company, and RMB3.36 billion via its subsidiary. M&A
Emperor purchases 12 shops for HK$515 mln Gaming, hospitality and property developer Emperor International Holdings Limited has made a HK$515 million (US$64.1 million) purchase of 12 retail shops located in Hong Kong, according to a filing on the Hong Kong Stock Exchange. The shops are located at MidLevels, nearby Hong Kong’s Soho district, on Seymour Road at the Fairview Heights building and are on the ground and lower ground levels, and were purchased via a wholly-owned subsidiary of Emperor. The total gross floor area of the purchase is 13,173 square feet and is being sold by Henderson Land Development Company, a Hong Kong-based company, to the Emperor subsidiary New Prominent Limited. The completion of the sale is expected to take place on July 10. ‘Leasing demand for shops at traditional luxury residential areas stays strong as the purchasing power of residents in luxury residential areas is resilient and the supply of retail spaces in Mid-Levels is limited,’ notes the filing. The group notes the addition is to ‘enhance the proportion of commercial shops among the property investment portfolio’. K.W.
Entrepreneurship
Mr. Start-ups to return to Macau The Portuguese Secretary for Industry will come to Macau to make preparations for the Start-up and Innovation Center project João Paulo Meneses newsdesk@macaubusinessdaily.com
L
ess than one year since his last visit, the Portuguese Secretary for Industry João Vasconcelos is to return to Macau for the third time. Business Daily understands that while in Lisbon last December, the Secretary for Economy and Finance, Lionel Leong Vai Tac invited Mr. Vasconcelos to meet him in the Special Administrative Region in the coming weeks and the invitation was accepted. A specific date for the trip has yet to be decided, but the MSAR’s secretary has indicated that the trip will happen soon. Mr. Leong visited Portugal in December last year and met again with the Portuguese Secretary for Industry, among other Portuguese
government officials. As reported by Business Daily previously, topics related to start-ups dominated Leong’s visit to Lisbon. In fact, João Vasconcelos seems to be the right person to help Macau to boost the development of startups. He was the Executive Director of Startup Lisboa and the Lisbon Innovation and Entrepreneurship Association between 2011 and 2015, and was responsible for LIDE Empreendedorismo, an association focused on promoting sustainability and social responsibility in business and companies.
Third time
In addition, Vasconcelos was the first Portuguese government official to visit Macau, since Prime Minister Antonio Costa took office. In March last year, three months after taking office, the Portuguese Secretary for
Secretary Lionel Leong Vai Tac met with Mr. João Vasconcelos in Lisbon last December
Industry met several members of the MSAR Government in Macau and visited Portuguese investments in the territory. During his visit, he promised that Portugal and Macau “will soon strengthen co-operation in the fields of science and technology” and will show Macau “a new Portugal” with “a new economy” and “new entrepreneurs”. Mr. Vasconcelos also indicated at that time that further “concrete steps” toward those ends would be taken in “the next months”. Hence, when Vasconcelos returned in October with the Prime Minister, he signed an agreement with Secretary Leong to establish a Start-up and Innovation Center in Macau in 2017. During the visit, he also co-chaired the two-day StartUP Macau Forum, which was organized by the Macau China Think-tank for Fintech Industries, with the support of the Portuguese government and conceptualization by CESL Asia. Two months later, Lionel Leong travelled to Portugal to meet the Portuguese official. Once again, the goal was to learn about new policies to support startups, helping young entrepreneurs to launch their own projects. That’s why the Macau delegation – always accompanied by Mr. Vasconcelos – visited several government-backed venture capital firms that invest in start-ups. They also visited a business center for start-ups in Lisbon that provides one-stop support services for markets such as China, Brazil, Angola and Europe. These are all examples that Lionel Leong wants to replicate in Macau.
Relations
‘One country, two systems’ U.S. Consul General noted his impression of a “palpable and persistent note of anxiety” In a speech entitled “Anxiety and Confidence in Hong Kong”, Consul General to Hong Kong and Macau, Kurt Tong warned of rising tensions in the HKSAR, yet reaffirmed the United States’ stance towards a One-China policy, despite critiquing some of the recent measures imposed by the mainland on the city. In his speech, given at the Foreign Correspondents’ Club, Tong noted his impression of a “palpable and persistent note of anxiety” felt in discussions with local Hong Kong residents, and touched on a number of sensitive topics, including the disappearance of the five booksellers from the SAR who were linked to publications which criticized the Communist Party, notes the South China Morning Post. “The unwarranted disappearances
of the booksellers, as well as the unfortunate, pre-emptive interpretation of the Basic Law with respect to official oath-taking, have contributed to a sense among many in Hong Kong that Beijing may be losing sight of the importance of respecting Hong Kong’s autonomy,” said the Consul General, as quoted by the publication. Tong recently visited Macau, meeting with the Secretary of Economy and Finance, Lionel Leong, to sign the “Foreign Account Tax Compliance Act” (FACTA), between the MSAR and the United States, ensuring financial institutions report the account information of Americans living in the MSAR to the Internal Revenue Service to avoid tax evasion. “I remain hopeful that the central government really does understand that the ‘two systems’ part of ‘one
country, two systems’ is critical to Hong Kong’s success, as well as to Hong Kong’s value to the rest of China,” noted the Consul General, opining that Hong Kong would be better served to act with a high degree of autonomy, while staying within the definitions of the Basic Law. Tong called the mainland's intervention in the oath-taking “unfortunate”, creating the impression that “Hong Kong couldn’t handle this oath-taking question by itself,” as quoted by Asia Nikkei Review.
Welcome mat
Hong Kong’s democracy was also a point highlighted by the HKSAR’s former Chief Secretary Anson Chan Fong On-sang, who has been invited to attend the inauguration ceremony of president-elect Donald Trump in Washington on January 20. “I will take the opportunity to understand the new administration’s stance on issues such as the One-China policy, universal suffrage and implementation of one country, two systems,” Chan said, noted the publication. K.W.
Retail
Macau Shopping Festival nets MOP230 mln in sales The organizer predicts the city’s retail industry will rebound soon The sixth edition of Macau Shopping Festival generated total sales amounting to MOP230 million (US$28.8 million), local Chinese-language newspaper Macao Daily reported yesterday. The event took place between December 3 and 31 last year. Of the total sales, a sale event featuring branded products between December 23
and 25 generated sales of over MOP2 million. In addition, another special sales event held at Landmark Macau achieved another MOP2 million. Frederick Yip, the organizer of the event and president of the executive committee of the Macau Association of Retailers and Tourism Services, forecast the city’s retail industry would be back on a path of growth
again soon, given the fact that the city’s economy has started to recover since gaming revenue began rebounding last August, and more casino-resort projects are set to be completed in the near future. Some 1,800 local small and medium-sized enterprises (SMEs) took part in the festival, according to the organiser. Regarding the new free Wi-Fi Internet access service provided at this year’s festival, the organiser claimed a total of 145,000 hours were used by 475,000 people. A.L.
Business Daily Thursday, January 12 2017 5
Macau Ho Chio Meng case
First three witnesses heard However, the judge presiding over the case, Justice Sam Hou Fai rejected the request, claiming the two would only be questioned on matters related to accusations against Ho.
only following Ho’s orders for the relocation of the decorations, as well as for the signing of some contracts with the companies mentioned in the accusations. He also pointed out there were at least three people working in the Prosecutor’s Office who had family ties with Wong and Mak at that time.
Valuable wood
The resting area
The corruption trial of the former prosecutorgeneral saw its first batch of witnesses take the stand Nelson Moura nelson.moura@macaubusinessdaily.com
T
he first three of some expected 100 witnesses took the stand yesterday in the trial of the corruption case against former prosecutor-general Ho Chio Meng. Businessmen Wong Kuok Wai, Mak Yim Tai and the former chief of the Public Prosecutor’s Office under the prosecutor-general, Antonio Lai Kin Ian were called to the stand for questions regarding the resting area on the 16th floor of the Hotline Building that was allegedly set up by Ho, and the relocation to his residence in Cheoc Van of the decorations made of valuable rosin wood seized by local Customs authorities. These three witnesses are also part of the nine defendants involved in the same case, whose trials will start on February 17. Defendants Wong and Mak - both currently being held in police custody – requested to postpone their testimonies for two and three days on the grounds that their lawyer had only been informed of the order for testimonies on Tuesday afternoon, and that therefore they had not had enough time to prepare their statements.
The hearing regarding the decorations made of rosin wood occupied most of yesterday’s trial. The former prosecutor-general was accused of moving the decorations, which had previously been seized by Customs in 2013, to the resting room area in the Hotline Building and to his residence in Cheoc Van. Mr. Lai testified that the reason the decorations were moved to the prosecutor’s office was because the office had received a report saying it was required for the prosecutors to investigate the case. “Does the department also request weapons used in murders, drugs or accident cars for inspection? I think you must have very little knowledge of the law to perform the actions you just said,” stated judge Lai Kin Hong. “Thanks for pointing out my mistake, but after 15 years in the department, nobody has ever pointed out that these actions were incorrect,” responded Mr. Lai. The former chief for the Office also defended himself by saying he was
Owning four management and decoration companies that are allegedly involved in the fraudulent contract outsourcing scheme in the case, Mr. Wong testified that he has known the ex-prosecutor-general since 2000. He claimed that he had rented another unit on the 16th floor of the Hotline Building for his companies and he had been appointed to do the repair and maintenance work for the resting area. Although he admitted that he had the keys for the resting area and had entered the area for cleaning purposes, Mr. Wong claimed he had only seen the ping pong table among the amenities mentioned in the accusations related to the area. According to the accusations, the former prosecutor-general had allegedly earned illicit benefits from renting a few units on the 16th floor of the commercial building. These units were claimed to be for the use of the Prosecutor’s Office but were never used for such functions. One of the units was allegedly used
as a resting room for invited officers of the Office, and was equipped with a sauna, karaoke machine, ping pong table, exercise machines and a bar. The area was kept secret from the majority of the employees of the Prosecutor's Office, who were ordered not to enter the room. Upon request from the case’s prosecutors, photos of the room were shown to Mr. Wong, but he said he had only seen the office materials and tables, and was not sure whether the amenities in the photos were from the resting area. In addition, the prosecution also asked Mr. Wong about the allegations relating to Ho’s Cheoc Van residence, which was supposedly rented out to visiting guests to the MSAR, but was allegedly used by the former official as his private residence. Admitting that he had conducted maintenance works in the unit, the witness denied that he was given the key to the residence, or that he had met the former official inside the unit. Following Wong’s testimony, his business partner Mak was also questioned about his relationship with the ex-top prosecutor. Claiming he has known the former official for more than 20 years, he said they only had an ‘ordinary friendship’ with each other. According to Mr. Mak, he met the former prosecutor-general in the Hotline Building two times in 2013 and 2014 to discuss family issues. In addition, both of them knew the owner of the Cheoc Van residence. The trial will continue tomorrow.
