Business Daily #1214 January 16, 2017

Thu, 26 January 2017 | 6pm ­ 8 pm | Terrazza, Galaxy Macau

MGM Cotai opening pushed back to third quarter Delay Page 7

Monday, January 16 2017 Year V Nr. 1214 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm MICE

Green and sustainability focus coupled with tech will push future MICE sector: experts Page 3

Court

www.macaubusinessdaily.com

Financing sector

Mismatched contracts, travel expenses and leases come under fire in Ho Chio Meng case Page 2

Environment

Mainland banks forecast to improve performance in 2017 Page 10

Electronic waste starts to become a problem in Asia Page 16

Cheap thrills

Tourism

The local tourist price index fell 5.44 pct year-on-year for 2016, due to accommodation prices falling 21.2 pct and transport and communication prices dropping nearly 10 pct y-o-y.

Restaurant charges and alcohol and tobacco prices increased about 2 pct for the year compared to 2015. Page 2

If you want it done right, do it yourself, and do it by hand.

Business Daily sat down with handcraft workshop company JE Handcrafts, set up by Jasmina Leong, to learn the advantages of running a workshop-based business, interest in the creative market, challenges for SMEs and what the company’s plans are for 2017 to diversify its handcrafted offerings and services.

Interview | SME Pages 4 & 5

HK Hang Seng Index January 13, 2017

Imperial Palace hotel holder forfeits license Forfeit License holder of Beijing Imperial Palace Hotel, Macau Hotel Developers Ltd, announced the return of its property license to authorities, due to the upcoming expiration of the hotel’s MGTO mandated temporary closure and its inability to complete the required renovation works by the deadline. Plans are to ‘re-develop, renovate, and re-apply’ for the license as soon as possible. Page 6

Global weakness

Trade China’s exports remained subdued as soft global demand weighed on sales, raising uncertainties about the nation’s external sector as it braces for potential trade frictions with the U.S. under a Donald Trump presidency. Page 8 22,937.38 +108.36 (+ 0.47%)

Worst Performers

China Shenhua Energy Co

4.07%

BOC Hong Kong Holdings

2.09%

Belle International Holdings

-2.33%

AAC Technologies Holdings

-0.27%

China Petroleum & Chemical

3.57%

Henderson Land Develop-

1.63%

Cheung Kong Property

-1.08%

Link REIT

-0.19%

PetroChina Co Ltd

2.61%

China Overseas Land &

1.55%

Want Want China Holdings

-1.00%

Cheung Kong Infrastructure

-0.16%

CNOOC Ltd

2.36%

Wharf Holdings Ltd/The

1.22%

China Merchants Port Hold-

-0.97%

Sino Land Co Ltd

-0.16%

China Resources Power

2.13%

MTR Corp Ltd

1.04%

China Construction Bank

-0.68%

Hong Kong Exchanges &

-0.05%

16° 17° 17° 20° 18° 21° 15° 22° 14° 20° Today

Source: Bloomberg

Best Performers

Tue

Wed

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

Better by hand

2 Business Daily Monday, January 16 2017

Macau Tourism

Tourist prices down 5 pct for 2016 On average, the city’s visitors enjoyed cheaper accommodation when staying in the territory last year, compared to 2015 Kam Leong kamleong@macaubusinessdaily.com

T

he local tourist price index (TPI) dropped by 5.44 per cent year-on-year, to 130.86 for 2016, due to decreases in both the cost of accommodation and transport & communications, according to official data released last Friday by the Statistics and Census Service (DSEC).

For last year, the average price index of accommodation for tourists plunged by 21.2 per cent compared

to one year ago, while charges for transport & communications also went down by 9.82 per cent year-on-year.

Prices for entertainment and cultural activities in the city also fell by 1.19 per cent compared to 2015.

However, charges for restaurant services went up by 2.27 per cent year-on-year. In addition, average prices of miscellaneous goods and food, alcoholic beverages & tobacco jumped by 2.2 per cent and 1.91 per cent year-on-year, respectively, according to the DSEC. The tourist price index reflects the

price change of goods and services purchased by visitors.

Quarterly results

For the fourth quarter of 2016, the index declined by 4.48 per cent to 134.96 year-on-year, also due to the cheaper hotel room rates and lower charges for transport & communications when compared to the same quarter of 2015.

In the three months, the average price index of accommodation dived by 15.97 per cent, while that of transport & communications also dropped by 16.23 per cent year-onyear, respectively.

Meanwhile, charges of restaurant services increased by 3.48 per cent year-on-year for the quarter, while that of miscellaneous goods also grew by 3.1 per cent from one year ago.

O n a q u a r t e r- t o - q u a r t e r

comparison, the quarter’s average price index for tourists, however, recorded an increase of 6.39 per cent.

The 24.4 per cent quarter-to-quarter growth in accommodation prices due to the National Day Holidays, the Macau Grand Prix and the Christmas holidays were the reasons given by the DSEC for the increase.

Apart from the increase in accommodation costs, tourists also saw the average prices of clothing & footwear jump by 8.13 per cent quarter-to-quarter for the three months, driven by the increased prices of ladies clothing and handbags.

Yet, the costs for transport & communications were still cheaper than in the third quarter of 2016, decreasing by 2.67 per cent, as airfares were lower on average in the three months, the Bureau said.

Corruption case

Trips, contracts and denials

park space owned by Ho’s brotherin-law, as well as other documents showing that the office had paid for other lease contracts for warehouses located in properties of businessmen Mak Im Tai and Wong Kuok Wai. Ho has been accused of setting up a criminal organization with Lei, Mak and Wong.

When asked by assistant prosecutor-general Chan: “Do you know the lessors are Ho’s friends?” Lai replied that he did not know about their relationship with Ho.

Witness testified on Ho’s residence, travel expenses, leasing contracts and handwriting Annie Lao annie.lao@macaubusinessdaily.com

The city’s Court of Final Appeal continued with the trial of former prosecutor-general Ho Chio Meng on Friday, calling the former chief of the prosecutor’s office, Antonio Lai Kin Ian, to the podium for the second time as a witness.

Song Min Li, judge of the Court of Final Appeal, questioned Lai regarding Ho’s use of the Cheoc Van residence, to which the official replied: “I only know Ho’s Cheoc Van residence was for his personal use,” denying that he had ever been to the residence and claiming that Ho’s residence was not used for accommodating his visitors.

“The statement I made previously was based on my own speculation regarding Ho’s Cheoc Van residence for personal use,” Lai stressed, requesting that the court correct his original testimony made during his interrogation.

Mismatched contracts

According to the accusations, Lai signed two contracts that did not match proposals attached to the relevant contracts, one of which involved the hiring of a domestic helper.

The proposal states that the workplace of the domestic helper was at Ho’s official residence. However, the contract states the workplace was the Cheoc Van residence.

Lai replied that the contracts he signed were prepared by his subordinate, noting: “I did not at all see the proposal that was attached to the contracts at the time I was signing the contracts. I am only aware of the content of the proposal as being different from the contract right now,” Lai said.

Travel expenses

According to the accusations, while attending an International Public Prosecutors Annual Conference held in Denmark in 2015, Ho used public funds to pay for ‘his personal trip’ with his wife and nephew.

The court was shown a travel expense document for the trip worth MOP569,262 (US$71,268) in total, of which miscellaneous expenses and admission fee expenses totalled MOP116,698 and were paid for by the Public Prosecutors Office (MP).

Assistant prosecutor-general Chan Tsz King questioned the two expenses for being noticeably high without being accompanied by supporting

Parking

Making space Transport Bureau promises to create more than 120 parking spaces for heavy vehicles in Cotai after February More than 100 parking spaces will be created in Cotai after February, according to statements made by the Transport Bureau (DSAT) to local broadcaster TDM. The announcement came after complaints filed by the Association of Employees of the Transport Sector, that drivers are currently forced to park their vehicles in non-parking areas due to the lack of parking spaces, incurring recently-increased fines for wheel locking and removal.

Under the new transport regulations, that came into effect on January 1 of this year, the removal fee for heavy vehicles - weighing over 3,500 kg or with a capacity of more than nine passengers - went up by 1,233 per cent, from MOP450 to MOP6,000, with the association

spokesperson Chio Pu Wan stating that fines should only be enforced after certain traffic infrastructure projects are developed for parking heavy vehicles.

“The Transport Bureau made a promise that it was creating more parking lots. They said that in February and March they will create 40 to 80 new parking spaces at Parque Industrial da Concórdia and at Avenida Marginal Flor de Lotus (each), increasing to 120 parking spots after March,” stated Legislator Ella Lei Cheng I, who accompanied the association members in their protest.

The Legislator also stated that a promise was made to develop a new area for heavy vehicle parking on the reclaimed land plot opposite MGM Macau. N.M.

Ho’s handwriting

Former prosecutor-general Ho Chio Meng

documents to justify the expenses.

In response, Lai said that he did not know the actual costs of living in the country and could not judge what expenses incurred could be considered high or low.

“Some Portuguese prosecutors from the office were actually also accompanied by their spouses to attend the conference. Their spouses paid for their own air tickets.

However, all their accommodation, meals and transportation costs were altogether paid for by the office,” Lai added.

Lai commented however, that he allegedly overheard a phone conversation between Ho and the former Chief Executive, Edmund Ho, in which he claims Ho was discussing the trip and thanked the former CE, who Lai believes was aware that Ho’s wife accompanied the former official on the trip.

Car park leasing

During the afternoon session, assistant prosecutor-general Chan pointed out that the prosecutor’s office had paid for a leasing contract for a car

The court requested that Lai testify on whether several documents found inside Ho’s office were actually signed by the former official, in order to identify Ho’s handwriting on documents presented so far in the case.

“These documents were produced by me and I submitted them to Ho for his signature. Based on my understanding, the handwriting was all done by Ho for the notes he made on the documents, but I cannot recognize them,” Lai claimed.

Later, the court presented two other manuscripts that were allegedly handwritten by Ho and were found in his residence by the city’s Commission Against Corruption (CCAC).

The Judiciary Police (PJ) identified the manuscripts as being ‘very likely’ written by Ho, and related to the accused criminal group.

The court then summoned a senior technician of the PJ who was responsible for testifying on Ho’s handwriting, saying that although 64 characters found in the manuscripts were not exactly the same, when compared with the daily handwriting examples he had seen from Ho, the handwriting in the manuscripts was confirmed to have been written by the same person, based on the technical testing of identification signs in the handwriting.

The corruption trial continues today.

Transport

Police prosecuted 1,078 Uber trips last year The Public Police Security Force (PSP) found 1,078 cases of drivers providing unlicensed taxi services via car-hailing application Uber for the whole year of 2016, according to the latest official data released last Friday.

This accounted for 83.8 per cent of the total drivers prosecuted for offering unauthorised taxi services.

The police force stressed in the announcement that it does not oppose taxi-hailing applications, but those offering the services must be licensed taxi drivers with licensed taxis.

For the year, the police also

prosecuted a total of 3,126 cases of taxi violations. Of the total, those related to overcharging and refusing to take passengers amounted to 75.3 per cent of the total.

Last week, the general manager of Uber Macau, Trasy Lou Walsh, told reporters that the platform has already had over 3,000 drivers register.

Without providing the exact number of total passengers and trips hailed, the manager said the total distance that local riders had travelled with the application reached some 3.3 million kilometres in 2016.

