Business Daily #1217 January 19, 2017

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

Former personal driver Mak Hak Neng takes the stand Ho Chio Meng trial Page 4

Thursday, January 19 2017 Year V Nr. 1217 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong World Economic Forum

Xi’s speech in Davos sets global leading role for China in Trump era Page 8

www.macaubusinessdaily.com

Forecast

A private poll says China’s latest figures on Friday will show steady pace Page 8

Business climate

Fortune

Only 23 pct retailers anticipate sales growth Page 2

Local billionaires reshuffled on Forbes’s HK rich list Page 7

Is Forum Macau still alive?

Gloomy commercial-unit sales

Real estate

Capital values of the office and retail property markets are both expected to dip by up to 10 pct y-o-y for this year, whereas rents in the two sectors are also projected to drop by up to 15 pct y-o-y, according to Jones Lang LaSalle’s forecast.

The trend of gaming operators moving offices to their own properties, upcoming completions of government office building and the continuous downturn in local retail sales are the reasons, says the firm. Page 6

MGTO’s 2017 to-do list

The local tourism body has plenty to check by the end of this year. According to its director Helena de Senna Fernandes, the Macau Tourism Master Plan is targeted to be released in June. In addition, diversifying tourist sources, enriching local tourism products and enhancing regional co-operation are also on the list.

Tourism Page 5

HK Hang Seng Index January 18, 2017

Fruitful Hengqin

Banking BNU unveiled its first branch in Hengqin yesterday. Many more may follow in the future. President of Monetary Authority of Macau, Anselmo Teng, reveals a few local banks are also interested in expanding their footprint to the Mainland Island, given the support of the central government in the CEPA policy. Page 3

Minor bubble trouble

Property China’s red-hot property market in major cities has continued to stabilize after authorities took a series of measures to contain prices, according to an official survey yesterday.

Of 70 large and medium-sized cities surveyed, 46 saw prices for new residential housing climb month-on-month in December, according to the National Bureau of Statistics. Page 10

23,098.26 +257.29 (+1.13%) Worst Performers

Belle International Holdings

+4.06%

Hang Lung Properties Ltd

+2.36%

Cathay Pacific Airways Ltd

-1.99%

Link REIT

+0.19%

Cheung Kong Property

+3.35%

Kunlun Energy Co Ltd

+2.17%

Want Want China Holdings

-0.41%

CLP Holdings Ltd

+0.26%

BOC Hong Kong Holdings

+3.05%

Hang Seng Bank Ltd

+2.14%

China Mengniu Dairy Co Ltd

+0.00%

China Petroleum & Chemical

+0.33%

China Merchants Port Hold-

+2.94%

China Life Insurance Co Ltd

+2.13%

Li & Fung Ltd

+0.00%

Power Assets Holdings Ltd

+0.34%

AAC Technologies Holdings

+2.69%

Cheung Kong Infrastructure

+1.89%

Hong Kong & China Gas Co

Lenovo Group Ltd

+0.39%

+0.14%

14° 21° 13° 19° 13° 18° 14° 19° 15° 18° Today

Source: Bloomberg

Best Performers

FRI

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

The creation of Forum Macau was an important political initiative, which has provided Macau with a political role, at least on paper. The project, a long time promise of the Portuguese government and constantly delayed, was taken up and effortlessly materialized by Beijing.

Macau has all it needs to serve as a bridge, to attract multilateral businesses, train translators, host conferences and be a base for services that help achieve common goals for Portuguese speaking countries.

Forum Macau will never replace bilateral ties, and member countries don’t need the Forum to improve those ties, although it may have played a part in the recent decision from São Tomé and Príncipe to cut ties with Taiwan and recognize Beijing instead of Taipei.

The critical declarations from the Chairman of the Board of Directors of the Chamber of Industry and Commerce Brazil-China of Macau, which we published yesterday, have been known for a long time.

Porfírio Gomes says that Forum Macau needs to be more active. Other sorts of things are being said about the Forum. Things like several African nations’ representatives taking advantage of the Forum to establish their private businesses in the territory, asking for direct support from the Forum Macau and behaving in a fashion that does not dignify their diplomatic posts or the countries they represent.

As time passed - and all the inherent difficulties that a project with all the political support it needs, but little initiative and some inertia - the Forum Macau gained a certain reputation: that of an institution that exists, organizes a few events with some participation, but you don’t really expect it to do something notorious.

Some officials from Forum Macau have also contributed to this state of affairs. A few months ago, when our sister publication – Macau Business – published a special report dedicated to Forum Macau, it received little more than silence from that entity. In other words, instead of taking the opportunity to publicize its strategies and goals, it chose to do nothing and all requests for interviews remained unanswered.

We understand the discomfort within the Forum Macau and, thus, the return of Echo Chan. We believe that, this time around, she’ll want to change things.

Often times, silence plays against you, when you feel that you’re being politically correct, but you’re really just feeding the lack of effectiveness.