Land disputes
‘It’s not our fault’ Land awardees for seven plots in Seac Pai Van, whose land grants were declared invalid by the government recently, claimed in an open letter that they always wanted to develop the plots but were not allowed to do so Kam Leong kamleong@macaubusinessdaily.com
or roads. There were no conditions for land development,’ they claimed.
A group of land concessionaries of the Seac Pai Van Industrial Zone published an open letter yesterday in Chinese-language newspaper Macao Daily, slamming the government and claiming that delays in the development of their awarded plots of land were due to the government not issuing planning conditions. The letter, signed by ‘the land concessionaires of several land plots in Seac Vai Van,’ points out that land grants of seven land plots in the zone had gradually been declared as invalid by the MSAR government since November 2016, due to the fact that the concessionaires had not completed the development of the plots prior to the expiration of their landuse terms. But the concessionaries claimed in the letter that the non-development was due to the government’s failure to fulfil infrastructure requirements in the zone between the time that the land grants were awarded at the end of 1980’s and 2013, as well as the government’s freezing of the original land-use planning for the plots in order to conduct a new study of planning for the area in 1993. ‘In 1993, the government suggested it was changing the purpose of the plots from industrial use to residential use, saying it would reset the landuse terms of the plots and amend the land grant contracts with the concessionaries once the new planning was completed,’ they wrote in the letter. ‘From the end of the 1980’s to 2013, the land plots in the zone were still in the form of mountains, without any infrastructure for water, electricity
No issuance of planning conditions
Pointing out the government’s completion of the Seac Pai Van public housing complex and the auxiliary facilities such as public transport networks in 2011, the concessionaries claimed, however, they did not receive any issuance of planning conditions from the government for their developments. They added that they had expressed to the government many times their desire to develop the land plots, and had paid the government rent, taxes and premiums on time over the past 25 years. ‘Nevertheless, we could not avoid the declarations of the land grant invalidity that were made “in accordance with the law”, and our expenses
and work on the plots from “being seized” even though [we are] not liable [for the non-development],’ they wrote. The land awardees hope the government will give more priority to the issue, and urged the society to come up with a resolution for the land disputes in order to protect the city’s economic development and the legal rights of investors.
The plots
According to the Official Gazette, the government first announced the invalidity of the land concessions held by Sociedade de Desenvolvimento e Fomento Predial Kin Chit Lda and Fapamac Fábrica de Papel (Macau) S.A.R.L over lots ‘SJ’ and ‘SG’ in the Seac Pai Van Industrial Zone,
Gov’t to reclaim another land plot
The government is to reclaim an idle plot of land on Rua dos Currais on the Macau Peninsula, according to a dispatch published in yesterday’s Official Gazette, signed by the Secretary for Transport and Public Works, Raimundo do Rosário. The land parcel covers an area of 3,409 square meters and
on November 23 last year. Both of the land grants were awarded in 1989. Following that, on January 4 this year, the government announced that the land grants for five more land plots in the area were invalid, namely plots ‘SA’, ‘SQ1’, ‘SG2’, ‘SF’ and ‘SD’, which were granted to five different awardees for industrial use between 1989 and 1993. The concessionaires, in order of land plots, were: Fábrica de Plásticos e Borrachas, S.A.R.L; Ieng Four Limitada; Companhia de Desenvolvimento e Fomento Predial Hua Quan Lda; Lau Lu Yuen; and Baía do Dragão Investimento Imobiliário Lda. All the dispatches stated that the land awardees would have no right to compensation from the government.
was originally intended for the construction of a 13-storey building to sell vehicles and parts. The land plot remained undeveloped by the time its 25year temporary land concession expired on November 15, 2014. The grantee of the land plot, João Wang, passed away in 2006 and his relevant parties can make an appeal against the dispatch to the Court of Second Instance and the Chief Executive. A.L.
6 Business Daily Thursday, January 12 2017
Macau Junket
Opinion
Former promoter owes Galaxy MOP103 mln
Former junket promoter Hoi Sam Kuong has been ordered by the Court of First Instance to pay Galaxy Casino S.A. over MOP103.4 million (US$12.9 million), according to a notice published by the court. The former junket promoter was listed in the 2015 ‘Individual
Ashley Sutherland-Winch* “Vegasization” of Macau The world is watching how Macau will improve its gaming economy. The “Las Vegasization” of Macau is a trending opinion, but will it work with the traditions of Chinese culture? Bo Bernhard, executive director of UNLV’s International Gaming Institute, and one of the world’s leading gaming academics, recently coined the phrase “Las Vegasization,” meaning ‘the growth of nongaming revenue as part of the total resort experience, a phenomenon that picked up steam in Southern Nevada in the late 1990s and has been expanding ever since,’ as reported by the Las Vegas Review Journal. It’s no secret that casinos in Macau are rapidly attempting to secure non-gaming revenue after the government’s diversification mandate, but the mere offering of these amenities has not shown to be overly successful with the large masses of tourists that visit Macau, or with locals. I think the major component in truly attracting patrons to non-gaming activities like shows, family friendly entertainment, dining, shopping, and attractions will be targeting the next generation. Bernard further stated, “Now, the obvious observation here is that younger generations have never been huge gamblers when compared with older generations – but we do see significant millennial expenditures in other parts of the facility, such as the nightclubs. As such, it could well be that this time is different – and that this time, the younger generation continues to feel an aversion to traditional gambling games, even as they age into cohorts when they traditionally embrace more sedentary activities like casino gambling.” Having relocated to Macau in 2015 after spending ten years living in Las Vegas, I see Macau’s Cotai Strip looking more like Vegas every day, with the Eiffel Tower, the dancing fountains of Wynn Palace, newly placed MGM lions, and shopping options. I will go out on a limb, however, and say that I don’t think the two cities will ever be the same because they are too culturally diverse. Macau could, however, change a few things to be more successful at drawing in a younger market and more international tourists, as opposed to the bulk of visitors coming from the mainland Chinese market - offering complimentary alcoholic beverages, sodas and mocktails to active gambling patrons could be a start. By presenting only tea and water for gamblers, I think the casinos are missing opportunities. Once Macau is seen as more of a “party and entertainment scene”, I think more North American and European tourists will make the journey East. Perhaps this atmosphere is not the ultimate goal for Macau but, in my opinion, it would open more doors.
*Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Persons’ segment of the list of gaming promoters on the website for the Gaming Inspection and Coordination Bureau. However, the name does not appear on the 2016 list. Hoi is instructed by the court to pay the amount ‘corresponding to the capital and the interest gained until May 24, 2016, as well as a 6 per cent tax,’ states the notice.
Benefits
Wynn Macau awards one-month’s bonus
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aming operator Wynn Macau Ltd announced on Tuesday that it would issue a ‘winter bonus’ to eligible workers tomorrow, according to an internal memorandum of the company.
The notice, uploaded to the Internet by the New Macau Gaming Professionals Association, details that staff who have worked for the company for more than six months will be given a bonus equivalent to one month’s salary; while those who
have worked for 90 or more days but less than 6 months, will be awarded a bonus based on the number of days that they have worked in the company. However, the top management of the company will not benefit from this bonus scheme. In the memorandum, the casino operator noted that the city’s gaming industry is still facing a lot of challenges at the moment. This ‘winter bonus’, together with the company’s ‘summer bonus’, comes under the company’s guaranteed annual bonus scheme that equals two-month’s salary for eligible employees. The program will last until the end of this year. Wynn Macau is the second gaming operator in the city to announce the awarding of bonuses to its workers this year, following SJM Holdings Ltd. K.L.
Regulations
350,000 underage persons refused entry to casinos in 2016 About 350,000 individuals under the age of 21 were refused entry into local casinos over the course of last year, according to information provided by the Gaming Inspection and Coordination Bureau (DICJ) to Lusa. The number is an increase compared to 2015, when 236,000 underage individuals were refused entry, and is the largest yearly number seen since November 1, 2012, when the new law went into effect making it illegal for casinos to employ individuals under the age of 21, and to allow them entry to gaming areas. The number of entry refusals in 2014 was the same as that in 2013, at around 330,000, according to data from the DICJ. This law, which at the time of its passing was far from unanimously
supported, was based on other jurisdictions, which, although defining individuals aged 18 as adults, stipulates 21 as the age at which they can begin entering spaces where casino gaming is authorized. The law mandates administrative punishments for those who violate the rules, with fines varying between MOP1,000 (US$125) and MOP10,000. Concessionaires are also mandated as having “responsibility of oversight”, with failure to comply resulting in fines of between MOP10,000 and MOP500,000. Aside from the Public Security Police Force (PSP) and the Judiciary Police (PJ) being authorised to request identification from casino visitors and to order their expulsion, DICJ inspectors and their respective
management, as well as casino directors are also authorised to do so. The law determines that “the workers of the concessionaires in the carrying out of their oversight functions at the entries of casinos can solicit proof of age of persons who wish to enter the casino and can bar entry to those who refuse”. Lusa
Gaming
Landing Int’l predicts annual net loss to grow Chinese real estate developer Landing International Development Ltd expects its annual net loss for the year of 2016 will increase compared to that of 2015. The company, which is developing the new integrated resort Jeju Shinwa World in Jeju, South Korea, said the expansion in loss was due to an increase in administrative expenses, ‘mainly staff related costs and marketing expenses, incurred in the construction and pre-opening stages of the integrated resort development and property development.’ In addition, the change in fair value of financial assets and growth in other operating expenses due to its business expansion, had also driven up its losses, the company said. For 2015, the developer recorded a
loss attributable to the owners of the parent company of approximately HK$988 million (US$123 million). Last week, the developer announced that it had completed the purchase of its stake in Jeju Shinwa World from its joint-venture partner Genting Singapore PLC and had become the sole owner of the project.