Business Daily Monday, January 16 2017 3

Macau

CEFCO 2017

Future MICE Technological advancements will allow local MICE events to become more sustainable and attractive to their target audiences, according to leading members of the sector Nelson Moura nelson.moura@macaubusinessdaily.com

I

ncreased interconnectivity, data analysis, and environmentally friendly policies will help the MICE (Meetings, Incentives, Conventions and Exhibitions) sector in Macau reduce costs and increase attendance, according to leading members of the sector.

According to the President of the Macau Fair and Trade Association, Tony Lam, and the President of Macau Amusing Grand Events Promotion Association, Lo Tak Chong, the low number of resources and limited area make Macau the perfect place for developing technologies and methods that allow more effective event management.

“Macau has limited resources for MICE, so in order to really develop in this industry we want to use green energy and technology to improve the industry,” said Lam. The statements were made at the Macau MICE Industry - Road to Innovation conference that took place on Friday, as part of the 13th China Expo Forum for International Cooperation (CEFCO 2017) held from January 12 to 14 at The Venetian.

encourage organisers, exhibitors and contractors to develop green conventions and exhibitions,” stated Lam. Soon after the initial initiatives, others started appearing, by exhibitors, such as using water-based inkjets for decoration, environmentally friendly carpets, and donating booth materials to NGO’s for re-use. A total of 500 awards were handed out for these initiatives in 2016.

According to Mr. Lam, since its implementation at the convention, the scheme has led to a 75 per cent reduction in waste, a 40 per cent increase in the ratio of light-saving equipment and a 40 per cent rise in recycled material equipment, as of 2015.

Demand for garbage trucks for the event was also reduced from 102 trucks in 2008 to 25 in 2015, he notes.

Technology handicaps

For Bruno Simões, Secretary of the Macau Meetings, Incentives and Special Events Association (MISE) and Managing Director of local event company DOC DMC, natural technological developments have already

helped cut costs and make the sector more sustainable and efficient.

“We don’t do paper mail and brochures anymore, everything is by email as communication has shifted to digital. This will be more predominant in the future as events will be more and more digital, with everyone having smartphones and an Internet connection,” stated Simões.

For the event planning businessman, technology is already an essential part of how to engage delegates, create pre-event ‘buzz’ and promote the delegates, while helping participants interact and network.

“Interaction is important and technological integration is, a lot of the time, promised but rarely delivered.

There needs to be a good integration, with the internet of things (IoT) with phones, tablets and computers being all interconnected during the event.

However people don’t like to download an event app that they will only use for a day, so offer apps that offer long term engagement for post-event features,” stated Mr. Simões.

Target audience

Studying your event’s target audience and ensuring the exhibition caters to that segment’s interests are also core values for event organising – a sentiment both Simões and Lo Tak Chong share.

According to the President of the Macau Amusing Grand Events Promotion Association, five years ago his company, MACEXPO Exhibition Co. Ltd, discovered that most exhibition visitors were from Mainland China,

Green and efficient

Sustainability of MICE events has been one of the missions pursued

by Tony Lam, who commented that since 2007 the Macau Fair and Trade Association has gathered environmental data on large exhibitions held in the MSAR so as to develop “green booths”.

This led to the creation of a scheme to establish green standards and guidelines for booth construction, and develop a reward system to encourage this practice, resulting in the launch of the “Green Booth Award” and the “Electricity Free Rebate Scheme” at the 2010 Macau International Environmental Co-operation Forum and Exhibition (MIECF). The schemes rate the sustainability of the convention booths.

“We wanted to dispel the misconception that environmental pro-action is equal to cost increase, and hoped these initiatives would

President of Macau Amusing Grand Events Promotion Association, Lo Tak Chong

while young people in Macau weren’t as interested in exhibitions.

“We needed to offer good branding for our exhibitions. If the theme is for young people we try to have some fun and sporty elements and promote them through online and offline campaigns. Shareable contents on Facebook act as starting points for the event image promotion, and live streaming allows us to get directly to all our followers,” Lo pointed out.

Lo praised the potential of artificial intelligence (AI) systems for collecting data from customers and personalising promotional campaigns.

“AI is already happening, in Google and Facebook. In the future you will see your target audience’s search habits and search history being analysed and used for targeted advertising, and you will be able to ask AI systems to send information to your target audience,” stated Mr. Lo. Big data will also have a role in reducing the environmental impact of exhibitions, according to Tony Lam, providing important details on MICE events planning, and through data sharing with other Pearl River Delta cities to reduce carbon emissions and material waste.

When asked if communication technology developments would make physical events and conferences redundant and unnecessary in the future, Mr. Simões stated that although such advancements would increase speed and efficiency “the need for physical conferences” won’t disappear “just because Skype and live conferences exist”.

4 Business Daily Monday, January 16 2017

Macau

Jasmina Leong Founder of JE Handcrafts Co., LTD

Interview | SMEs

Staying competitive Local SME (small or medium-sized enterprise) JE Handcrafts Co. Limited, a handcraft workshop company, finds its business has followed the same ups and downs as the local economy in recent years. The company founder, Jasmina Leong, tells Business Daily that in order to stay competitive and create sustainability in the cultural and creative industries, the key is to continue to improve your skillset and knowledge in the industry, as well as offering unique products that stand out from the competition Annie Lao annie.lao@macaubusinessdaily.com

W

hen did you set up your company?

My company started offering handcraft workshops in 2012. At that time there were only a few places in Macau offering these kinds of workshops - teaching how to create handmade products. The local cultural and creative industry had not started at that time and in the beginning, I started running workshops part-time for six months. Later I started my business full-time and my company first began by running silver clay workshops.

Why did you want to open a business like this?

I learnt how to make some handcrafts myself before setting up my own company. I went to Hong Kong to make handcrafts, as it is close to Macau, then later went to Japan to take more lessons. After learning all the different handcrafts myself, I had an idea of how to teach people my handcraft making skills. Especially at that time, Macau did not have much of these kinds of workshops available.

How did you go about finding a shop location?

I found it difficult to find the right

location for my business. From the beginning, I actually rented out some places at my friends’ stores in order to run my workshops. One of the main reasons is the expensive rental fees in Macau. But I was lucky that I met a good landlord and was able to rent two units in the Fu Lun Building on Rua do Campo.

How have the changes in the economy affected your business?

From 2012 and 2015 I had more students joining my workshops as the city’s economy was quite good.

However, last year, I saw a significant drop in student enrollment due to the economic downturn in the previous year.

In terms of total numbers for enrollment, the same private workshops saw a decrease of 70 per cent yearon-year in 2016. However, other workshops, organized for other private companies, generally increased last year. So the difference can help to balance out the losses occurring from the private workshops I ran last year.

Do you have other ways to attract more students?

I am going to open workshops that partner with the city’s Continuing Education Subsidy Scheme this year and have registered my company as a learning center.

I hope joining the Continuing

Education Subsidy Scheme can attract more people to join. Another reason for joining is that there are many other similar companies which have joined the Scheme, creating competition for my company, so I need to be part of it.

“Locals here tend to choose to buy overseas products rather than local brands as they think that the overseas products are better, even if they’re more expensive” Do you think lowering workshop prices is an effective way to stay competitive?

I don’t plan to reduce workshop prices because it will create a negative impact on the industry. However, I will offer more discounts when more students are joining the workshop together.

How do you stay competitive?

I have noticed that my students are

always keen to learn more difficult skills from different workshops. In the beginning, I offered workshops that only taught you how to make one easy item. And I have noticed my students can accept new ideas easily and quickly. Therefore, if my company does the same things for one to two years, they will quickly get bored and it may also not be sustainable for my business in the long term. As a result, it is important to introduce new products or workshops, from silver gift-making to embossed flower gifts, and so on, to diversify my product range. So I try to offer something new and different that others don’t offer in Macau.

How do you diversify your business?

When I introduce new products for the workshops, I need to think about the level of difficulty in learning how to make such items. I don’t want to teach something that is way too easy to learn and people can make by themselves after only taking one session. I want to set up workshops that require some time and skills to complete. So I started to offer more difficult workshops for people who want to learn difficult handcraft making skills.

What other things are you doing differently from others in the industry?

I face competition in the industry.

Since there are more and more young people like me who have also started small from doing it part-time as amateurs, and are now engaged on a full-time basis. The only advantage for me is that I started early, in 2012, so many people already know of my company. One important thing to keep us competitive is by adding more new products. For instance, I travel overseas to join competitions to win awards in order to stay ahead of the crowd in the industry. I went to

Business Daily Monday, January 16 2017 5

Macau something for their loved ones, especially for the silver clay workshop.

During the summer holidays, I have less people joining the workshops and so I started to offer family workshops.

During the low seasons I offer workshops to other non- profit organizations and private companies in the city. But during the festive seasons we focus more on running private workshops. For instance, I run workshops for couples on Valentine’s Day. Do your customers see pricing as an important factor when deciding whether to join workshops?

If the others do not have what I offer, my students don’t really see pricing as an important factor in deciding to join my workshops. Indeed, they would rather pay more for what is unique and special. The key is to differentiate my products so my customers will not compare them to others, especially when they can compare the same things with different prices, so they will go for cheaper one.

What’s your impression of the current cultural and creative industry in the city?

My business is in the culture and creative industry and [I can see that] it is not a popular market here. Locals here tend to choose to buy overseas products rather than local brands as they think that the overseas products are better, even if they are more expensive. This local consumer behavior is really my challenge, but this buying perception needs time to change. Therefore, I choose to do things that are unique in the city.

Also, the local environment is not good or lacks promotion of the industry in the city. Local entrepreneurs need to work hard to build up their own brands.

Japan for a competition. Also, going to international conferences can help me gain important knowledge and skills, which I cannot gain in Macau.

Do more difficult workshops make your business more profitable?

From a business point of view, it is more profitable to offer more skilled workshops that require you not only to join for one session, but on an ongoing basis, with more difficult skills required in order to do it.

What’s your customer demographic?

I run workshops from Mondays to Fridays. Most of my students are working people so they come to join my workshops after work. I want them to feel relaxed after work at my workshops, as most of my workshops run usually for one session. In general, my students are aged around 25 to 45 and tend to be female.

On the weekends, I run workshops for organizations and institutions.

Some private companies also ask us to run workshops for their employees’ team-building activities, as this has become a trend recently in the city. I also have Hong Kong and mainland tourists coming to join my workshops for one session because they have told me they could not find this kind of workshop in Hong Kong and the mainland.

How do you attract more students to join your workshop?

I have set up a customer database so I can send them emails for any updates about workshops coming up. Usually I have customers who can come to join one or two sessions per year.

Is your business affected by festive seasons?

During festive seasons I tend to have more male students joining my workshops as they want to hand-make

JE Handcrafts Co. Ltd. was established in 2012 and offers handcraft workshops in the city.

Located on Rua do Campo, the group’s retail space is located inside

Do you only offer workshops as your major business?

I also sell our handmade products in my shop located in the Village Mall.

In addition to that, I receive orders from my customers for tailor-made gifts. But of course, the most profitable part of my business is still running workshops.

“From a business point of view, it is more profitable to offer more skilled workshops that require you not only to join for one session but on an ongoing basis, with more difficult skills required in order to do it” Also, I have noticed that people like to make their own products and put their own personality into what they are making, so as to be unique.