Prior to the purchase of the stake, the two operators each owned a 50 per cent interest in the integrated resort project. In addition to the new development, the Chinese developer also runs the Landing Casino on the same Korean Island and the Les A Club in London, U.K. K.L.
Business Daily Thursday, January 12 2017 7
Gaming Analysis
What’s next for Packer? After Macau and Vegas, investors ask what’s next for Australia’s Packer Byron Kaye
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decade ago, Australian billionaire James Packer had a clear, if unconventional, strategy: to turn his father’s established television-to-newspaper conglomerate into a casino empire, tapping Asia’s richest gamblers. But as that plan falters, partly under the weight of China’s corruption crackdown, Packer has taken cash out of the Crown Resorts business and pulled back in both Las Vegas and Macau in the past two months - unsettling even seasoned investors who say they need to know what the alternative is for the company. A series of technology investments by Packer, largely in Israel, have helped muddy the waters - along with a film production company in which one of Packer’s partners is Steven Mnuchin, who has been nominated for the position of U.S. Treasury Secretary. “It’s pretty hard to digest it all with only a smattering of information,” said Angus Gluskie, a fund manager at White Funds Management, which has a small stake in Crown. “We all want to get a handle on what the real agenda is.”
Walked away
The high roller gambling business has struggled since Beijing’s graft crackdown began in 2014, battering Macau, which had been a potential transit point for illicit money outflows and corrupt officials fleeing China. In late 2015, Packer quit the Crown board saying he wanted to concentrate on casino developments in Las Vegas. Shares in the company rose on the expectation Packer would take parts of Crown private without having the conflicts of interest of being a board member. That plan has come to nought.
Last month, Crown said it was walking away from its third attempt to build a casino on Nevada’s famed strip and that it was selling down its stake in the Macau-focused Melco Crown Entertainment to almost nothing, from a third of the company. That represented a major pullback from its foray into China. Gaming revenue from Macau has declined every month for more than two years; and the company said turnover from VIP gamblers - largely Asian tourists - at its Australian casinos would likely fall 45 per cent in the second half of 2016. Mathan Somasundaram, a strategist with stockbroker Baillieu Holst, said an announcement on Tuesday that Packer would rejoin the Crown board showed that the company’s global ambitions and the businessman’s privatisation plans had ended. “The back tracking of the global expansion was a clear flag that privatisation was going to be too hard to sell,” Somasundaram said. “The local business is stable, but likely to see lower growth.” Responding to Reuters questions on investor concerns, Crown said the retreat from Macau and Vegas was consistent with a strategy to redeploy capital to growth projects and to cut debt. Crown spokeswoman Natasha Stipanov said Crown’s sale of Melco Crown shares “should make it clearer for investors to more easily evaluate the financial and operating performance of the company’s high quality core Australian assets”. Crown has casinos and hotels in Melbourne and Perth, and a casino and high-end hotel development in Sydney. But the uncertainty has hit its shares, with negative sentiment also fuelled by a fresh anti-graft blow from Beijing, when 18 of its staff were arrested in China for suspected
Crime
Filipino senator calls for Jack Lam’s extradition Leila de Lima also suggests the country’s senate should look into the case Sheyla Zandonai sheyla.zandonai@macaubusiness.com
In another episode linked to Jack Lam’s indictment on bribery and economic sabotage in the Philippines, the country’s senator Leila de Lima has urged the government to order Lam’s arrest or extradition to the country, reported the Inquirer. According to the Manila Bulletin, the senator said that the senate should investigate the probe into the reported 50-million pesos (MOP8 million) extortion by dismissed officials from the Bureau of Immigration (BI) related to Lam’s online casino in Clark Field, Pampanga. Justice Secretary Vitaliano Aguirre II said in response that there is no need to involve the senate, since the Bureau of Immigration, the National Bureau of Investigation (NBI) and the Office of the Ombudsman are already working on the case. Senator de Lima, however, claimed the Secretary’s close ties to Al Argosino and Michael Robles, two of the officials who allegedly received bribes from the Macau-based casino tycoon, did not confer impartiality on the investigation that is being led by Aguirre himself, both at the BI
and the NBI. The Inquirer also quotes her as saying that one of the two BI officials has reportedly left the country with his family. Yet the Justice Secretary indicated the senator was using Lam’s case as “retaliation” for a series of drug trafficking and graft accusations brought against her by the NBI over her alleged involvement in the illegal drug trade. Manila Bulletin also reported that the Bureau of Internal Revenue is to start investigations into the tax liability of Lam’s casino operations for sequestration of assets he left in the country. Settling tax liabilities was one of the conditions the Philippines’ President Rodrigo Duterte prescribed in order to allow Lam’s return to the country. The tycoon is said to have fled to Macau before his casino Fontana was shut down by the Philippines Amusement and Gaming Corporation (PAGCOR) on December 2, 2016. The police raided the premises arresting some 1,300 Chinese nationals who lacked immigration papers and were working for a call center-like operation suspected to be a front for online gambling.
“gambling crimes” in October. Crown shares are down more than 10 per cent since the October arrests and are trading 22 per cent below where they were when Packer first shifted to gambling in a 2007 demerger just before the global financial crisis. Australia’s benchmark S&P/ ASX 200 has fallen 12 per cent during the same period. Separately, Packer has also sold part of his stake, leaving his family with under 50 per cent of Crown for the first time since 2013. “I think they have been a bit shellshocked in terms of the volatility that’s coming out of Macau over the last two years or so,” said Theo Maas, a partner at Arnhem Investment Management, which holds Crown shares. “The real question is whether you can compensate that with a better relationship with Mainland China again or with other Southeast Asian customers.”
What Next?
As Packer has dramatically scaled back his global ambitions with Crown, the Sydney native has moved away from his home country. He now lives in homes in Los Angeles or Tel Aviv, Israel. He has invested in Israel’s hightech industry, a sector which has previously proven fruitful for the Australian and may offer clues about his own private investments, if not Crown’s. Crown did not respond to questions about Packer’s reason for moving to Israel or his business there. A source at Australian technology investment company Square Peg, which has interests in about 20 small
firms including several in Israel, told Reuters that Packer was an investor, though he does not have day-to-day involvement. Packer’s link to Square Peg can be traced to an investment in an online jobs portal, where he made a AUD50 million profit selling a stake in Australian jobs website Seek.com Ltd in 2013. The seek founder, Paul Bassat, is a founder of Square Peg. Crown has also bought a 20 per cent stake in Los Angeles-headquartered Japanese restaurant chain Nobu, in which actor Robert de Niro is also an investor. Before its retreat offshore, Crown said it would roll out Nobu restaurants in casinos around the world. Crown declined immediate comment on whether that plan was unchanged. “Clearly he’s been a distracted man for some time, and I think some of his top lieutenants are pretty distracted too,” said a third Crown investor, who asked not to be named because of the sensitivity of the issue. “I’ve probably got as many questions as you, and I’m not sure I have any of the answers.” Reuters
8 Business Daily Thursday, January 12 2017
Greater China Yuan
Banks forced to cover tracks of forex regulator Mainland banks were told to “manage sentiment” to prevent public panic Engen Tham and Samuel Shen
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hina’s forex regulator is telling banks to keep its instructions about curbing capital outflows secret and to ensure that research analysts keep any negative views about the yuan’s prospects to themselves, several bankers said. Both demands are seen as an attempt by the authorities to prevent alarm that could trigger further declines in the yuan, the bankers from local and foreign banks said. The yuan lost more than 6 per cent against the dollar last year and is at eight-year lows, prompting a flurry of restrictive measures on capital outflows from the State Administration of Foreign Exchange (SAFE), including setting limits on banks’ currency volumes in some cities or provinces and requiring approval for ever smaller transactions. SAFE, which is part of the People’s Bank of China (PBOC), is insisting in oral instructions to dozens of banks that they don’t reveal its role in such restrictions, six bankers said, which was damaging their relationships with clients since they were unable to explain why they were turning away business. SAFE and the PBOC have yet to respond to requests for comment. SAFE’s reticence began at least as far back as August, when its Shanghai branch called at least 20 of the major foreign and domestic banks operating in the city to a meeting with the regional heads of several SAFE departments. A representative from an international bank attending the meeting said there were no written instructions, but a high-ranking SAFE official told them explicitly what was expected of them. “You must control your forex deficit, but you can’t say that SAFE is controlling capital outflows,” the official told the bankers.
The banks were told to “manage sentiment” to prevent public panic, the banker said, and the banks’ research analysts should not broadcast any negative views on the yuan. “They told us not to publish bad house views - analyst house views - on the yuan”, the person said. A second banker on the forex team of an international bank said his bank had received the same instructions. Where a bank has exceeded the SAFE-set limits for forex transactions in a month, they have to turn business away, but are unable to explain the real reason why, several bankers complained. “We’re not going to tell our customers that (our forex business) has stopped; we just have to find ways to turn down the business we’re not allowed to do,” said a banker at Chinese Commercial Bank Ping An who had received SAFE instructions from seniors. “It’s not good for client relationships,” he added, explaining that he had told his clients to go to other banks. Ping An did not return requests for comment.
Penalty threat
In a verbal order to at least two lenders, SAFE said it would vet all cross-border money transfers worth US$5 million or more, down from US$50 million, banking sources told Reuters in late November. They also told the banks to interview clients to make sure the forex deals were not for fake transactions, or else face punishment, according to two bankers at separate listed banks. In response to those orders, one of the banks sent an internal notice to employees, seen by Reuters, to alert them to SAFE’s requirements, explaining that the regulator’s penalties could include “cancelling business qualifications” needed for the lender to conduct forex business. The notice passed on SAFE’s
instructions that staff should not mention the regulator. “Please do not reply to clients using wording such as SAFE controls, or SAFE doesn’t allow or strictly controls FX purchases,” it read. Instead, they should adhere to the line provided by SAFE, that the purpose of the changes was to “promote healthy development of outbound direct investment” and “crack down on fake deals”, the notice added.
Key Points Forex regulator tells banks not to reveal its hand in curbs SAFE told banks to bury negative research on yuan -bankers Banks concerned about damaging customer relationships China’s foreign exchange reserves fell to US$3.05 trillion in November from US$3.3 trillion in the first 11 months of 2016, and many traders are betting there will be further outflows as U.S. interest rates rises make dollar assets more attractive.
But SAFE wants banks to advise clients to buy yuan and sell dollars, the international bank representative said, a play that is likely to lose clients money. “If a person doesn’t have this need, how am I supposed to encourage it?” the banker said. At the same time, SAFE is quietly choking programmes designed to open overseas markets to Chinese investors. Even where institutional investors have been granted quotas to invest overseas, they are finding it increasingly difficult to exchange yuan into another currency. “SAFE would tell you that you still need to stand in the queue, and the waiting period is ‘uncertain’,” said an executive at Shanghai-based China equity fund house Greenwoods. An investment programme set up so global funds can raise Chinese cash to invest overseas has ground to a halt without explanation. “The application process seems to be in a state of suspension,” Michael Lu, managing director of Greater China Business Development of Dutch money manager Robeco told reporters in November. Reuters
Investment
Alibaba won’t seek board seats at Taiwanese firms The deal has yet to be approved by Taiwan’s Investment Commission Faith Hung
Alibaba Group Holding, which is awaiting regulatory approval for a US$45 million fund it is participating in, has promised the Taiwanese government it will not take board seats at local firms the fund invests in, a source with direct knowledge of the matter said. The fund is being raised by China Development Financial Holding (CDF), one of the island’s biggest financial holding firms, and the Chinese e-commerce giant is planning to take a 29.99 per cent stake. The deal has yet to be approved by Taiwan’s Investment Commission despite an application three months ago, raising concern that the fund may be rejected amid a chill in political relations with China. It follows a US$300 million Taiwan Entrepreneur Fund that Alibaba founder Jack Ma announced in 2015 but while the start-ups that the fund has invested in so far are based in Taiwan, they are not incorporated in Taiwan. Beijing cut off an official
communications channel with Taiwan in June, after Taiwan’s President Tsai Ing-wen declined to commit to the “One China” principle that Taiwan is part of China. In a sign of heightened tensions, Taiwan scrambled jets and navy ships on Wednesday as a group of Chinese warships led by China’s sole aircraft carrier sailed north through
the Taiwan Strait. Other business deals have been affected. In November, Taiwan’s ChipMOS Technologies said it scrapped a planned US$373 million stake sale to China’s Tsinghua Unigroup due to uncertainty about Taiwanese regulatory clearance, the second deal in eight months involving Unigroup and a firm in the island to fall through. The source, who declined to be identified due to the sensitivity of the subject, said Alibaba’s investment
plans offered benefits to Taiwan start-ups. “Alibaba can offer Taiwan entrepreneurs assistance to enter markets not only in China but in Southeast Asia as well,” said the source. The commission said that it was appropriate to take a more cautious approach to investments from China.
“We welcome foreign investments, and Chinese investments in principle as well” Emile Chang, the Taiwan’s Investment Commission executive secretary “We welcome foreign investments, and Chinese investments in principle as well,” said Emile Chang, the commission’s executive secretary. “But the review process is stricter.” Representatives for Alibaba did not respond to requests for comment. Other investors in the fund include Quanta Computer, a supplier of Apple Inc, and Far EasTone Telecommunications, said the source. Reuters
Business Daily Thursday, January 12 2017 9
Greater China M&A
In Brief
HNA extends reach to NZ with purchase of non-bank lender UDC HNA, which has over US$90 billion of assets globally, announced about US$20 billion of deals in 2016 alone according to Reuters Jamie Freed and Charlotte Greenfield
HNA Group, one of China’s most acquisitive conglomerates, said it would extend its reach to New Zealand with the US$460 million purchase of asset finance firm UDC, prompting an immediate credit rating downgrade for the nation’s biggest non-bank lender. HNA, best known as the owner of Hainan Airlines Co, said the NZ$660 million acquisition from ANZ Banking Group offered significant growth opportunities in Australia and New Zealand and would create synergies in its leasing business. With a portfolio that ranges from car loans to equipment finance, UDC is New Zealand’s largest non-bank lender, with NZ$2.6 billion in gross loans in 2016, according to KPMG. Toyota Finance New Zealand ranks a distant second with NZ$777 million. Standard & Poor’s said, however, it would downgrade its long-term rating of UDC to BBB from A-, given the likely loss of timely financial support from ANZ and adding that UDC
may face challenges in maintaining its franchise in debt funding markets and amongst some of its borrowers. It also said the sale could also change the risk appetite of UDC, which had traditionally been more conservative than other New Zealand finance companies. Other firms to be acquired by HNA have also been hit with downgrades or placed on credit watch. This includes Chinese information technology outsourcing firm Pactera Technology International Ltd which had its rating cut by Moody’s Investors Service. HNA, which has over US$90 billion of assets globally, announced about US$20 billion of deals in 2016 alone, Reuters calculations showed. Among them was a US$6.5 billion purchase of a 25 per cent stake in hotel chain Hilton Worldwide Holdings Inc. UDC, which saw net profit rise 3 per cent to a record NZ$58.5 million in the year to end-September, will join HNA’s finance arm, which operates a diverse set of businesses
in equipment leasing, insurance, and credit services. ANZ said it expected the sale to be completed in the second half of 2017 though it was subject to regulatory approvals. It will need approvals from the Reserve Bank of New Zealand and the Overseas Investment Office. “The sale of UDC is consistent with our strategy to simplify the bank,” ANZ New Zealand CEO David Hisco said in a statement.
Key Points UDC is NZ’s biggest non-bank lender by far HNA’s first foray into New Zealand, latest in string of deals Sale completion expected in H2 of 2017
Global summit
Xi to promote “inclusive” globalisation at Davos China’s President Xi Jinping will seek to promote “inclusive globalisation” in his keynote speech at the World Economic Forum (WEF) in Davos, Switzerland, later this month, China’s foreign ministry said yesterday. “Economic globalisation is facing resistance,” vice foreign minister Li Baodong said at a briefing on Xi’s Davos visit. Beijing will respond to the international community’s concern over globalisation by putting forward China’s opinions on how to “steer economic globalisation towards greater inclusiveness”, he said. This year’s forum is expected to be dominated by discussion of an outbreak of public hostility towards globalisation. M&A
Last week, ANZ, which is seeking to boost capital and focus on its strongest competitive points, agreed to sell its 20 per cent stake in Shanghai Rural Commercial Bank Co Ltd for A$1.8 billion. The bank is also considering the sale of its Australian wealth and life insurance business, valued by the bank at A$4.5 billion. Reuters
Chicago Stock Exchange responds over fake news The Chicago Stock Exchange has asked the U.S. Securities and Exchange Commission to remove a letter from its website that fraudulently claims to be from a journalistic organization calling for a halt to the exchange’s sale to a China-led consortium. The letter “is nothing more than ‘fake news’ masquerading as investigative journalism,” Albert Kim, associate general counsel of the exchange, known as CHX, said in response to the letter on Jan. 6. The author of the disputed letter was attempting to undermine the SEC rule filing process and the integrity of the government, Kim said. Cross-Strait relations
Official voice says trade with Taiwan progressing
Final ruling
Beijing hikes anti-dumping duties on U.S. animal feed The penalty hike was larger than experts had expected Josephine Mason and Hallie Gu
China has increased punitive tariffs on imports of a U.S. animal feed ingredient known as distillers’ dried grains (DDGS) from levels first proposed last year, potentially escalating a trade spat between the world’s two largest economies. In a final ruling, the Commerce Ministry said yesterday that anti-dumping duties will range from 42.2 percent to 53.7 percent, up from 33.8 percent in its preliminary decision in September. Anti-subsidy tariffs will range from 11.2 percent to 12 percent, up from 10 percent to 10.7 percent. The ruling is a major victory for China’s fledging ethanol industry, which had complained the U.S.
industry was unfairly benefiting from subsidies, and follows a year-long government probe. Yesterday, Beijing said it found the domestic DDGS industry had “suffered substantial harm” due to subsidised imports from the United States. China is the world’s top buyer of DDGS, a by-product of corn ethanol that is used by feed mills as a substitute for corn and soymeal. China imports almost all of its needs from the United States, the largest exporter. The decision is a big blow to the larger U.S. ethanol industry, including global traders Archer Daniels Midland Co (ADM) and Louis Dreyfus, along with biofuel producer Poet LLC, oil refiner and ethanol producer Valero Energy Corp and grains group Andersons Inc. The penalty hike was larger than experts had expected, and comes amid growing tensions between the two countries over China’s corn
subsidies and its steel and aluminium exports. U.S. President-Elect Donald Trump, who takes office on Jan. 20, has threatened to impose punitive tariffs on Chinese goods coming into the United States. Many Chinese businesses have already started to wind back imports of U.S. DDGS since the preliminary ruling in September, switching to domestic suppliers or alternatives like soymeal. “I don’t buy DGGs from the U.S. anymore and have turned to domestic DDGs, soymeal and rape meal,” said Mr Hu, who is in charge of buying protein in southern China for feed manufacturer New Hope Liuhe. He declined to give his first name as he is not authorised to speak to the media. Imports have steadily dropped in recent months. Shipments in October and November fell to 135,000 tonnes and 163,000 tonnes respectively, about a third of the total in August before the first ruling. In the first 11 months of the year, imports were down 53 percent at just under 3 million tonnes. The new rates will take effect from today and be in force for five years. Reuters
A mainland spokesperson said yesterday that the mainland would bring up new policies to promote Taiwanese investment and boost cross-Strait cooperation in 2017. “The mainland is still Taiwan’s largest trade partner and the biggest source of exports and trade surplus,” said Ma Xiaoguang, with the State Council’s Taiwan Affairs Office, at a press conference. “The mainland is the best choice for Taiwanese industrial and commercial circles to develop business, and no force will stop or weaken the promising future of the winwin situation of cross-Strait economic cooperation,” added Ma. Overcapacity
Authorities to cull shoddy steel production by Q2 China will phase out production of low-quality steel made from scrap metal, or “ditiaogang,” before the end of June, the country’s top economic planner said. Authorities have sent 12 inspection groups to some areas including Hebei, Henan, Guangxi and Heilongjiang to oversee the move, according to Lin Nianxiu, deputy director of the National Development and Reform Commission, on Tuesday. He made the remarks at a meeting of the China Iron and Steel Industry Association addressing steel capacity cuts in 2017.