People like to give out handmade gifts to their friends and loved ones rather than buying items straight from gift shops. It is more personal and special for them.

How do you continue to upgrade your handcraft-making skills?

I went to South Korea recently to learn how to make handcrafted candles, and I am planning to offer a

the Village Mall at the Broadway Centre Building and sells handicrafts.

The company also provides workshops to organizations and institutions in the city.

new workshop for this. Because of the language barrier in South Korea I hired a translator there. I want to bring this new product to Macau, as it is unique and can diversify choices of different workshops for my customers. I always keep myself up-todate with the latest information on the Internet in the handcrafted gift industry overseas. I also do research myself on how I can get unique products and how I can learn to make them. I plan to introduce at least two products each year.

Do you find it hard to source materials for your workshops?

It is hard to buy the materials for running my workshops, as I cannot get any of the materials in Macau. I have suppliers from Japan, the U.S. and South Korea. It is especially [difficult] if you are sourcing materials from small suppliers overseas, as they don’t even know where Macau is located. For instance, last time I wanted to buy some tools from the U.S. and have them sent to Macau for the workshops, but the supplier decided not to ship here.

Do you find it difficult to find employees?

I find it hard to hire people who can help me to run my workshops full-time.

I hope I can find more full-time teachers as I am going to launch more large-sized workshops this year. Currently, only I and another full-time teacher are running the workshops.

How do you market your company?

I promote my workshops mainly through social media platforms such as Facebook and Instagram. However, word-of-mouth marketing is also very effective. In the future, I will create a short film to promote my company.

Do you think the government provides enough support for local SMEs? The city’s cultural and creative industries still need more support from the government. It took me nine months to get a license to run my business. It was such a time-consuming procedure to deal with and I don’t understand why it needs to take such a long time to get it done. The information

from the government is not always transparent. It would be better if the government could make all kinds of application procedures easier for local SMEs and especially for new start-ups. For instance, I was targeting to launch workshops for which my students can use their allowance from the Continuing Education Subsidy Scheme this year, but the government still has not informed me of the day the new Scheme will start this year.

As a result, I have had to postpone my plan.

“It took me nine months to get a license to run my business.

It was such a timeconsuming procedure to deal with and I don’t understand why it needs to take such a long time to get it done” What are your future business plans?

I have a new project coming up this year. I will launch a series of handmade gifts targeting mothers and their babies, as previously I ran a workshop that taught gift-making for new mothers to remind them of their newborns. And I have noticed that mothers are willing to spend more money on their children. So I will focus more on creating family-related gifts this year. The reason I want to do this is because I launched this kind of gift making workshop before and it filled up very quickly.

In addition, I am also planning to launch a new product line selling handmade silver products with my company branding. Further plans would be selling my products to the city’s gaming operators in order to expand my current client network.

6 Business Daily Monday, January 16 2017

Macau Opinion

Sheyla Zandonai* Upbeat downbeat As per tradition, the year began with various discussions about numbers and forecasts.

Gambling amassed MOP223 billion in gross revenues for 2016 – slightly down from optimistic brokerage estimates, though much higher than the previous year. Analysts sitting behind their stock-trading, multiple-monitor-equipped desks suggest that Macau’s economy is on the rise, with non-gambling related activities picking up momentum. But the VIP segment may not lag for long, either. It is purportedly regaining steam, with fearless junkets slowly returning to entice and enlist gamblers from the mainland, despite Crown’s scare last year when a dozen of its managerial and executive staff were detained in China – with most still remaining there – on charges the authorities called “gambling-related,” which could mean pretty much anything, really.

Financial markets sometimes seem to undergo tremendous turmoil with very little cause. Nearly a month ago, the Monetary Authority of Macau announced it was halving the limit of single cash withdrawals at the city’s ATMs for UnionPay cards issued on the mainland (although the total daily cap of MOP10,000 remained unchanged) in an attempt to staunch capital outflows. Some casino stocks dropped as much as 14 per cent. Hong Kong, with its well-established financial services sector, deals with overwhelmingly larger daily financial transactions and yet nobody is talking about it.

Forecasts of a US$40 billion gambling market in Japan?

Those are groundless assertions, according to Japan-based analysts, though several international media outlets have jumped to conclusions in order to create attention-grabbing headlines. It seems that reasons similar to these are allowing figures like Donald Trump to get the upper hand, making prospects for international politics gloomy, if not terrifying.

Facts seem to matter less these days, but they should matter nevertheless.

So I would like to close this column by highlighting a few facts that may provide a different picture of Macau in those times when markets oscillate between nervousness and enthusiasm in a single day: an extremely low unemployment rate of 1.8 per cent (only nine other countries in the world perform better); a current account balance of US$12.11 billion; and a budget surplus which accounts for 14.2 per cent of GDP, the third highest in the world**. Even should Macau fall on hard times, there is plenty in the public coffers to tide it over. A cause for more concern, I’d say, is not converting monetary wealth into social and cultural capital.

Hotels

Imperial Palace returns hotel license The license holder has decided to give up the problematic property and is now considering its redevelopment Kam Leong kamleong@macaubusinessdaily.com

T

he license holder of Beijing Imperial Palace Hotel, Macau Hotel Developers Ltd, has announced the return of its license for the property to the authorities.

On July 22 of last year, the hotel was ordered by the Macao Government Tourism Office (MGTO) to undergo a six-month temporary closure to correct its operational malpractices and fire-safety violations.

Last Friday, the company announced in a statement that it ‘is forced to return its current hotel license to MGTO’ due to the expiration of the hotel’s temporary closure period on January 22, as well as the unfeasibility of completing renovation works by the deadline.

‘In particular, authorities have raised concerns over ownership of the hotel’s land property,’ the company noted in the announcement.

According to the operator, it has filed renovation plans with the city’s Land, Infrastructure and Transport Bureau for a work permit to remove all illegal structures and conduct other mandatory refurbishment works.

Describing the irregularities in the property as being ‘severe’ and ‘inherited from the hotel’s former management led by Chen Mei Huan,’ the company, who claims it is now under the management of businessman Ng Man Sun, said the application for maintenance

Re-development

Nevertheless, the company noted in the announcement, its intentions to re-develop the property.

‘Macau Hotel Developers Limited plans to re-develop, renovate, and re-apply for the hotel license as soon as irregularities caused by Former Management are rectified, and compliance requirements are once again met,’ it said.

Hong Kong-listed Amax International Holdings Ltd, which is controlled by Mr. Ng and holds a 24.8 per cent interest in the Greek Mythology Casino located inside the hotel property, said in a filing last Friday that the company is assessing the potential impact of the return of the hotel license on the company.

Last July, Amax said that the casino could ‘continue to operate notwithstanding the close down of the hotel,’ citing the advice of its lawyers in Macau. ‘[The company is] seeking advice from professionals to decide on the next possible appropriate actions to be taken,’ the group wrote in

Ownership disputes

In 2012, Mr. Ng, who acquired the hotel license in 1996, fell out with Ms. Chen, his former girlfriend, over the ownership of the hotel and the casino.

Ms. Chen claimed at that time that she owned 80 per cent of the property, while Mr. Ng told a court in the British Virgin Islands that the transfer of shares to Ms. Chen in 2011 was just temporary.

In 2013, the city’s Court of First Instance ordered the seizure of the then-New Century Hotel in lieu of an undisclosed debt owed to Hoi Cheng Nga, the head of Energy Travel Agency Ltd. One month after the court order, the hotel property was renamed Imperial Palace.

In May 2016, a statement, signed by ‘Empresa Hoteleira Macau Lda’ (the Portuguese name of Macau Hotel Developers Ltd) and published in Chinese-language newspaper Macao Daily, said the ownership of the hotel had been transferred to a company named Victory Success Holdings Limited in October 2015.

But Mr. Ng claimed then that he still owned ‘the lawful legal title to use the property.’

Following the enforced shutdown of the hotel last July, Mr. Ng said he had taken over the operations of the hotel since January 2016.

Meeting

DICJ director meets with Jack Lam The director of the city’s Gaming Inspection and Coordination Bureau (DICJ), Mr. Paulo Martins Chan, has

**All data from 2015.

Source: CIA Factbook

*scholar and contributor to this newspaper.

works was still being reviewed by the DSSOPT and pending approval.

Meanwhile, MGTO said in a statement on Friday that it had received the request from the company for the license return last Thursday, and the Office had accepted the application on Friday, cancelling the license and dismissing its shut-down measures upon the property.

Friday’s filing. ‘The company will publish further announcements to update the company’s shareholders and potential investors on the latest development of the business operations of Greek Mythology.’

The casino, running under the gaming license of Sociedade de Jogos de Macau S.A. (SJM), ceased operations at the beginning of 2016 for “renovation purposes”.

Jack Lam, founder of Jimei group

met with founder of local junket operator Jimei, Jack Lam, to find out more information regarding the group’s legal issues in the Philippines, as reported by Portuguese-language broadcaster TDM. “We met with this man [Lam] and we are still gathering some information from the authorities in the Philippines to know more about the facts involved,” Chan told the broadcaster.

“We only know the information from what we see in the media, which isn’t always correct, therefore we want to have more formal, more accurate, information provided by the Philippine authorities,” Lam told the broadcaster.

Lam’s arrest was ordered by

the President of the Philippines, Rodrigo Duterte, after a raid on his Fontana casino resort property resulted in the arrest of over 1,300 Chinese nationals. The junket owner is alleged to have conducted illegal online gaming operations from the facility, without paying tax, as well as being investigated for economic sabotage and bribery for allegedly offering bribes to secure the freedom of some of the imprisoned nationals apprehended in the raid.

President Duterte commented that he could conditionally allow Lam back into the country provided he pays back taxes and promises to not attempt bribery in the future, local media reported. K.W.

Business Daily Monday, January 16 2017 7

Macau

Dividend

Analysts: ‘Melco Crown’s special dividend issuance positive’

A

nalysts at Aegis Capital Corp see the latest special dividend announcement of casino operator Melco Crown Entertainment Ltd (MPEL) as offering ‘a strong, positive read-through’ for the company and the local gaming industry.

Last Thursday night, the gaming

One new non-executive director; two resign

Meanwhile, Melco Crown also announced last Thursday the appointment of John William Crawford as an independent non-executive director of the company with immediate effect. The new executive will join the company’s audit & risk committee, compensation

operator announced the declaration and payment of a special dividend of some US$650 million (MOP5.2 billion), representing US$0.4404 per share.

The operator also announced an amendment to its quarterly dividend policy, from a policy based on some 30 per cent of consolidated net income attributable to the company,

to one targeting a quarterly cash dividend payment of US$0.03 per ordinary share.

The amendment, according to David Bain, analyst with Aegis Capital, shows the operator’s strong property positioning. ‘[The amendment] implies MPEL’s property positioning is solid, with

committee and nominating and corporate governance committee.

The same announcement also reads out the resignations of its two independent non-executive directors: James Andrew Charles MacKenzie - with effect as of February 1 - and Robert Wason Mactier, with immediate effect.

The company claimed the two executives both ‘wish to reduce

their workloads so as to be able to devote greater time and focus to their many other businesses and charitable commitments’.

Mr. MacKenzie’s role as the chairman of the company’s audit & risk committee will be assumed by another independent non-executive director of the company, Alec Yiu Wa Tsui, from next month.

Gaming

MGM Cotai launch now expected for Q3 The opening of MGM Cotai, a new casino-resort development by gaming operator MGM China, has been pushed back to the third quarter of this year from the second quarter.

Speaking to reporters on Saturday, the CEO of the corporation, Grant Bowie, said the company is now targeting the launch of the new project for the third quarter of the year, according to local broadcaster TDM. The company had previously planned to unveil the project during the second quarter of the year. ‘We now expect to celebrate the opening of this iconic building in Cotai in the second quarter of 2017,’ the company wrote in its interim report released last September.

The casino project was initially slated for a 2016 opening date, later pushed back to the first quarter of this year, before it was further postponed to the second quarter.

Meanwhile, Mr. Bowie added on Saturday that the company has not received confirmation of an exact number of the new-to-market table game allocation that it is requesting from the government for the new project, saying the firm would

continue its negotiations with the authorities.

According to the interim report, the casino-resort is expected to be completed at a cost of HK$24 billion (US$2.99 billion), excluding land costs and capitalised interest.

On the other hand, the CEO said the gaming company has not made a decision on whether to award a salary increase to its workers this year.

He claimed that a decision would be made based on market demands, a review of the company’s business as well as its board of directors.

Asked by reporters whether the company would shift its resources to Japan following the country’s decision to legalise gaming, the company executive, however, said this local arm of Las-Vegas based MGM Resorts would continue its focus on the local and China market.

“MGM China is totally focused on Macau and China. And that is our sole interest. We’re a Macau company. We’ve been here for many years and will continue to develop our interests in Macau and in Greater China,” the CEO said, as quoted by the broadcaster. K.L.

City of Dreams continuing as a premium mass leader despite adjacent competition from Wynn in August 2016 and its Macau Studio City property continuing to ramp,’ wrote the analyst in a note following the announcement.

In addition, he said the announcement shows the company’s management believes the city’s gaming recovery is visible and sustainable. ‘[It] demonstrates alignment with shareholders. Recall that Melco International, controlled by MPEL Chairman Lawrence Ho, recently increased its ownership of MPEL to 51 per cent,’ the analyst noted.

He added that the pay-out would not impede the company’s plans to bid for a gaming license in Japan, despite the fact that the scheme ‘signifies a post [capital expenditure] development world.’ K.L.

8 Business Daily Monday, January 16 2017

Greater China

Trade fears

Figures show worst export fall since 2009 China reported a trade surplus of US$40.82 billion for December Elias Glenn and Sue-Lin Wong

C

hina’s massive export engine sputtered for the second year in a row in 2016, with shipments falling in the face of persistently weak global demand and officials voicing fears of a trade war with the United States that is clouding the outlook for 2017.

In one week, China’s leaders will see if President-elect Donald Trump makes good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods.

Even if the Trump administration takes no concrete action immediately, a n a l y st s s a y t h e s p e c t r e o f deteriorating U.S.-China trade and political ties is likely to weigh on the confidence of exporters and investors worldwide.

The world’s largest trading nation posted gloomy data on Friday, with 2016 exports falling 7.7 per cent and imports down 5.5 per cent. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009.

It will be tough for foreign trade to improve this year, especially if the inauguration of Trump and other major political changes limit the growth of China’s exports due to greater protectionist measures, the country’s customs agency said on Friday.

“The trend of anti-globalization is becoming increasingly evident, and China is the biggest victim of this trend,” customs spokesman Huang

Songping told reporters.

“We will pay close attention to foreign trade policy after Trump is inaugurated president,” Huang said.

Trump will be sworn in on Jan. 20.

China’s trade surplus with the United States was US$366 billion in 2015, according to U.S. customs data, which Trump could seize on in a bid to bring Beijing to the negotiating table to press for concessions, economists at Bank of America Merrill Lynch said in a recent research note.

A sustained trade surplus of more than US$20 billion against the United States is one of three criteria used by the U.S. Treasury to designate another country as a currency manipulator.

Key Points China 2016 exports fall for 2nd year, worst drop since 2009 A protectionist Trump may limit export growth - customs 2016 exports tumble 7.7 pct, imports fall 5.5 pct y/y Dec exports drop more than expected, imports top forecasts China’s 2016 commodities imports soar, boost global prices China is likely to point out that its own data showed the surplus fell to US$250.79 billion in 2016 from US$260.91 billion in 2015, but that may get short shrift in Washington.

“Our worry is that Trump’s stance towards China’s trade could bring about long-term structural weakness in China’s exports,” economists at

ANZ said in a note.

“Trump’s trade policy will likely motivate U.S. businesses to move their manufacturing facilities away from China, although the latter’s efforts in promoting high-end manufacturing may offset part of the loss.”

On Wednesday, China may have set off a warning shot to the Trump administration. Beijing announced even higher anti-dumping duties on imports of certain animal feed from the United States than it proposed last year.

“Instead of caving in and trying to prepare voluntary export restraints like Japan did with their auto exports back in the 1980s, we believe China would start by strongly protesting against the labelling with the IMF, but not to initiate more aggressive retaliation ... immediately,” the BofA Merrill Lynch Global Research report said.

“That said, even a ‘war of words’ could weaken investor confidence not only in the U.S. and China, but globally.”

China’s December exports fall

China’s December exports fell by a more-than-expected 6.1 per cent on-year, while imports beat forecasts slightly, growing 3.1 per cent on its strong demand for commodities which has helped buoy global resources prices.

An unexpected 0.1 per cent rise in shipments in November, while scant, had raised hopes that China was catching up to an export improvement being seen in some other Asian economies.

China reported a trade surplus of $40.82 billion for December, versus November’s US$44.61 billion.

While the export picture has been grim all year, with shipments rising

in only two months out of 12, import trends have been more encouraging of late, pointing to a pick-up in domestic demand as companies brought in more raw materials from iron ore to copper to help feed a construction boom.

China imported record amounts of crude oil, iron ore, copper and soybeans in 2016, plus large volumes of coal used for heating and in steelmaking.

“Trade protectionism is on the rise but China is relying more on domestic demand,” said Wen Bin, an economist at Minsheng Bank in Beijing.

Prolonged weakness in exports has forced China’s government to rely on higher spending and massive bank lending to boost the economy, at the risk of adding to a huge pile of debt which some analysts warn is nearing danger levels.

Data next Friday is expected to almost certainly show that 2016 economic growth hit Beijing’s target of 6.5-7 per cent thanks to that flurry of stimulus.

But signs are mounting that the red-hot property market may have peaked, meaning China may have less appetite this year for imports of building-related materials.

“It is hard to see what could drive a more substantial recovery in Chinese trade,” Julian Evans-Pritchard, China Economist at Capital Economics, wrote in a note.

“Further upside to economic activity, both in China and abroad, is probably now limited given declines in trend growth. Instead, the risks to trade lie to the downside...,” he said, saying the chance of a damaging China-U.S. trade spat has risen since Trump’s appointment of hardliners to lead trade policy.

A decline in China’s trade surplus in 2016, to just under US$510 billion from US$594 billion in 2015, may also reduce authorities’ ability to offset capital outflow pressures, which have helped drive its yuan currency to more than eight-year lows, ANZ economists said. Reuters

Funding

Mainland gets record in venture capital investment in 2016 The strong performance in China is expected to continue in 2017 with artificial intelligence Sijia Jiang

Megadeals in China helped bring a record US$31 billion in venture capital investment into the country in 2016 despite a sluggish global economy and a sharp drop in the number of new deals, a report showed on Friday.

Venture capital investment in China rose 19 per cent to account for around a quarter of the global total of US$127 billion last year, even though the number of deals declined 42 per cent to just 300, according to KPMG’s quarterly report on global VC trends.

China saw its two biggest deals for the year in the first half of 2016: US$1.2 billion in funding for peerto-peer lending platform Lufax and Apple’s US$1 billion investment in

taxi-hailing app Didi Chuxing.

Despite cautious investor sentiment shown in a 9.4 per cent drop in global investment value and a 24 per cent slide in deal count in 2016, average investments in China are getting bigger and bigger.

The deal count in China has more than halved over the past three years but investment has tripled from US$12 billion in 2014. Beijing alone has attracted US$37.3 billion of venture capital since that year, including US$18.5 billion in 2016.

The strong performance in China is expected to continue in 2017 with artificial intelligence, where investment is “growing by the day”, a new focus for investors, KPMG said.

It also said Chinese outbound VC

investment, especially in the U.S., is expected to grow at a solid pace driven by Chinese companies’ desire to acquire technologies for use in the home market.

“Investors in Asia are shifting their investment focus,” said Philip Ng, Partner and Head of Technology,

KPMG China.

Artificial intelligence, robotics and big data are replacing online-to-offline to be what is grabbing investing attention, while there is also increased focus on fintech, education and healthcare related start-ups, he said. Reuters

Business Daily Monday, January 16 2017 9

Greater China Results

In Brief

Wanda posts first sales decline in at least 11 years Company’s head Wang Jianlin has taken an “asset-light” strategy for his real-estate business in recent years, reducing reliance on property sales and increasing his focus on leasing and management Prudence Ho

Dalian Wanda Group Co.’s revenue fell for the first time in at least 11 years after a slump in its property business outweighed growth from entertainment operations at billionaire Wang Jianlin’s conglomerate.

Sales, which includes property-contracted sales, declined 14 per cent in 2016 from a year earlier, according to a Wanda statement on Saturday, more than a January 2016 forecast of a 12 per cent drop. Revenue at Dalian Wanda Commercial Properties Co., the group’s real-estate unit, declined 25 per cent to RMB143 billion (US$20.7 billion).

Wanda’s operating income rose 3.4 per cent to RMB255 billion, while profit grew more than 10 per cent,

it said, without giving specifics.

China’s second-richest man has been acquiring Hollywood assets he bought film producer Legendary Entertainment last year - to help Wanda diversify away from its realestate roots.

Wang, speaking to employees at Wanda’s annual meeting in Hefei, the capital city of Anhui province in eastern China, said Ffan.com, a unit that includes Internet financing and credit-rating businesses, will raise RMB10 billion via a private placement this year. He ultimately plans to list the unit by 2020 and target profit of more than RMB10 billion.

Takeover talks

Wang delisted Dalian Wanda Commercial Properties last year in Hong Kong under a plan to eventually seek

Wanda founder Wang Jianlin

a listing in Mainland China, where valuations tend to be higher. The company has been in takeover talks with several candidates to execute a backdoor listing, people familiar with the matter said in November.

‘Wanda Cultural Industry Group Co., which includes most of Wanda’s theme parks, film production and exhibition businesses, saw sales climb 25 per cent to RMB64.1 billion last year’ Wang has taken an “asset-light” strategy for his real-estate business in recent years, reducing reliance on property sales and increasing his focus on leasing and management. The transition has resulted in sales volatility, but could improve the group’s cash flow and earnings stability.

Wanda Cultural Industry Group Co., which includes most of Wanda’s theme parks, film production and exhibition businesses, saw sales climb 25 per cent to RMB64.1 billion last year.

The increase also reflected income from newly acquired businesses including Legendary Entertainment.

Entertainment will continue to be the growth driver for Wanda.