10 Business Daily Thursday, January 12 2017
Greater China Funding squeeze
Domestic companies turn to structured debt Investors are demanding higher yield premiums to hold bonds since the beginning of October
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ash-strapped Chinese companies are ramping up sales of asset-backed securities (ABS) to raise funds as they face record delays in collecting payments from customers. Structured note sales backed by assets such as receivables jumped 130 per cent to RMB455.2 billion (US$65.7 billion) last year, based on official data released Monday. They accounted for 54 per cent of all asset-backed securities issued in China, up from 33 per cent in 2015. By comparison, notes backed mainly by bank loans, which used to constitute the bulk of ABS issuance, fell 4.6 per cent in 2016, the data show.
“Companies in China, especially the private sector, are having a hard time getting financing” Wang Xuebin, executive director at the investment banking arm of JPMorgan First Capital Securities Co
Chinese firms have been trying to find new ways to borrow as they weather the worst economic slowdown in a quarter of a century, with government measures to rein in risks in financial markets tightening their access to credit. Corporate bankruptcies in China jumped an estimated 20 per cent in 2016 and will likely rise 10 per cent in 2017, according to estimates from Euler Hermes Group. Sales have also been fuelled by government support for firms to monetize assets and increase cash flow. “Companies in China, especially the
private sector, are having a hard time getting financing,” said Wang Xuebin, executive director at the investment banking arm of JPMorgan First Capital Securities Co. “The jump in ABS issuance was also driven by the fact that corporate bond sales became harder in the second half 2016.” It now takes a record 94 days for companies to collect cash on completed sales, up from about 76 two years ago. In addition to issuing ABS, companies are selling unpaid customer bills to financial firms in order to fill the funding gap. Investors are demanding higher yield premiums to hold bonds since the beginning of October as tighter monetary conditions triggered an unwinding of leverage by banks and brokerages. Average yield premium of top rated five-year local corporate over government bonds rose 50 basis
points in 2016, the most since 2011. By comparison, the spread on AAA rated five-year ABS widened 40 basis points over sovereign notes, according to ChinaBond data. For investors, there should be lower risk investing in ABS than bonds issued by the same firm because ABS are secured by income generating assets and are isolated from other operations of the company, according to Wang. Yitong Road and Bridge Co., a toll road operator in Ordos City in northern China, failed to make payment on RMB70 million of ABS due on May 29, becoming the first company to default on the product in the nation, according to ChinaBond. In October, United Credit Ratings downgraded two ABS products issued by Bohai Steel Leasing to A from AAA, citing the issuer’s deteriorating asset quality and external guarantor Bohai Steel
Group Co.’s lack of ability to repay the ABS in case of failure. “As the economy slows, ABS investors could face higher risks if the underlying assets are heavily related to the real economy such as account receivables and beneficiary rights,” said Li Yan, general manager of the structured finance department of China Chengxin International Credit Rating Co. For some investors the credit quality of the company ultimately sponsoring the ABS deal is what matters because of risks around the collateral. “There is uncertainty whether the underlying assets for ABS will be truly isolated,” said Cheng Peng, Beijing-based head of investments at Genial Flow Asset Management Co. “We consider more the creditworthiness of the issuer, the same as we look at bonds.” Bloomberg News
Trade
U.S. panel upholds duties on Chinese-made Samsung, LG washers Lawyers for the companies said that the production of washers moved to Thailand and Vietnam U.S. regulators on Tuesday upheld hefty tariffs on Samsung and LG brand residential washing machines manufactured in China, saying these products were sold below cost, harming American appliance makers including Whirlpool Corp. The U.S. International Trade Commission voted unanimously to impose final duties on the products of up to 52.5 per cent following a Commerce Department probe last year. The decision locks the duties in place for five years, but Samsung Electronics Co Ltd and LG Electronics Inc have largely shifted production for the U.S. market away from China to Thailand and Vietnam. The ruling is the latest in a long-running tariff battle between Whirlpool and its South Korean arch-rivals. In 2012, a previous probe by the U.S. Commerce Department found that Samsung and LG washers made in South Korea and Mexico were sold below production costs in the
United States or benefited from unfair subsidies. The South Korean companies subsequently shifted production for the
U.S. market to China. In Dec. 7 testimony before the trade commission, lawyers for LG and Samsung said that the companies were now producing washers for the U.S. market in Thailand and Vietnam. In the case of Samsung, that production began in June 2016, about a month
before the Commerce Department issued preliminary anti-dumping duties against Chinese-made LG and Samsung washers.
‘In 2015, imports of such washers from China were valued at an estimated US$1.1 billion’ “This is a gratifying win for American manufacturing, particularly our more than 3,000 employees at our factory in Clyde, Ohio, who make clothes washers for American consumers,” said Whirlpool Chairman and CEO Jeff Fettig said. The Commerce Department probe last year stemmed from a petition by Whirlpool Corp over imports of washers manufactured by LG and Samsung in China. In 2015, imports of such washers from China were valued at an estimated US$1.1 billion. Reuters
Business Daily Thursday, January 12 2017 11
Asia Oil industry
Asia’s diesel profit may rise for first time since 2013 Analysts say China’s “Belt and Road Initiative” will boost infrastructure investments and diesel demand in Myanmar, Bangladesh and Pakistan Jessica Jaganathan and Florence Tan
A
sian refiners’ profit margins from producing diesel in 2017 may rise for the first time in four years as demand for the fuel improves in the infrastructure, construction, mining and oil and gas exploration sectors. A return to normal winter conditions after last year’s warmer-than-average temperatures along with a recovery in crude oil prices
that will stabilise the finances in some producer countries will also spur higher margins, analysts and traders said. Diesel demand growth will likely drive refiners’ profit for producing a barrel of diesel from Dubai crude to an average of US$11.40 a barrel in 2017, higher than the US$10.70 a barrel recorded in 2016, said Suresh Sivanandam, senior manager, refining research Asia Pacific, at Wood Mackenzie in Singapore. This would be the first annual
increase since 2013. In 2016, the average margin fell to a seven-year low of US$10.60 a barrel, according to data on Thomson Reuters Eikon. The 2017 forecast would still be below the peak of US$26 in 2008 when China was a net importer of the fuel. Coal prices that surged in 2016 should continue to provide support for diesel demand in 2017 as miners increase their consumption to operate machinery. Coal miners in Indonesia and Australia boosted output because of rising prices in 2016. That Indonesian growth should continue in 2017, said Woodmac’s Sivanandam. “The recovery in coal prices is expected to give some boost to diesel demand, after years of muted
growth,” he said. Continuing growth in other emerging economies is also expected to support diesel demand in Asia, said Sri Paravaikkarasu, head of East of Suez Oil at energy consultants FGE. Diesel is used to fuel heavy vehicles in industry and construction as well as mining equipment and also as a heating fuel in Europe. China’s “Belt and Road Initiative” will boost infrastructure investments and diesel demand in Myanmar, Bangladesh and Pakistan, said analysts from consultants Energy Aspects in a note to clients. The initiative “will be a key driver of infrastructure investment in the coming years,” said Energy Aspects.
Global uptick in diesel demand
Globally, diesel demand is expected to rise by 500,000 barrels per day (bpd) in 2017, following a decline of 50,000 bpd in 2016, boosted by a pick-up in drilling activity in North America and an uptick in mining activity in China, Energy Aspects said. Spring refinery maintenance in Asia is expected to be the heaviest since 2014, with 1 million bpd more capacity shut in March and April this year than during the same time in 2016, which will significantly draw down diesel stocks, the consultants said. Still, with Asian refinery capacity expansions expected to exceed 1 million bpd in 2017, mainly in China, Vietnam and India, diesel could come under pressure again in the second half of the year, Energy Aspects said. “While overall Asian demand should improve, growing refinery and condensate splitter runs in both Asia and the Middle East will keep the market well-supplied,” said FGE’s Paravaikkarasu. Reuters
Regulation
Indonesia says bond dealers must avoid conflicts of interest Foreigners hold more than 37 per cent of Indonesia’s government bonds Eveline Danubrata and Gayatri Suroyo
Indonesia’s finance ministry, which recently cut its business ties with JPMorgan Chase & Co, announced new rules that require primary bond dealers to “safeguard” their partnership with the government and avoid conflicts of interest. The regulation is likely to add to analysts’ concern about moves to strike back over unfavourable investment commentary after Indonesia punished the U.S. bank for its downgrade of the country’s stocks in November. Primary dealers “have the duty to safeguard the partnership with the Indonesian government based on professionalism, integrity, the avoidance of conflict of interest, and looking at the interests of the Republic of Indonesia,” according to documents uploaded to the ministry’s website on Wednesday. The documents, dated Dec. 30, said the finance minister can revoke the appointment of a primary dealer if it does not fulfil the stated conditions. The finance minister also has
the authority to accept or reject an application to be a primary dealer by taking into consideration the track record of the bank or securities firm, including its working experience with the ministry. A primary dealer is a bank or a securities firm appointed by
the finance minister that can buy government bonds in auctions and resell them in the secondary market. Indonesia had 19 such dealers as of Nov. 25. Foreigners hold more than 37 per cent of Indonesia’s government bonds. The local capital market lacks depth and liquidity, making the perception of foreign investors particularly important for Southeast Asia’s biggest economy.
The Finance Ministry dropped the JPMorgan’s services as a primary dealer for domestic sovereign bonds and as an underwriter for bonds sold to the global market. The bank also no longer receives certain transfers of state revenue. Suahasil Nazara, the head of the ministry’s fiscal policy office, on Jan. 4 defended the penalising of JPMorgan, saying its research was “not credible and not objective”. Reuters
12 Business Daily Thursday, January 12 2017
Asia In Brief Bank of Japan
Kuroda told PM U.S. economy growing steadily Bank of Japan Governor Haruhiko Kuroda voiced optimism over the health of the U.S. economy in a meeting with Prime Minister Shinzo Abe yesterday. In his first such meeting since September, Kuroda said he received no particular requests from the premier on monetary policy and that there was no specific discussion about U.S. Presidentelect Donald Trump. “Today’s meeting is one of the meetings that I regularly hold with the prime minister,” Kuroda told reporters after the meeting. “I explained recent developments in the global economy. We did not specifically talk about Trump,” he said.