Wang, who plans to build a global movie-distribution network, aims to achieve RMB10 billion profit in its film business and 20 per cent market share in the global movie industry by the end of the decade. Bloomberg News

Regulatory hurdles

Tsinghua deals unravel as Powertech calls off share pact Its failure to clinch regulatory approval on the island comes at a time when ties between China and Taiwan have cooled J.R. Wu

Taiwan’s Powertech Technology Inc said Friday it was terminating a share agreement with China’s Tsinghua Unigroup Ltd, unravelling more than US$2 billion in deal-making that the state-run Chinese giant had hoped to seal on the island.

Key Points Powertech doesn’t see regulatory OK for plan in Taiwan soon Move is last of 3 Taiwan firms to scrap pacts with Tsinghua Tsinghua’s US$2.6 bln dealmaking ends as China-Taiwan ties cool Powertech, a Taiwanese chip tester and packager, said the plan was being scrapped because a one-year period authorised by its shareholders to get the deal approved in Taiwan was about to lapse and local regulators had yet to give a green light.

“In light of this, the board determined the private placement would not be completed within the timeframe authorised by shareholders,” Powertech said in a statement.

The company said it did not rule out future cooperation with Tsinghua Unigroup.

The original deal, announced in late 2015, would have given the Chinese giant a quarter stake in Powertech for US$600 million.

The termination of Powertech’s share sale comes after two local rivals, ChipMOS Technologies Inc and Siliconware Precision Industries Co (SPIL), separately called off similar sale of their shares to Tsinghua Unigroup last year.

Tsinghua Unigroup would have invested a total of around US$2.6 billion for partial stakes in all three companies had the deals been successful.

But its failure to clinch regulatory approval on the island comes at a time when ties between China and Taiwan have cooled since Taiwan President Tsai Ing-wen and her ruling independence-leaning Democratic Progressive Party (DPP) took power last year.

Taiwan has protected its prized chip industry from becoming too reliant and open to China, and Tsinghua Unigroup’s investment plans were going to have to go through unprecedented parliamentary review in Taiwan, which had not yet happened.

In November, Tsinghua Unigroup said via one of its units that its plans to take a partial share in Powertech and ChipMOS faced rising risks due to an on-going regulatory review in Taiwan. Reuters

Property

Chongqing imposes harsher tax measures Chongqing will impose a property tax on first-time home buyers who are non-residents with no job or company in the city, state news agency Xinhua reported on Friday. The new rule, effective from Jan.14, is being brought in in response to recent large price fluctuations in Chongqing as speculators from outside the city flood the market, Xinhua said. Under previous rules, non-residents who didn’t work and owned no companies in Chongqing only needed to pay a property tax for second homes in the city.

Trade

Authorities see protectionist Trump to limit exports U.S. President-elect Donald Trump may limit the growth of China’s exports by imposing greater trade protectionist measures, China’s customs agency said on Friday.

China is the biggest loser in the anti-globalisation trend, customs spokesman Huang Songping told reporters, adding it will be difficult for China’s foreign trade to improve in 2017 due to rising costs and other factors. The challenges China faces in trade are not short-term but its economy can handle them, he said, adding he hopes that U.S.China trade cooperation will continue.

FDI

Foreign direct investment to Mainland rises Foreign direct investment (FDI) to China increased 4.1 per cent on the year to RMB813.22 billion in 2016, the country’s commerce ministry said on Friday.

FDI to China in December rose 5.7 per cent on the year to RMB81.42 billion, the Ministry of Commerce said in a statement on its website. FDI in services increased 8.3 per cent in 2016 and made up 70.3 per cent of all FDI, it added.

FX

Regulator denies reports of forex controls China’s foreign exchange regulator said on Friday that recent media reports about forex controls are untrue and disturb normal market operations. The State Administration of Foreign Exchange would continue to crack down on illegal activity in the forex market, a notice posted on its microblog account said.

The Chinese government has been intensifying a campaign to put the brakes on the depreciation of the yuan, including tightening controls on capital outflows. The yuan fell more than 6.5 per cent against the dollar last year.

10 Business Daily Monday, January 16 2017

Greater China Lenders

Big banks, after record write-offs, poised for recovery “Buy” and “strong buy” recommendations of analysts on more than 20 Chinese banks have risen to 171 now from 153 six months back Matthew Miller and Saikat Chatterjee

C

hina’s big state-owned banks are poised to modestly accelerate profit growth and see a steady recovery in their shares in 2017 as interest margins stabilize and government policies help ease the pace of formation of new bad loans.

Record write-offs for bad loans and shrinking margins - caused by six consecutive interest rate cuts led to flat profits and beaten down valuations last year for the likes of Industrial and Commercial Bank of China Ltd (ICBC) and China Construction Bank Corp (CCB).

But with banks adopting government-mandated debt-restructuring measures like debt-for-equity swaps, the bad loans situation for the bigger banks could ease. And with margins stabilising as the impact of the rate cuts fades, the banks are gradually enticing investors again.

“In 2017, it’s a focus on quality,” said Wei Hou, senior equity analyst

for China banks at research firm Sanford C. Bernstein. “The large banks are more protected on the downside and their valuations are relatively attractive,” said Hou, who has an outperform ranking on ICBC, CCB and Bank of China .

“Buy” and “strong buy” recommendations of analysts on more than 20 Chinese banks have risen to 171 now from 153 six months back. In contrast, “sell” and “strong sell” recommendations were at 56, up slightly from 51 over the same period, Thomson Reuters Starmine data shows.

Healthier banks are vital for China as the world’s second-largest economy navigates a slowdown and attempts to halt a rapid build-up of debt. For the banks, higher share prices would make it easier for any fund-raising ahead of new global capital rules coming into force in the years ahead.

Some recent economic data in China has bolstered the case for investor optimism. Producer prices inflated

by a stronger-than-expected 5.5 per cent for December, its fastest increase since September 2011. That is positive for state-owned enterprises, which have been wrestling with falling prices and borrow heavily from the largest banks.

Discounted valuations

China’s five biggest listed banks currently trade at an average 0.79 times book value, as investors have discounted for the costs of non-performing loans (NPLs) and subdued profitability. The steep price-to-book discount compares to the banks’ fiveyear average of 1.0.

The numbers last year did look quite bad. Write-offs for just the first half of 2016 amounted to RMB220.8 billion (US$32.03 billion) for the top 23 banks listed in Hong Kong and Shanghai for which statistics are available, according to Reuters calculations. In 2015, bad loan disposals at those banks amounted to RMB353.2 billion.

Loans 90 days past due increased 19.9 per cent to RMB1.1 trillion in the first half of 2016 for the same 23 banks.

Net interest margin (NIM), the difference between interest earned on loans and that paid out to depositors,

shrank between 30 and 40 basis points across the banking sector in 2016, squeezing profits.

But the tide may be turning. The rate cuts will cease to hurt NIMs on a year-over-year basis in 2017.

The lenders have also begun a major restructuring of corporate debt. Since October, state lenders led by CCB and ICBC have announced debt-for-equity swap agreements totaling more than RMB300 billion with big stateowned groups, mainly coal, energy and steel firms.

Key Points Valuations for some lenders expected to rise Interest margins for big banks stabilizing; NPL formation easing State lenders have announced RMB300 bln of debt-equity swap deals

“The risks priced on the Chinese banks are somewhat overplayed, and combined with some of the highest savings rates in the world, there may be tactical opportunity,” said Stephen Corry, chief investment strategist at LGT Bank in Hong Kong.

Not all banks are set to benefit.

For some of the country’s mid-tier and city commercial lenders, which have expanded their balance sheet by borrowing funds and through the issuance of wealth management products, tightening liquidity and Beijing’s crackdown on excessive risks in the financial sector are likely to hurt.

Bank of Communications Co (BoCom) and China Minsheng Banking Corp already are feeling the impact of margin compression and are expected to report that lending margins fell below 2 per cent for the first time last year, according to Bernstein research.

“The valuation gap between leading banks and laggards could widen,” Lucy Feng, UBS’s banking analyst, wrote in a Jan. 5 report.

“Banks with strong capital and less risky exposure could be the major outperformers.” Reuters

Financing

LeEco gets fresh investment round from Sunac Sunac has been seeking investment opportunities linked with China’s technological innovation and the upgrade of consumption sectors Chinese technology conglomerate LeEco has secured a new round of investment worth RMB15.04 billion (US$2.2 billion) from property developer Sunac China Holdings, according to a stock exchange statement made

by Sunac on Friday.

Last year LeEco’s founder and chairman Jia Yueting said that his company was facing financial obstacles due to the rapid pace of growth in various businesses, but the company soon afterwards announced it had secured commitments for US$600 million to support its automotive and other high-tech businesses.

Sunac, through its real estate subsidiary Sunac Real Estate, said on Friday it plans to invest RMB6.04 billion in LeEco’s Shenzhen-listed unit Leshi Internet Information and Technology Corp Beijing, by acquiring an 8.61 per cent stake.

It also plans to invest RMB1.05 billion in LeEco’s film production

company, Leshi Pictures, by acquiring a 15 per cent stake, and pay another RMB7.95 billion (US$1.15 billion)

for a 33.5 per cent stake in Leshi Internet’s subsidiary Leshi Zhixin, known for its smart Internet TVs. Trading in Leshi Internet Information’s shares, which was suspended on Dec. 6, will resume today.

Sunac said the strengthened partnership with LeEco will enable both firms to cooperate in areas such as

intelligent hardware, real estate, and smart homes. It also highlighted industrial real estate as an area for greater cooperation.

For LeEco, the fresh round of funds can likely help resolve some financial difficulties it has faced in recent months, as it continues its push into the smartphones, film, sports, electric and driverless vehicles markets.

‘For LeEco, the fresh round of funds can likely help resolve some financial difficulties it has faced in recent months’ In the stock filing, Sunac said it paid RMB35.39 per share for its stake in Leshi Internet.

Leshi Internet Information also said in a separate filing on the Shenzhen stock exchange that Chinese insurer Huaxia Life invested RMB400 million (US$58 million) in Leshi Zhixin. Reuters

Business Daily Monday, January 16 2017 11

Asia Bilateral talks

Japan, Australia stress importance of TPP Both countries looking to protect strategic and trade interests in the Asia-Pacific region Harry Pearl

J

apanese P ri m e M i n i st e r Shinzo Abe met his Australian counterpart Malcolm Turnbull in Sydney on Saturday where the pair agreed to deepen defence ties and stressed the importance of the Trans-Pacific Partnership (TPP).

Abe’s visit comes amid heightened regional tension in the South China Sea and fears U.S. President-elect Donald Trump will push ahead with his pledge to kill the trade agreement once he takes office on Jan. 20. “ W e h av e c o n f i r m e d o u r commitment to the rule of law, free trade and open markets in our region,” Turnbull told reporters at a joint press conference.

Abe said the increasingly uncertain geopolitical landscape made the relationship between Japan and Australia more important than ever.

“It is important to guard and increase the robustness of the free, open and rules-based international order,” Abe said.

Both leaders spoke of their desire to see the TPP ratified, despite opposition from Trump.

The 12-member pact aims to cut barriers in some of Asia’s fastestgrowing economies, but it does not include China.

Wi th o u t U . S . a p p r o va l th e

agreement cannot come to fruition.

Following bilateral talks, the two leaders announced the signing of an Acquisition and Cross-Servicing Agreement (ACSA), which will increase cooperation in combined military exercises, training and peace-keeping operations. The agreement is expected to be finalised by the end of 2017.

The announcement comes nearly nine months after Australia chose a French bid over a Japanese design for a new fleet of submarines.

The loss of the US$40 billion contract was a major blow for Abe’s ambitions to develop Japan’s defence export capabilities as part of a more muscular security agenda.

Japan, as well as Australia, is looking to protect its strategic and trade interests in the Asia-Pacific region, especially as China becomes increasingly assertive in the South

and East China Seas.

Both leaders also reaffirmed the importance of their respective security alliances with the United States.

China’s recent naval exercises in the South China Sea and the building of islands there, with military assets, have unnerved its neighbours and risk provoking a reaction from the United States.

Trump’s nominee for secretary of state, Rex Tillerson, has said China should be denied access to islands it has built in the South China Sea. China claims most of the resource-rich sea, through which ab o u t US $ 5 t r i l l i o n i n sh i p borne trade passes every year.

Neighbours Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims. Reuters

Japan’s Prime Minister Shinzo Abe (L) speaks as Australia’s Prime Minister Malcolm Turnbull looks on during a press conference at Kirribilli House in Sydney, Australia, 14 January 2017. Lusa

Monetary policy

S.Korea central bank keeps rates at record low Governor said 2017 GDP growth was now seen at 2.5 per cent Christine Kim and Cynthia Kim

South Korea’s central bank kept interest rates unchanged at a record low 1.25 per cent on Friday, for a seventh month, and slashed its growth forecast for 2017 as it braces for U.S. policy developments under the presidency of Donald Trump.

The central bank is also watching an influence-peddling scandal that could topple President Park Geun-hye, who has already been impeached by parliament and now awaits a constitutional ruling.

“Going forward, we should scrutinise the new U.S. administration and growing household debt,” Governor Lee Ju-yeol told a news conference, noting Friday’s vote had been unanimous.

The central bank last adjusted rates in June last year, cutting by 25 basis points.

Lee said 2017 GDP growth was now seen at 2.5 per cent and the consumer price index was seen rising 1.8 per cent versus previous forecast growth of 2.8 per cent and 1.9 per cent, respectively.

“Much has changed since our last

revision in October, leading to our forecasts today,” said Lee. “But the biggest reason for the downgrade was consumption.”

The finance ministry cut its economic growth forecast this year to 2.6 per cent from 3.0 per cent seen in December.

Lee said recent improvements in consumption were partly government-led, and noted his disagreement with the view consumer spending was recovering swiftly.

Consumer sentiment fell in December to its worst level in more than 7-1/2 years, sapped by Korea’s political crisis and turbulent financial markets.

“Judging from today’s remarks, the BOK will stay accommodative for a while although I doubt it will increase the chances for a rate cut,” said Oh Suk-tae, economist at Societe Generale.

“It seemed like Lee was giving forward guidance; the BOK won’t be raising rates just because the United States is doing so.”

Even if some analysts feel a cut is needed, the BOK finds itself in a tight spot for monetary policy: Although

economic growth is sluggish, household debt continues to mount even as the U.S. Federal Reserve readies further rate hikes.

Benchmark 10-year Treasury bonds bounced from record-low yields last December as the Fed hiked rates, and have been trading at levels last seen in late 2015, raising questions over gaps between South Korea’s policy rate and market interest rates.

This is largely the reason a majority of analysts see the BOK standing pat for the rest of the year, according to a Reuters survey, despite some saying

South Korea’s central bank headquarters

the economy would benefit from another rate cut.

South Korea’s economy, Asia’s fourth-largest, could face headwinds from the incoming Trump administration if the protectionist policies Trump promoted in his election campaign were to be implemented - severely undermining the exports that have just started to turn around.

As for the on-going political turmoil at home, central bank officials have said monetary policy will not be directly influenced by a new president, should one take office, but the bank is preparing itself for changed macro-economic policies that could come with a new administration. Reuters

12 Business Daily Monday, January 16 2017

Asia Monetary stance

Singapore’s Q4 bounce seen lessening chance of easing Many economists see the risk of Singapore’s economy slowing further this year Masayuki Kitano

A

rebound in Singapore’s economy at the end of 2016 has reinforced expectations for the central bank to stand pat in April on hopes that its recent easings will support growth.

Eleven out of 14 economists in a Reuters survey said they expect the Monetary Authority of Singapore (MAS) to keep policy unchanged at its semi-annual review in April.

One shifted from an easing call after Singapore’s economy posted surprisingly strong growth in the fourth quarter and dodged

a recession, helped by a surge in manufacturing.

“The outcomes of growth and inflation are pretty much in line with what the MAS expected,” said Vishnu Varathan, senior economist for Mizuho Bank, seeing no compelling reason for policy easing.

Although three analysts expect the MAS to ease, two of them said the chances of easing have probably receded.

The MAS manages monetary policy by changes to the exchange rate, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners based on its nominal

effective exchange rate (NEER).

Analysts calling for an easing say the central bank will recentre the Singapore dollar NEER’s policy band lower in April, which would give more room for the currency to decline.

“We believe both fiscal and monetary easing remain necessary,” NatWest Markets economist Vaninder Singh said in a research note, citing factors such as weakness in services and slowing consumer demand.

“We hold this view even before fully taking into account any possible impact on trade from the Trump administration’s policy agenda.”

There is heightened uncertainty around the outlook for international trade as policymakers and investors wait to see if U.S. President-elect Donald Trump carries through on his

protectionist threats when he takes office on Jan. 20.

Many economists see the risk of Singapore’s economy slowing further this year, after growth slipped to a seven-year low of 1.8 per cent in 2016. Among 12 economists who gave 2017 forecasts, six expect growth of 1.4 per cent or lower.

Currency and interest rates

One complication for MAS is that a loosening of its exchange-rate policy can add to upward pressure on domestic interest rates, as investors seek compensation for holding a weakening currency, some analysts say.

Key Points 11 of 14 analysts see MAS on hold in semiannual April meet 1 shifts view from easing to no change after Q4 GDP bounce 3 expect MAS to ease by re-centering policy band lower Little change to 2017 GDP views, many expect slower growth That dilemma is made more stark since U.S. interest rates are expected to rise further in 2017.

Andy Ji, currency strategist for the Commonwealth Bank of Australia, said the MAS faces a decision on whether to provide support to exportoriented sectors, or to businesses and households that would feel the pinch if interest rates rise.

“It’s still debatable whether a cheaper currency is going to help anything...given the global slowdown in trade,” Ji said.

“I would be more concerned with the domestic part of the economy, construction and services,” he added.

The MAS, which kept policy unchanged at its latest review in October, last eased policy in April 2016. Reuters

World Bank forecast

Asia’s smallest economies forecast to be among fastest growing China is investing in everything from railroads to real estate in Cambodia, Laos and Myanmar Karl Lester M Yap

Asia’s smallest economies are growing faster than giants like China, according to the World Bank.

Cambodia, Laos and Myanmar will post the most rapid expansions in Asia after India from 2017 to 2019, sustaining growth rates of close to 7 per cent, according to forecasts released this week. Among the least developed countries, the combined size of the three economies is less than US$100 billion, about a third of neighbours like Singapore, Malaysia and Philippines. Located in the Mekong region, Southeast Asia’s frontier nations are stepping up their infrastructure drive to boost growth and diversify their economies as they seek to shed their image as the region’s backwater.

Vietnam — which has transformed its economy from a mainly farming one to an exporter of electronic goods like smartphones — stands as their

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role model, said Eugenia Victorino, an economist at Australia & New Zealand Banking Group in Singapore.

“The promise of transforming the Mekong into a manufacturing hub has a lot of potential”

Cambodia trying to imitate Vietnam’s model of luring FDI to prop up their export capacity.”

They’re counting on China, which is investing in everything from railroads to real estate in the three countries.

After decades of military rule, Myanmar is liberalizing its economy and adopting market reforms after a transition to democracy. China is its largest trading partner and is building a special economic zone, power plant

and deep-water seaport on the west coast. In Laos, a long-delayed US$5.7 billion railway from China through northern Laos officially began last month, the Global Construction Review reported. Cambodia has gained particular appeal for Chinese manufacturers seeking to relocate, which aligns with China’s strategy to export industrial capacity through initiatives such as its One Belt, One Road program. Bloomberg News

Eugenia Victorino, an economist at Australia & New Zealand Banking Group in Singapore

“The promise of transforming the Mekong into a manufacturing hub has a lot of potential,” Victorino said.

“Vietnam provides the template for an export-led growth from agricultural.

We have seen Myanmar, Laos, and Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Monday, January 16 2017 13

Asia In Brief Energy

Myanmar to drill more new offshore gas blocks A total of 37 new more offshore blocks will be drilled in Myanmar by foreign companies this year for gas exploration, said U Htay Aung, Deputy Permanent Secretary of Ministry of Electricity and Energy, Friday. These blocks are located in M(9) of Zawtika gas field, A(6) and AD(7) of Yadana gas field. The drilling will be conducted at the end of this month. Myanmar Oil and Gas Enterprise is not only operating the drilling itself, but also cooperating with foreign companies. The country earned US$1.82 billion from natural gas export as of December 9 in this fiscal year 2016-2017.

Tourism

Brunei expects arrivals to reach 450,000 by 2020

Reform

Corporates look past India’s cash crisis Prime Minister has promoted a business-friendly agenda since coming to power in 2014 Promit Mukherjee and Euan Rocha

Business leaders from around the world attending an investment summit in the western Indian state of Gujarat this week cheered Prime Minister Narendra Modi’s reforms, and said the disruption caused by his radical demonetisation move should be temporary.

Executives at the week-long, biennial Vibrant Gujarat Summit held in Modi’s home state said the tide was turning on investments into India, although some complained the approval process remained prohibitively slow.

Modi has promoted a business-friendly agenda since coming to power in 2014, and his reforms have helped turn India into the world’s fastest growing major economy, albeit with the help of hefty government spending to fund projects.

“We are making a real bet on the country. What we are seeing with Prime Minister Modi is really some substantive change, it’s more than lip service,” said Peter Huntsman, Chief Executive of U.S. chemical maker Huntsman Corp.

Huntsman said his company, which sells products ranging from adhesives to industrial inputs, is doing “preliminary analysis on what may end up being several hundred million dollars worth of investments in India.”

As someone who first came to India in the late 1980s and has seen the promises made over decades, he described the pace of change under Modi as “near light-speed”, and said that an overhaul of India’s unwieldy tax code would be a game changer.

After lengthy delays and political horse trading among lawmakers, Modi finally won parliamentary approval last year to implement the Goods and Services Tax (GST),

although it is likely to go only some way to unifying rates.

The prime minister also stunned Indians on Nov. 8 when he abolished old 500 and 1,000 rupee notes in a bid to root out corruption and drag the nation into the age of digital payments.

The World Bank said in its report this week that the move would slow India’s economic growth to 7 per cent this fiscal year, down from an earlier estimate of 7.6 per cent.

Other economists have also pared growth forecasts, as money shortages over the last two months have caused frustration for millions of people in an economy largely driven by cash.

Industrialists like B. K. Goenka, chairman of Indian conglomerate Welspun Group, believe the economic hit from so-called demonetisation is in the past.