Official forecast
Thailand’s economy expected to expand 3.2 pct in 2016 The finance ministry has forecast economic growth of 3.4 per cent this year
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hailand’s 2016 GDP growth is expected to be 3.2 per cent, Deputy Prime Minister Somkid Jatusripitak said, adding that Southeast Asia’s second-biggest economy was still on shaky ground but should see an improvement this year. “There are no investors, investors do not dare invest, exports are not good. Autos are the only good thing...for the whole year 2016 growth should be around 3.2 per cent,” Somkid told reporters at a seminar in Bangkok.
Thailand’s export-reliant economy has struggled since a May 2014 coup by the army and exports and domestic demand remain subdued. Last year, the military government introduced various measures to boost both private and public spending. The finance ministry has forecast economic growth of 3.4 per cent this year. Somkid told reporters yesterday that Thailand’s GDP should grow between 3 and 4 per cent in 2017 as exports, commodity prices and tourism improve.
Employment
Australia job vacancies highest since mid-2011 Job vacancies in Australia have risen for a second straight quarter to hit the highest since mid2011, a promising sign for an improvement in labour demand. Total job vacancies increased 2.1 per cent to 182,000 seasonally adjusted in the SeptemberNovember quarter, from 178,100 in the three months to August. Vacancies were 8.9 per cent higher than in the same period of 2015, data from the Australian Bureau of Statistics yesterday showed. Vacancies in the private sector climbed 2.4 per cent to 164,700, again the highest number since mid 2011. That was up 8.6 per cent on the November quarter of 2015. Trade
S.Korea import prices rise South Korea’s import prices in December jumped at their sharpest pace in more than five years on soaring oil prices and the won’s declines against the dollar, central bank data showed yesterday, adding upward pressure on inflation. Import prices rose 9.2 per cent in December from a year ago in won terms, the Bank of Korea said, the fastest annual growth since a 10.7 per cent jump in November 2011. For 2016 as a whole, import prices dropped 4.2 per cent. Aside from December, the only other month prices rose was November, when they increased 3.6 per cent. Official trip
Japanese PM to visit Australia Japan’s Prime Minister Shinzo Abe and a business delegation will visit Australia on Saturday amid unease over future U.S. presence in Asia. Australia’s Prime Minister Malcolm Turnbull will meet Abe on Saturday for a “working meeting”. The pair are expected to discuss regional security issues, the now defunked Trans Pacific Partnership and potential policies of U.S. President-elect Donald Trump. “We are committed to advancing our economic, investment and trade relationship, our defence and security cooperation, and our common commitment to a secure and prosperous region,” Turnbull said in a statement yesterday.
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Thailand received a record 32.6 million foreign visitors in 2016, according to the tourism ministry
Thailand received a record 32.6 million foreign visitors in 2016, according to the tourism ministry. Thailand’s King Bhumibol Adulyadej, who reigned for seven decades and was seen as a stabilising figure in the country, died on Oct. 13. King Maha Vajiralongkorn, his only son and heir, ascended the throne
Key Points GDP should grow 3-4 pct in 2017 as economy improves-deputy PM Exports, commodity prices and tourism seen picking up on Dec. 1, putting to rest concerns from some quarters that the royal succession would not go smoothly. The junta has overseen a period of relative political stability in Thailand following more than a decade of unrest including on-off street protests and two coups, partly by muzzling dissent including its political opponents. “I believe in 2017 there should be confidence in Thailand’s economy, the political situation is better, the royal transition was smooth...exports to the United States should be better, Somkid said. “We don’t think Europe will be good but it should have a minimal impact on us,” he added, without giving further details. The junta has promised to hold a general election later this year as part of its roadmap to return Thailand to democratic rule. Reuters
Monetary policy
S.Korea central bank expected to stand pat Bets on a further policy easing waned, given the economy would face an increased capital outflow risk - just as the U.S. starts to raise its Fed funds target South Korea’s central bank is expected to hold its key interest rate at a record low 1.25 per cent on Friday, its policy options constrained by skyhigh household debt and the U.S. Federal Reserve’s plans to speed up its rate-hike cycle. All 23 analysts surveyed by Reuters forecast the Bank of Korea would keep its base rate steady for a seventh month at its meeting on Friday.
Key Points All 23 analysts surveyed see base rate kept at 1.25 per cent on Jan. 13 BOK to release revisions to its growth outlook
Bets on a further policy easing waned, given the economy would face an increased capital outflow risk and a further increase in household debt if the BOK were to cut its reference rate - just as the U.S. starts to raise its Fed funds target. South Korea is waiting for a constitutional ruling on parliament’s impeachment of President Park, which could take months and jeopardize government policies even as the economy struggles with sluggish exports and weak consumption. BOK Governor Lee Ju-yeol said in December that downside risks to growth appeared to have increased from October, when his team last revised the growth outlook to 2.8 per cent for 2017.
“Downside risks seem to outweigh upside risk. We will monitor the growth path for another month before reviewing the outlook in January,” Lee told reporters in December after leaving rates unchanged. The BOK issued a report in December warning that the debt-servicing capacity at some of the most vulnerable households could fall as they brace for higher loan rates stemming from rising yields in the United States. Household debt stood at a record high of 1,295.8 trillion won ($1.08 trillion) at the end of the third quarter of 2016, up 11.2 per cent from a year earlier. Aside from the rate decision itself, the BOK will also issue revisions to its quarterly outlook for inflation and economic growth. The finance ministry slashed its growth outlook to 2.6 per cent from 3 per cent earlier, citing weaker domestic demand and slower job growth for the year ahead. Reuters
Seven analysts foresaw a rate cut later this year, while an HI Investment & Securities analyst said the Bank of Korea’s (BOK) next move would be a hike in early 2018. Nomura International and Goldman Sachs Group are among those who recently pushed back projections for further monetary easing this year, citing the Fed’s expected tightening cycle and risks from the influence-peddling scandal that embroiled President Park Geun-hye. Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Thursday, January 12 2017 13
Asia Electronic payments
India’s Prime Minister touts digitized economy to business leaders Scepticism exists over how many of the hundreds of anticipated memorandums of understanding expected to be signed at the week-long summit will translate into real spending Rupam Jain and Promit Mukherjee
I
ndian Prime Minister Narendra Modi told a gathering of business leaders on Tuesday that the country was on the verge of becoming the world’s most digitized economy, and avoided direct mention of the economic hit from demonetisation. Speaking at India’s biggest investor summit, organized in his home state of Gujarat, the 65-year-old said his government was strongly committed to continue reforming the Indian economy.
digitized economy. Most of you wanted this change in India. I am proud to say that it is happening before you. “Creating an enabling environment for business, and attracting investments, is my top priority.” Modi’s address to the Vibrant Gujarat investor gathering comes weeks after his shock decision to abolish 500 and 1,000 rupee notes, worth around US$7.50 and US$15 each. The move caused widespread anger among millions of people across the country, as they endured long queues
at banks and ATMs to draw money or deposit old notes about to expire. The radical gambit has been billed as an attempt to root out corruption, end terror financing and move the country into the age of digital payments. But Modi’s government has struggled to produce enough new bank notes to meet demand, leading to a temporary slump in business in an economy that is heavily dependent on cash. India’s corporate earnings expectations have taken a hit. Fears that the note ban will dent profits in the latest quarter have led to a 2.25 per cent drop in earnings estimates since Nov. 8 for those companies that are part of the country’s benchmark Index, according to Thomson Reuters data.
Still, Indian government officials are optimistic that major investment pledges will come out of the meeting, which is being held at a sprawling convention centre in the western city of Gandhinagar. “The summit is a symbolic gesture to lure investment, but companies will only invest if there are changes at the macro policy level,” said professor Sebastian Morris of the Indian Institute of Management in Ahmedabad, noting investors need to see infrastructure and support. “This time we want to hand-hold investors and assure them that the business environment is perfect for them to launch new businesses,” said Deepak Bagla, managing director of Invest India, a vehicle set up to guide investments into the country. Reuters
“Believe me, we are on the threshold of becoming the world’s most digitized economy” Narendra Modi, India’s Prime Minister “We are working to adopt and absorb newer technologies, to bring about transparency, and to end discretion,” Modi told the summit, adding that foreign direct investment in the country has topped US$130 billion in his two-and-a-half years in office. “Believe me, we are on the threshold of becoming the world’s most
Legislation
Indonesia to issue new mining rules this week Traders have been closely watching the situation given Indonesia is a major producer of metals such as copper and nickel Wilda Asmarini and Bernadette Christina Munthe
Indonesia will issue new rules for miners this week, the mining minister said late on Tuesday, which will cover contracts and permits, exports, taxes, divestment obligations and domestic processing requirements, among other issues. Indonesia announced in 2014 a ban on ore shipments to push miners to build smelters to process ore locally, but gave some concessions to concentrate producers after protests from the industry. As part of this push, a ban on the export of mineral concentrates from Indonesia is due to kick in on Jan. 12. Rules now being drafted will allow concentrate shipments to continue beyond that deadline in certain cases, Energy and Mineral Resources Minister Ignasius Jonan told reporters after a cabinet meeting. The new rules were needed “to clarify agreements on downstream mineral processing and other related matters,” Jonan said, referring to directions from President Joko Widodo and rules on domestic processing set out in the 2009 Mining Law. The rules would have to maximise returns on Indonesia’s natural resources, as mandated in the
Constitution, while also considering increasing state revenues and employment opportunities, he said. “The government hopes for the creation of new work areas,” he said. Foreign mine investors would need to divest 51 per cent of their holdings “wherever possible,” he added.