“Demonetisation is over. It was a bold decision and in the long run it will benefit. It will also help the implementation of GST,” said Goenka, adding moves to cleanse the system prior to implementing GST later this year made sense.

Welspun outlined proposed investments of 40 billion rupees ($588 million) in Gujarat during the summit, which ended Friday.

Risks and rewards

Canadian billionaire investor Prem Watsa said his India-focused investment vehicle Fairfax India is raising a further US$500 million, as its initial US$1 billion raise from 2015 has already been largely earmarked for deployment.

“I’m saying India is the single best country to invest in worldwide for the long-term,” said Watsa, adding that all the companies Fairfax India has invested in so far are registering double digit growth rates. “I see huge opportunities.”

“You’re going to see a transformation take place before your eyes in India,” said Watsa, comparing Modi’s reform agenda in India to the transformation Lee Kuan Yew brought to Singapore.

Even for optimists, though, challenges remain.

Fairfax India warned two weeks ago that a US$323 million deal it had struck in March 2016 to acquire a 33 per cent stake in the Bengaluru airport was still in limbo, awaiting some government and regulatory approvals.

That deal had initially been expected to close in mid-2016.

The head of Dubai’s DP World, which operates several ports along India’s coastline, said he was “very bullish” on India but that more work was needed to speed up approvals.

Others pointed to the unpredictability of Indian politics as a wild card factor.

Key Points Biennial investment conference in Gujarat winds down Senior executives generally bullish on India, praise Modi Disruption from demonetisation seen as temporary Some complain approval process too slow, holding up projects That challenge was illustrated this week when Amazon.com was forced to remove doormats resembling the Indian flag from its Canadian website, after an Indian government threat to rescind visas of the company’s employees if they did not stop selling them.

“Investors will just have to accept a higher level of risk to get the returns they want from big markets like India,” said Amitabh Dubey, a political analyst at emerging markets advisory firm Trusted Sources. Reuters

Easing visa requirements for visitors from a number of countries will boost the inflow of tourists into Brunei, thus helping the country achieve the annual target of 450,000 visitor arrivals by air by 2020 from 218,000 in 2015, said Haji Ali, Brunei’s minister of Primary Resources and Tourism. “The ease of visa requirements will help ease travel to Brunei Darussalam and increase the number of visitors to the country. In addition, providing clear tour packages comprising affordable prices can give a competitive advantage for Brunei over other tourism hotspots in the region,” the minister said.

Air bags scandal

Takata to pay US$1 bln penalty Japan’s Takata Corp on Friday agreed to plead guilty to criminal wrongdoing and to pay US$1 billion to resolve a U.S. Justice Department investigation into ruptures of its air bag inflators linked to at least 16 deaths worldwide. The deal was announced hours after prosecutors in Detroit charged three former senior Takata executives with falsifying test results to conceal the inflator defect, which triggered the world’s biggest automotive safety recall. Takata will pay a US$25 million fine, US$125 million in a victim compensation fund, including for future incidents, and US$850 million to compensate automakers for massive recall costs.

Trade

Myanmar earns over US$1 bln from pulses Myanmar exported about 1 million tons of beans and pulses earning over US$1 billion in the first nine months of this fiscal year 2016-2017 as of December, official media reported Saturday. The export increased by about 150,000 tons compared with the same period of last fiscal year 2015-2016. Myanmar’s beans and pulses are mainly exported to India, followed by China, Indonesia, European countries and Japan. About 80 per cent of them go to India. India has proposed in previous year to increase its demand for Myanmar’s mung beans and pigeon peas by 25,000 tons per year starting in 2017.

14 Business Daily Monday, January 16 2017

International In Brief Financing

IMF board approves credit line for Poland The International Monetary Fund said on Friday its executive board approved a new two-year flexible credit line arrangement for Poland worth about 8.24 billion euros, about half the size of the country’s previous credit line. The IMF said the arrangement is expected to be treated by Polish authorities as precautionary, with no plans to draw upon it.

“Poland continues to benefit from very strong economic fundamentals and policy frameworks,” IMF Deputy Managing Director Mitsuhiro Furasawa said in a statement.

“Economic growth remains robust, unemployment continues to decline, and deflation has dissipated.”

Legislation

U.S. House takes first step toward Obamacare repeal The Republican-led U.S. House of Representatives on Friday approved a measure making the first move toward scrapping Obamacare, joining the Senate in instructing key committees to write legislation repealing the health insurance law. Eliminating Obamacare is a top priority of the Republicanmajority Congress as well as President-elect Donald Trump, who has urged lawmakers to act quickly. The resolution passed on Friday instructs committees of the House and Senate to draft repeal legislation by a target date of Jan. 27.

Monetary policy

Rate cuts unlikely to give boost to Brazil Interest rate cuts will probably take longer than usual to boost economic growth in Brazil as a high debt load dampens confidence among families and businesses, economists said. Forecasts for economic growth in 2017 remain just above zero after two years of sharp contraction, even after the central bank slashed rates by 75 basis points on Wednesday to 13 per cent and suggested it would cut closer to single digits this year. Economists say rate cuts in Brazil usually help boost growth within six to nine months of a central bank decision.

Protectionism

Mexico will ‘immediately’ respond to border tax Mexico must be ready to respond immediately with its own tax measures if the incoming administration of President-elect Donald Trump imposes a border tax, the economy minister said on Friday, warning such protectionism may trigger a global recession. Trump, who takes office on Jan. 20, has promised a “major border tax” on companies that shift jobs outside the United States, and such a measure could hobble Mexico’s exports to its top trading partner. “It is clear we need to be prepared to immediately neutralize the impact of such a measure,” Economy Minister Ildefonso Guajardo said.

Lenders’ mood

Top U.S. bank executives optimistic heading into 2017 The idea that banks will benefit from lighter regulation, rising interest rates and lower taxes under Trump has driven bank stocks up nearly 25 per cent since the election David Henry and Dan Freed

E

xecutives of big U.S. banks expressed optimism on Friday about the outlook for 2017 in their first public comments about quarterly earnings since the U.S. presidential election in November.

JPMorgan Chase & Co and Bank of America Corp, the two largest U.S. banks, kicked off the corporate reporting season on a rosy note, each with healthy increases in fourth-quarter profit. Those improvements came on the back of trading revenue gains, higher interest rates, healthy loan growth and cost controls.

“We are very optimistic about the future, optimistic about new policies which could spur growth” Brian Moynihan, Bank of America Chief Executive

On the flip side, the earnings of Wells Fargo & Co, which also reported on Friday, were hurt by the fallout of a sales scandal and a loss related to accounting, both of which are particular to the San Francisco-based lender.

Results at regional lender PNC Financial Services Group Inc were better than expected, with Chief Financial Officer Rob Reilly predicting the bank will be able to increase revenue faster than expenses this year.

On conference calls with reporters and analysts, top executives were sanguine about topics ranging from interest rates and loan growth, to regulation and the incoming administration of President-Elect Donald Trump.

Optimistic

“We are very optimistic about the future, optimistic about new policies which could spur growth,” Bank of America Chief Executive Brian Moynihan said.

The bank’s finance chief, Paul Donofrio, predicted BofA will be able to produce an additional US$600 million in the current quarter from higher interest rates, with further gains throughout the year.

He also cited customers’ “high credit quality” and positive trends in auto, home and middle-market loans, as being supportive of earnings.

In the fourth quarter, BofA benefited from an aggressive cost-cutting program Moynihan detailed last summer, as well as a pickup in trading revenue.

JPMorgan Chief Executive Jamie Dimon was slightly more circumspect, but said he was comforted by the fact that Trump was selecting people with experience to join his team.

Dimon also cited several positive economic trends that suggest the

global economy is headed in the right direction, which will help buoy bank earnings.

“The economy is getting a little bit better,” he said. “Interest rates help and looking forward, you probably have a better political, legal and regulatory environment.”

The bank is sticking by its loan growth forecast of 10 to 15 per cent for 2017, though Chief Financial Officer Marianne Lake said it might be toward the lower end of the range.

‘Solid performance’

Despite Wells Fargo’s unique troubles, its chief financial officer, John Shrewsberry, also said the bank had a “solid underlying performance,” citing loan growth, good credit quality and higher interest rates.

The idea that banks will benefit from lighter regulation, rising interest rates and lower taxes under Trump has driven bank stocks up nearly 25 per cent since the election.

Nearly all the executives commented on the enthusiasm evident in markets, but were hesitant to fully endorse it.

For instance, Dimon noted that it may take a full year for the new government in Washington to decide exactly how it will tackle complex issues like corporate tax reform.

And, he said, increased competition means lenders may just “compete away” any tax benefits they receive.

“We’ve all heard that the new administration in Washington supports tax reform, regulatory relief and other pro-growth policies,” said PNC Chief Executive Bill Demchak. “But, so far, a move in interest rates is the only thing that has actually happened.”

Other big banks, including Citigroup Inc, Morgan Stanley and Goldman Sachs Group Inc, will report results next week. Reuters

Derivatives

EU, U.S. strike deal to boost transatlantic insurance market The deal needs approval from the European Parliament and U.S. Congress The European Union and the United States agreed on Friday to reduce legal and capital barriers to boost the US$3 billion transatlantic insurance and reinsurance market.

The accord has been under negotiation for more than a year and follows an agreement last year on derivatives.

U.S. and EU representatives said in a joint statement they had reached a deal “that will ensure on-going robust insurance consumer protection and provide enhanced regulatory certainty for insurers and reinsurers operating in both the U.S. and the EU.” Under the deal, EU and U.S. authorities will lift requirements for reinsurers to hold more capital

against risks if they operate from the other side of the Atlantic, eliminating one key hurdle for cross-border expansion.

Insurers will also benefit from lower supervisory requirements, a move expected to reduce costs.

“This is a major deal that is set to benefit insurers, reinsurers and policy holders on both sides of the Atlantic,” said the EU financial services commissioner, Valdis Dombrovskis.

The deal paves the way for EU companies to increase their market share in the United States and for US companies to sell their policies more easily in the 28 European Union countries.

The deal needs approval from the European Parliament and U.S. Congress.

Two powerful Democrats on U.S. congressional committees said in statements on Friday that they will review the agreement to make certain that it leads to more balanced treatment of U.S. insurance companies.

“This is a major deal that is set to benefit insurers, reinsurers and policy holders on both sides of the Atlantic” Valdis Dombrovskis, EU financial services commissioner

“I look forward to closely studying the agreement and consulting with stakeholders to ensure that the agreement successfully addresses EU discrimination against the U.S. insurance and reinsurance industries,” said Representative Richard Neal of Massachusetts, the most powerful Democrat on the U.S. House Ways and Means committee. Reuters

Business Daily Monday, January 16 2017 15

Opinion Business Wires

The Times of India A Sebi (Securities and Exchange Board of India) panel has proposed increased transparency in the processes for appointment and removal of board of directors. The panel has also said that companies should have better systems for evaluating the performance of directors and should periodically disclose how board members have performed.

Although U.K. Sinha-led Sebi did not raise any specific issue, the regulator’s International Advisory Board said that it has taken note of “the recent developments on corporate governance related issues in India.” The Sebi release on IAB came after its two-day meeting in Jaipur ended on Saturday.

Bangkok Post The Bank of Thailand is temporarily allowing credit card operators to lower the minimum payment requirement of 10 per cent of the monthly balance for cardholders who are victims of the southern flooding. The relaxation takes effect immediately and lasts until the end of June. Southern flood victims who pay less than 10 per cent of their due balance on credit cards will not be classified as special mention loans - typically defined as 30-90 days overdue - but the cardholders must prove that they are hurt by the severe flooding.

Water as a force for peace

T The Korea Herald Bank loans extended to self-employed people in South Korea have grown sharply amid an economic slump and weak demand for workers in the corporate sector, data showed yesterday.

Outstanding loans for self-employed people by the country’s five major banks - Shinhan, KB Kookim, Woori, KEB Hana and NH - nearly doubled to 180.4 trillion won (US$153 billion) from 96.6 trillion won in 2010, according to the banking data. The total grew by 16.2 trillion won in 2016 alone. The number of selfemployed people in the country came to around 5.7 million as of end-October last year.

Philstar Manufacturers of local garments and hard goods are bullish on the growth of their exports this year as they seek to tap into more markets in Southeast Asia. Robert Young, president of the Foreign Buyers Association of the Philippines (FOBAP), said his group expects export earnings to rise 2 to 5 per cent this year from US$1 billion in 2016. “We will be tapping new markets especially now that the ASEAN economic integration is already in place.

We started with the U.S. and then Europe and some parts of Asia,” Young said.

he changing of the guard on the 38th floor of the United Nations building in New York, with António Guterres taking over for Ban Ki-moon as UN Secretary-General, has taken place at a time when notions about peace and conflict are undergoing a subtle change. In particular, the role of resources – and especially water – is getting the recognition it deserves.

This has been a long time coming. Both Ban and his predecessor, Kofi Annan, have argued for some two decades that protecting and sharing natural resources, particularly water, is critical to peace and security. But it was not until last November that the issue gained widespread acknowledgement, with Senegal – that month’s UN Security Council president – holding the UN’s first-ever official debate on water, peace, and security.

Open to all UN member states, the debate brought together representatives of 69 governments, which together called for water to be transformed from a potential source of crisis into an instrument of peace and cooperation. A few weeks later, Guterres appointed Amina Mohammed, a former Nigerian environment minister, as his deputy secretary-general.

The growing recognition of water’s strategic relevance reflects global developments.

In the last three years, the Islamic State (ISIS) captured the Tabqa, Tishrin, Mosul, and Fallujah dams on the Tigris and Euphrates Rivers.

ISIS subsequently lost control of all of them, but not before using them to flood or starve downstream populations, to pressure them to surrender.

Many analysts hope that ISIS will finally be eliminated from Iraq and Syria in the next few months. But that does not mean that the group will disband; on the contrary, it may well relocate to the border areas between Libya and Chad, putting West African cities and water installations at risk.

This tactic is not exclusive to ISIS. Extremist groups in South Asia have also threatened to attack water infrastructure. And of course state actors, too, can use water resources to gain a strategic advantage.

The importance of water in the twenty-first century – comparable to that of oil in the twentieth – can hardly be overstated. Yet some strategic experts continue to underestimate it. The reality is that oil has alternatives like natural gas, wind, solar, and nuclear energy. By contrast, for industry and agriculture as much as for drinking and sanitation, the only alternative to water, as former Slovenian President Danilo Türk once put it, is water.

The same is true for trade. Consider the Rio Chagres.

While it may not be widely known, it is vitally important, as it feeds the Panama Canal, through which 50 per cent of trade between Asia and the Americas flows. There is no risk of the natural depletion of the river flow for the next hundred years, but, in the event of a security crisis in Central

“

Sundeep Waslekar President of Strategic Foresight Group

America, it could be taken over by rogue forces. The impact on the global economy would be enormous.

The consensus on the need to protect water resources and installations in conflict zones is clear.

What is less clear is how to do it. Unlike medicines and food packets, water cannot be airdropped into conflict zones. And UN Peacekeeping Forces are badly overstretched.

The International Committee of the Red Cross does negotiate safe passage for technicians to inspect and repair damage to water pipes and storage systems in Iraq, Syria, and Ukraine; but each passage needs to be negotiated with governments in conflict and rebel commanders – a long and cumbersome process. A better approach would be for great powers, with their considerable influence, to negotiate short-term ceasefires in areas experiencing protracted conflict, specifically to repair and restore water systems.

To pave the way for such an approach, however, the UN Security Council will have to declare water a “strategic r e s o u rc e o f h u m a n i t y ” and adopt a resolution to p r o t ect w at e r r es o u rc es and installations, similar to Resolution 2286, adopted last May to protect medical facilities in armed conflicts.

In the longer term, countries that share riparian systems will need to establish regional security arrangements to preserve and protect their resources. With collaborative management underpinning collective protection, water, often a source of competition and conflict, could become a facilitator of peace and cooperation.

Denis Sassou-Nguesso, President of the Republic of the Congo, is at the forefront of this movement, by leading a group of eight governments toward the establishment of the Blue Fund for the Congo Basin. If successful, the Fund will help to mitigate climate change, create new avenues of river-based employment, and promote collective security in an unstable region. The Africa Action Summit in Marrakesh two months ago described the Fund as one of the four key ideas that can transform the continent.

Last March, on World Water Day, Jordan’s Prince Hassan bin Talal and I called for the establishment of a Marshall Fund for the world’s shared river basins. The Blue Fund for the Congo Basin is a step in that direction. Now, we need similar funds to emerge to protect all of the world’s 263 shared river basins and lakes. It is a huge challenge; but, given the power of water to sow conflict and support peace, we must confront it head-on. Project Syndicate

The importance of water in the twentyfirst century – comparable to that of oil in the twentieth – can hardly be overstated.

”

16 Business Daily Monday, January 16 2017

Closing Pollution

Smog to blanket north of the country

Smog hit some parts in north and central China starting yesterday, China’s national observatory warned, suggesting people in affected areas to make precautions.

The smog, which will hit Beijing, Tianjin, Hebei, Shanxi, Henan and Shaanxi, is expected to last until a cold front comes to the rescue around Thursday, the National Meteorological Centre said.

People in the affected regions were asked to make precautions and choose public transport services to cut emissions and mitigate pollution.

Severe smog triggered red alerts in more than 20 cities at the beginning of 2017. When authorities issue red alerts, some manufacturers are required to cut production, and heavily polluting vehicles are banned from the roads.

In environment inspections last year, the Ministry of Environmental Protection said a total of 720 people were detained and 6,454 held accountable for environment-related wrongdoing.

In 2016, the government refused 11 highpollution and high-energy consuming projects, involving total investment of RMB97 billion (US$14 billion). Xinhua

UN study

E-waste rising dangerously in Asia China more than doubled its own generation of e-waste between 2010 and 2015

E

lectronic waste is rising sharply across Asia as higher incomes allow hundreds of millions of people to buy smartphones and other gadgets, with serious consequences for human health and the environment, according to a UN study released yesterday.

So-called e-waste in Asia has jumped 63 per cent in five years, the report by the United Nations University said, as it warned of a need for most nations across the region

to improve recycling and disposal methods.

“For many countries that already lack infrastructure for environmentally sound e-waste management, the increasing volumes are a cause for concern,” said Ruediger Kuehr, the report’s co-author and head of the UN University’s Sustainable Cycles Programme.

For many years, China and some other parts of Asia have been a dumping ground for discarded electronics from the developed world, recycling

the waste in often unsafe but ultracheap backyard factories.

But the report said that in recent years, Asia has rapidly emerged as a major source of electronic waste, due to increasingly affluent consumers buying items such as phones, tablets, refrigerators, personal computers and televisions.

China more than doubled its own generation of e-waste between 2010 and 2015, the period of the study, according to the report.

Per capita the worst-offending economy in the region was Hong Kong, with each person in the Chinese territory generating an average of 21.7 kilograms of e-waste in 2015.

Singapore and Taiwan were also big e-waste dumpers, with just over 19 kilograms per person generated in 2015, according to the study.

Cambodia, Vietnam and the Philippines were among the lowest e-waste generators with an average of about one kilogram for each person.

Meanwhile, improper and illegal e-waste dumping means increased exposure to extremely toxic chemicals, leading to severe health and environment consequences.

Acids that are used to separate the metals in the electronic products are a particular concern, with inhalation or exposure to them causing serious health problems.

“For many countries that already lack infrastructure for environmentally sound e-waste management, the increasing volumes are a cause for concern” Ruediger Kuehr, UN report’s co-author In the Chinese town of Guiyu, which built its economy on recycling waste from overseas, heavy metal contamination has turned the air and water toxic, according to a 2014 study by researchers at Shantou University Medical College.

Children in the town also had high lead levels in their blood, the university study found.

When an AFP team visited Guiyu in 2014, electronic remnants were strewn in a nearby stream, and the air was acrid from the burning of plastic, chemicals and circuitboards. AFP

Diplomatic position

State council official

UK finance minister

Beijing says One-China policy Chinese economy likely can’t be bargaining chip to hit bottom in 2017

Britain may change “economic model”

China’s foreign ministry said its One-China policy isn’t negotiable and urged Donald Trump to recognize the “high sensitivity” with which it views Taiwan, a day after the president-elect hinted for the second time in a month at a reset of U.S.-China relations.

Trump was quoted by the Wall Street Journal late Friday as saying he would only commit to the One China policy after assessing the progress the world’s second-largest economy makes on trade and currency issues.

“The One-China principle, which is the political foundation of the China-U.S. relations, is non-negotiable,” Ministry of Foreign Affairs spokesman Lu Kang said in a statement on the agency’s website.

One China is an acknowledgment that Taiwan and China are part of the same China, even if they disagree on what that means. Beijing regards it as a bedrock policy, not the bargaining chip that Trump has suggested.

“In order to avoid disruption to the sound and steady development of the China-U.S. relations and bilateral cooperation in key areas, we urge relevant parties in the U.S. to fully recognize the high sensitivity of the Taiwan question,” Kang said. Bloomberg News

Britain could change its economic model to regain competitiveness if it were to leave the European Union without an agreement on market access, British finance minister Phillip Hammond said in a German newspaper interview published yesterday.

In a thinly veiled threat that Britain could use its corporate tax as a form of leverage in Brexit negotiations, Hammond told Welt am Sonntag he hoped Britain would remain a European-style economy with corresponding tax and regulation systems.

“But if we are forced to be something different, then we will have to become something different,” Hammond said when asked directly about Britain’s plans to lower corporate tax.

“If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term,” he said.

“In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness,” Hammond said.

“We will change our model, and we will come back, and we will be competitively engaged.” Reuters

The Chinese economy is likely to hit bottom in 2017 as several factors will combine to support the bottoming process, a Chinese economist said Saturday.

If investment, supply-side structural reforms and the fostering of new growth momentum achieve desired results, there is a high probability that the economy may bottom this year, said Wang Yiming, deputy director of the development research centre of the State Council.

On the demand side, manufacturing investment is on the up, while infrastructure spending will remain strong, which mean overall investment will stabilize in 2017, he said.

If China’s capacity-cut targets are solidly delivered, producer prices will keep going up to support the broader economy, while new technologies and new business models will help cultivate fresh growth momentum, Wang pointed out.

Buoyed by increased government spending on infrastructure and a booming home market, the economy held steady against rising headwinds, with GDP expanding stably at 6.7 per cent in each of the first three quarters of the year. Xinhua