“The government hopes for the creation of new work areas” Ignasius Jonan, Energy and Mineral Resources Minister Traders have been closely watching the situation given Indonesia is a major producer of metals such as copper and nickel. Any relaxation of Indonesia’s ban on ore exports could impact nickel prices and nickel smelter investors, which have been supported by supply restrictions, including from the Philippines, which took Indonesia’s place as the world’s top nickel ore exporter in 2014. No mention was made of nickel or bauxite on Tuesday, but Jonan said the new rules would include
obligations on domestic processing of low-grade ores. Last month Jonan said the government was considering allowing some nickel ore and bauxite exports. A change to the existing rules is critical for Phoenix, Arizona-based Freeport McMoRan, whose Grasberg operation in Indonesia currently exports around two-thirds of its output as copper concentrate. Freeport, along with statecontrolled PT Aneka Tambang Tbk and other major miners, had lobbied President Joko Widodo’s administration to ease the ban to allow more time for them to build the necessary smelters to process all the ore at home. A continuation of concentrate
exports would be linked to the development of smelters, Jonan said on Tuesday, stopping short of providing details. In December, the government said Freeport would first need to switch over from its current contract of work (COW) to a special mining licence in order to clinch a new export permit. This would mean Freeport needs first to agree on new fiscal terms including taxes and royalties among other things, issues that may take longer to resolve. Freeport’s exports from Indonesia were held up for more than six months in 2014 in a fractious export tax dispute connected to the country’s mining rules, costing Southeast Asia’s top economy more than US$1 billion and putting thousands of jobs at risk. “Hopefully in 1, 2, 3 days this week this will all be finished,” Jonan said. Reuters
14 Business Daily Thursday, January 12 2017
International In Brief Remittance
Fed 2016 profits to U.S. Treasury fall The interest paid by the Fed to major banks last year jumped to US$12 billion as the central bank’s chief tool for raising rates nationally provided a boon to some of the country’s largest financial institutions. In preliminary estimates of its 2016 results, the Fed said that its year-end remittances to the U.S. Treasury are expected to fall to US$92 billion, down US$5.7 billion from a record US$97.7 billion transferred in 2015. Part of the decline is due to a drop of about US$2.6 billion in what the Fed earns on its holdings of U.S. Treasury bonds and mortgage-backed securities accumulated in fighting the 2007 to 2009 financial crisis. Angola
Unions call for minimum wage rise The secretary-general of the National Union of Angolan Workers – Union Confederation (UNTA-CS), Manuel Viage, on Tuesday called for the national minimum wage to be increased by above the rate of inflation by April. The union leader called for the rise as he spoke to Lusa, adding that discussions with the government in the first quarter of the year should also include “adjusting the salaries of civil servants.” “We can see that everything points to discussion of the adjustment of civil servants wages also including discussion of the national minimum wage,” said Viage.
VC
Venture investment slides in 2016 The decline ended a calmer year after venture capital reached fever pitch in 2015 Heather Somerville
V
enture capital investment continued its slide in the fourth quarter of last year, rounding out a restrained year in start-up financing but not the collapse many had feared. Investments in venture-backed companies in the United States fell 16 per cent to US$11.7 billion from the previous quarter. That was 19 per cent below the same period the year before and marked a three-year quarterly low, according to the latest MoneyTree Report from PricewaterhouseCoopers and CB Insights, released yesterday. The quarter had 982 venture deals, marking the first time since 2011 that there were fewer than 1,000 deals in a quarter, according to the report. The decline ended a calmer year after venture capital reached fever pitch in 2015, driving valuations to record levels and raising concerns about another Silicon Valley bubble. The cooling in 2016 has been widely
viewed as healthy, providing it does not lead to a sudden collapse of funding. “There was (caution) of catastrophe. I don’t think that’s yielded itself,” said Tom Ciccolella, U.S. venture capital leader at PwC.
“There is a big appetite for the asset class” Tom Ciccolella, U.S. venture capital leader at PwC Although the fourth quarter of 2016 produced the lowest funding since the same period in 2013, when only US$9.9 billion was invested, startups continued to score billion-dollar deals, which prior to 2014 were unheard of, Ciccolella said. In December, satellite communications company OneWeb raised
US$1.2 billion, the lion’s share of which came from Japan’s SoftBank Group Corp. However, investors are generally keeping a tighter lid on start-up valuations, with just four new companies in the fourth quarter earning the highly prized “unicorn” status of a valuation of US$1 billion or more. The third quarter of 2015 marked the peak for unicorns, when 16 startups earned that designation, according to the MoneyTree report. Last year’s restraint may not extend to this year, as venture firms have padded their coffers. Venture capital fundraising hit a 10-year high of US$41.6 billion last year, creating a surplus of cash for new start-ups, according to a separate report from PitchBook Data Inc and the National Venture Capital Association, also released yesterday. More venture capital funds are also hitting their fundraising target: 88 per cent of venture funds achieved their target in 2016, compared to 80 per cent the year prior, according to the PitchBook report. “There is a big appetite for the asset class,” Ciccolella said. “There is so much money ready to be invested.” Reuters
Mozambique
Annual inflation over 25 per cent Mozambique’s monthly inflation rate was 3.47 per cent in December bringing the year’s total inflation to 25.26 per cent, one of the highest in recent years and much more than the 10.55 per cent seen in 2015, the country’s statistics institute said on Tuesday. As in previous months, food and drink was responsible for most of the increase in December as tomato prices rose 47.7 per cent, coconuts 22.6 per cent and peanuts 10.2 per cent. Forex
U.S. charges three traders in rigging probe The U.S. Justice Department on Tuesday brought charges against three former traders at JPMorgan Chase & Co, Citigroup Inc and Barclays Plc arising from a global probe into the manipulation of foreign exchange prices at major banks. Richard Usher, formerly of JPMorgan, Rohan Ramchandani, formerly of Citigroup, and Chris Ashton, formerly of Barclays, were charged in an indictment filed in federal court in Manhattan with conspiring to restrain trade. The case came after JPMorgan, Barclays, the Royal Bank of Scotland and a Citigroup unit pleaded guilty in May 2015 to conspiring to manipulate currency prices, agreeing at that time to pay more than US$2.5 billion in criminal fines.
Forecast
World Bank sees higher 2017 global growth The bank forecasts 2017 U.S. growth at 2.2 per cent versus 1.6 per cent in 2016 David Lawder
The World Bank on Tuesday said global growth would accelerate slightly as recovering oil and commodity prices ease pressures on emerging-market commodity exporters and painful recessions in Brazil and Russia come to an end. In its latest Global Economic Prospects report, the multilateral lender said it expected 2017 real gross domestic product growth to rebound to 2.7 per cent from a post-financial crisis low of 2.3 per cent last year. Growth in advanced economies is expected to edge up to 1.8 per cent in 2017 from 1.6 per cent in 2016, the World Bank said, while emerging and developing economies will see growth accelerate to 4.2 per cent this year from 3.4 per cent last year. “After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,” World Bank Group President Jim Yong Kim said in a
statement. “Now is the time to take advantage of this momentum and increase investments in infrastructure and people.” However, there was considerable uncertainty surrounding the forecasts, which did not incorporate the effects of various policy proposals from U.S. President-elect Donald Trump, which are expected to include increased fiscal stimulus from tax cuts and infrastructure spending, and a more protectionist trade stance. The World Bank forecasts 2017 U.S. growth at 2.2 per cent versus 1.6 per cent in 2016, but the increase could be considerably larger - and have effects far beyond U.S. shores. “A surge in U.S. growth - whether due to expansionary fiscal policies or other reasons - could provide a significant boost to the global economy,” the bank said. However, this could lead to higher interest rates and tighter financial conditions that would have adverse effects on some emerging market
countries that depend heavily on external financing. It added that lingering uncertainty over the course of U.S. economic policy could weigh on global growth by keeping investment money on the side-lines until there is more policy clarity.
‘The World Bank said China’s growth would continue to slow, easing to 6.2 per cent in 2017’ The World Bank said China’s growth would continue to slow, easing to 6.2 per cent in 2017 from 6.7 per cent in 2016, but growth would edge higher in some Southeast Asian economies, including Indonesia and Thailand. India’s strong growth is expected to accelerate, rising to 7.6 per cent in 2017 from 7.0 per cent in 2016 as reforms ease domestic supply bottlenecks and increase productivity. Reuters
Business Daily Thursday, January 12 2017 15
Opinion Business Wires
The Phnom Penh Post Cambodia and Laos officially inaugurated a newly expanded border crossing yesterday that is expected to increase trade and tourism between the two countries, according to authorities. The Trapeang Kriel-Nong Nokkhiane border gate, which connects Cambodia’s northern Stung Treng province to Laos’s southern Champasak province, is the sole official land crossing between the two countries, and an artery for bilateral trade and investment. Prime Minister Hun Sen presided over the inauguration ceremony of new facilities at the border gate on Tuesday alongside his Laotian counterpart, Thongloun Sisoulith.
Jakarta Globe Indonesia is gearing up preparation to start importing cattle from Mexico as negotiation on a similar deal with its neighbour and largest cattle supplier Australia remains in limbo. Australia is demanding that Indonesia loosen an import restriction that requires imported cattle to weigh at least 350 kilogram and be 30 months old when it arrives in the archipelago. The requirement limits cattle options that Australia can supply to Indonesia. Indonesia has asked in return that Australia cut the price of its cattle by one Australian dollar (70 US$ cents) per kilogram.
Trump through Chinese eyes
W
The Star Malaysia Airports Holdings Bhd (MAHB) recorded a 6 per cent growth in passenger traffic at its airports in the country last year to 88.83 million passengers, with the KL International Airport (KLIA) surpassing the 50-million mark for the first time. In a statement to Bursa Malaysia, the airport operator said 43.2 million international passengers passed through MAHB airports in Malaysia in 2016, representing an 8 per cent jump. Growth in domestic traffic was lower at 4.1 per cent to 45.59 million passengers. For KLIA, passenger traffic grew by 7.5 per cent to 52.62 million.
The Korea Herald South Korea plans to set up a fund worth at least 100 billion won (US$83.3 million) to offer financial help to the cruise industry as the country aims to bring more foreign tourists ashore, Oceans and Fisheries Minister Kim Young-suk said yesterday. Korea Cruise Line, a cruise ship operator, was launched in late 2015, but has failed to initiate fullscale operations so far due to financial trouble over its initial investment. Kim said the fund will help Korea Cruise Line purchase a cruise ship worth about 200 billion won. The fund will be created by the private sector, with the government’s investment accounting for 10 percent of the capital, Kim said.
hen Donald Trump won the United States’ presidential election in November, he had a lot of Chinese fans. But Trump’s popularity has since plummeted, owing to his statements – often via Twitter – on contentious issues, such as Taiwan and the South China Sea. This isn’t the first time China’s view of a US leader has deteriorated rapidly. The abrupt change in Chinese sentiment toward Trump is reminiscent of what happened to US President Woodrow Wilson after his re-election a century ago. At the time, many Chinese intellectuals, including the young Mao Zedong, admired Wilson, a political scientist and former president of Princeton University. Then, in 1919, Wilson backed the Treaty of Versailles, which transferred control of former German territories in Shandong Province to Japan, rather than return them to China. Wilson quickly lost his lustre in China. The shift was similar – but the reasons are very different. A century ago, China was driven to support Wilson, and then to loathe him, by its own weakness. Today, it is China’s strength that is guiding its view of the US president. In 1916, the year Wilson was elected to his second term, China was in terrible shape. While the republic established in 1912 was ostensibly a single entity, it was actually highly fragmented. Military strongmen controlled different regions, while foreign powers, through bribes and bullying, seized large swaths of China’s territory. For Chinese intellectuals, Wilson offered a bookish contrast to thuggish warlords. But Wilson’s appeal in China went beyond image. In 1918, Wilson’s popularity soared – and not just in China – following an address to Congress calling for national “selfdetermination.” Overlooking Wilson’s support of Jim Crow in the US and the invasion of Haiti on his watch, intellectuals in imperialism-ravaged countries from Egypt to Korea took his declaration to heart, and began to view him as a saviour and champion of the oppressed. Chinese patriots, in particular, hoped that, under Wilson’s leadership, the US might deepen its involvement in Asia in ways that would help protect China from the predations of Imperial Japan. For them, Wilson’s support of the Treaty of Versailles constituted a profound betrayal. The China of 2016 is unimaginably different from the China of 1916. It has leap-frogged even advanced countries in the global economic hierarchy. It is unified under a strong and focused leadership. And it is very big, including nearly all the territories that were part of the Qing Empire at its peak. A rare exception is Taiwan, but the “one China” diplomatic fiction sustains the fantasy that someday, somehow, the democratic island and authoritarian mainland will be reintegrated.
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Jeffrey N. Wasserstrom Professor of History at UC Irvine, is the editor of The Oxford Illustrated History of Modern China
In short, China no longer needs US protection. Instead, it wants a US president who is occupied largely with domestic issues, and is not much concerned with constraining China’s rise, as Barack Obama was. That way, China could get to work reshuffling power relationships in Asia for its own benefit, without having to worry about American interference. Before the election, Trump was already known to level wild accusations at China, typically related to economic issues like trade. But his apparent lack of interest in foreign policy was very appealing for Chinese leaders. He seemed far more likely than his opponent, former US Secretary of State Hillary Clinton, to leave China alone. His suggestion that he would be less committed than his predecessors to supporting traditional US allies in Asia, like South Korea and Japan, was music to Chinese nationalists’ ears, much as his questioning of American commitments to NATO was music to Russian President Vladimir Putin’s. Like Wilson, Trump also gained some fans simply by virtue of a personality that is atypical for a politician. Of course, Trump is no bookworm. But many people liked that he seemed to say (or tweet) whatever he felt, offering “straight talk” that contrasted sharply with the approach of more polished politicians, including President Xi Jinping, who watches his every word. A similar desire for “authenticity” has fuelled – albeit in a very different way – the popularity of another US official, Gary Locke, who became the US ambassador to China in 2011. Photographs of Locke carrying his own daypack and buying coffee at Starbucks – humble acts that high-ranking Chinese officials would have underlings do – spurred a flurry of online posts celebrating him as a virtuous public servant. How different America must be, his fans claimed, from China, where corrupt officials and their pampered offspring indulge in luxurious lifestyles reminiscent of the imperial families of dynastic times. It is hard to imagine that particular US-China contrast carrying weight now, as photos of Trump’s garish Manhattan penthouse and opulent Mara-Lago parties continue to emerge. And while Trump’s communication style remains striking, particularly in comparison to Xi’s, it becomes far less appealing when one is the target of his blunt comments on touchy topics. Just as a weak China was not able to count on Wilson’s protection, a strong China will not be able to count on Trump to get out of its way – at least not without throwing a few elbows. Project Syndicate
In short, China no longer needs US protection. Instead, it wants a US president who is occupied largely with domestic issues
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16 Business Daily Thursday, January 12 2017
Closing Health
More human bird flu infections confirmed in the mainland
China has confirmed 106 cases of human H7N9 bird flu infections, and 20 deaths in December, according to a statement issued on the website of National Health and Family Planning Commission yesterday. The new official number is a significant jump from around 40 cases that had been revealed in media reports and by local government to date. The latest government statement did not include
details of where each case happened. China has culled more than 170,000 birds in four provinces since October and closed some live poultry markets after people and chickens were infected by strains of the avian flu. This comes as South Korea and Japan battle their own major outbreaks. The current outbreaks appear isolated. The virus is likely to strike in winter and spring, and farmers have in recent years ramped up measures such as cleaning regimes to prevent the disease. Reuters
Markets
Mainland investors losing appetite for bonds in 2017 The change in perception is already having an impact on the sales of bond funds, which were popular last year Samuel Shen and John Ruwitch
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tung by a late-2016 tumble in bonds, Chinese investors are signalling a switch into shares this year in the hope of better returns as the economy recovers and as a hedge against rising inflation and tighter monetary policy. That would be a dramatic reversal from last year, when assets under management for bond funds surged 142 per cent to RMB1.93 trillion (US$280 billion), while equity and balanced fund assets dropped 17 per cent to RMB1.99 trillion, according to data from Chinese consultancy Z-Ben Advisors.
benchmark 10-year bond prices rising enough to knock 200 basis points off yields from mid-2014 to October last year. But a two-month bond sell-off late last year sent yields up again, reclaiming nearly a third of the gains, as concerns over capital outflows and a falling yuan spooked investors. The yields have risen a further 15 bps to 3.22 per cent in 2017 as China intervened to defend the yuan. “We’re at a turning point in liquidity conditions,” said Gu Weiyong, chief investment officer at Ucom Investment Co, as central banks shift toward tighter monetary policies both
in China and the United States. Gu, who slashed his bond holdings at the end of last year, said he only sees some “trading opportunities” this year in China’s bond market, as “yields will likely rise further, along with inflation”. Inflation in China has been picking up in line with the rally i n c o m m o d i t i es, f e e d i n g o f f government’s economic stimulus and restructuring efforts. In September a rise in producer prices ended nearly five years of deflation, and they surged 5.5 per cent in December. The change in perception is already having an impact on the sales of bond funds, which were popular last year. With interest waning, a number of fund houses, including China Asset Management Co, GF Fund Management Co and Wanjia Asset Management Co, have extended the
subscription periods for new bond funds over the past month. “2017 will be a year of tighter monetary policies, and higher yields, so we need to be cautious when allocating assets into fixed-income products,” said Chen Liming, head of the wealth management unit at Everbright Securities Co. But stocks look increasingly attractive, he added. “The economy has bottomed out, and listed companies’ profitability is improving, so we should allocate more to equities.” UBS China strategist Gao Ting expects China’s stock market to rise around 6 per cent in 2017, driven mainly by improving corporate fundamentals, and Franklin Templeton Sealand Fund Management Co Ltd has also forecast that Chinese stocks will trend up in 2017. Reuters
“We’re at a turning point in liquidity conditions” Gu Weiyong, chief investment officer at Ucom Investment Co
“Bond investors face the triple whammy - rising inflation, improving economy, and tightening liquidity,” said Xie Yi, executive director at First Seafront Fund Management Co. While China’s main stock index fell 12 per cent last year, yuandenominated bonds had been m o vi n g th e o th e r w a y , w i th
OPEC
Traffic
Crime
Saudis said to curb oil to China as others spared
Beijing no longer Vietnam busts US$13 million China’s most congested city online gambling ring
Saudi Arabia was said to cut February crude sales to China and southern Asian nations while largely sparing countries including Japan and South Korea, as it curbs supply as part of a deal between OPEC and other producers. Two Southeast Asian refiners received cuts of about 30 per cent from the world’s biggest crude exporter, according to two people with knowledge of the matter who asked not to be identified because the information is confidential. Reductions to a buyer in India were about 20 per cent, one of the people said. Overall term supplies to Asia for next month declined between 5 and 10 per cent, according to one of the people. The reductions will primarily be focused on the medium and heavy oil varieties as the producer concentrates more on sales of lighter grades to stay in the battle for market share against U.S. and African rivals. Saudi Arabia is trying to implement its portion of promised reductions under a deal between global producers, the success of which will determine if a recovery in benchmark prices is sustainable. The Dec. 10 agreement between the OPEC and 11 others including Russia is aimed at ending a glut that’s battered crude and the economies of producing nations worldwide. Bloomberg News
It may come as a surprise to daily commuters in the capital, but according to the latest traffic report, Beijing is no longer the country’s most congested city. The annual report, released by leading Chinese navigation service provider AutoNavi (listed as AMAP on NASDAQ), said Jinan and Harbin have beaten Beijing in having the worst traffic jams among 60 Chinese cities surveyed in 2016. Beijing was crowned the most congested city by the report in 2015. Netizens coined the term “shoudu,” which sounds similar to “the capital” but means “the most congested,” to mock the traffic in Beijing, home to 21.7 million people and 5.7 million cars. According to the latest report, Jinan, Harbin, Beijing, and Chongqing are the only four cities with a traffic jam delay index over 2.0, which means rush hour commutes take double the time they would during non-rush hours. Guiyang, Shenzhen, Kunming, Hangzhou, Dalian, and Guangzhou occupy spots five to ten on this year’s list, respectively. Shanghai, which ranked 7th in 2015, was not among the top 10. In fact, the report shows that traffic has improved in all three mega-cities -- Beijing, Shanghai, and Guangzhou. Xinhua
Vietnamese police have broken a US$13 million online gambling ring, arresting six people in the latest bust in a country where betting is banned. Gambling is illegal in Vietnam outside of a staterun lottery and a few foreigner-only casinos. But the law is widely flouted, especially in the run-up to major sporting events when many punters turn to illegal gambling dens or place bets online. Five people were arrested Ho Chi Minh City and one taken into custody in Hanoi on Tuesday, a police official told AFP, requesting anonymity. According to police’s official newspaper Cong An Nhan Dan, the gang was behind a betting website launched in 2015 and run by a firm in the Philippines. “The total amount of transactions from 2015 until now reached more than US$13 million,” the report said, citing police statistics. The website allowed gamblers to move money through bank transfers or ATMS and place bets using crypto-currencies on football and tennis matches, online casino games and the lottery, the report said. AFP