Curiously, the Forum Macau officials will have their spring lunch with the Portuguese and English media. We hope that there’s more on the menu than just New Year wishes and a desire to only talk again at the 2018 spring lunch.

If the Forum Macau wants to be respected by its member states, then it must impose strict rules, preventing diplomats from crossing the line or taking personal advantage of the organization. It also must intervene more, using a strategy that is supported by all members and, especially, Beijing. It must exist in the media and with the media, with a multilateral strategy, so that its actions are effective - and produce concrete results in the business world, instead of mere protocols that are signed during fairs, just because it looks good, but lead to nothing.

This may well be a second opportunity for Forum Macau, or it may just be the continuation of an existence that is being kept artificially alive. It’s up to Forum Macau to decide what it wants to do and how it wants to do it. Time is running against it.

2 Business Daily Thursday, January 19 2017

Macau Transportation

PSP frees over 200 on-street parking spaces

prosecuted a total of 239 vehicle owners for occupying the spaces, in addition to having towed 97 of those vehicles. On Tuesday, the Public Security Police Force (PSP) said Transport Bureau said it had received 636 it has freed over 200 on-street tariffed cancellation of vehicle registration requests parking spaces (with parking metres) that in the first 15 days of the year following had been occupied for a long period of time, following the new adjusted transport the new transport fees coming into effect. fees that were implemented on the first day PSP yesterday urged drivers to leave the of this year. According to a press release, for parking metres prior to the expiration of the first 16 days of the year, the police force their paid time. C.U.

Business climate

Only one-fourth retailers expect sales growth in December In particular, all those selling leather goods anticipate their business performance improved last month compared to one year ago.

Kam Leong kamleong@macaubusinessdaily.com

O

nly 23 per cent of interviewed retailers in the city anticipated their sales would register a year-onyear growth for December whilst the majority expected their businesses would have no significant ups or downs, according to the latest

business climate survey released yesterday by the Statistics and Census Service (DSEC).

According to DSEC, it interviewed a total of 135 retailers in the city, which accounted for 70 per cent of the total.

All retailers selling leather goods said their sales should either increase or remain stable for last month as compared to the same month in 2015, whereas 37 per cent of the retailers

of watches, clocks and jewellery expected a year-on-year sales increase for the month.

Nevertheless, some 41 per cent of the retailers told the surveyor that they could probably record a decline in sales for the same month.

Meanwhile, for last November, 39 per cent of the surveyed retailers said they had reported a year-onyear growth in sales, which is up by 4 percentage points from October.

Retailers of leather goods are among those who enjoyed sales growth for the month. According to DSEC, all interviewed leather goods retailers said they had registered a year-on-year

increase in sales for November.

In addition, some 62 per cent of adults’ clothing retailers, 50 per cent of the Department Stores and 11 per cent of motor vehicle retailers said they had seen sales increase yearon-year in the month, which is up by 12, 28 and 11 percentage points, respectively, compared to October.

But 53 per cent of the interviewed retailers said their sales had posted a year-on-year decrease for last November. Yet the proportion, compared to that for the month of October, went down by 5 percentage points.

Restaurants

On the other hand, some 40 per cent of 167 restaurants and similar establishments expected their receipts would decrease year-on-year for last December. Some 19 per cent anticipated business would record a growth year-on-year, DSEC said.

For last November, 30 per cent of the establishments said they had posted a year-on-year growth in receipts, which is attributable to the Grand Prix and the Food Festival that took place in the same month.

But 50 per cent of the interviewed restaurants said they had registered a year-on-year decline in receipts for November.

DSEC notes that the results only reflect the business performance and the expectations of the sample restaurants and retailers, where it has not conducted any extrapolation of the results.

Public transport

Sino-Luso

Bus operators: more drivers needed

China names Ding Tian new Forum Macau deputy head

To carry more passengers, improving traffic conditions and attracting more drivers are necessary, say the three bus operators Annie Lao annie.lao@macaubusinessdaily.com

Deputy General Manager of local bus operator Transportes Urbanos de Macau SARL (Transmac), Kent Li, said local traffic conditions need to be improved in order to increase the current capacity of carrying passengers.

A discussion on the increasing demands for bus drivers in the city took place during yesterday’s TDM radio programme ‘Macau Forum’.

Mr. Li suggested during the radio show that the driving speed of local

buses should be allowed to increase by 10 to 15 per cent on exclusive bus lanes in order to increase passenger capacity.

According to Mr. Li, Transmac carried a total of 90 million passengers last year, which accounted for 45 per cent of the total.

Manager of another local public bus company New Era, Chan Yat said he noticed the number of passengers has been increasing, claiming his company carried about 77 million passengers last year, with an average daily increase of 10,000 passengers.

Given the increasing demands, Mr. Chan revealed his company is planning to buy 57 new buses by the middle of this year.

Lack of drivers

Meanwhile, the deputy general manager of Transport expressed his worries that the industry may see high turnover of bus drivers this year as the local economy is recovering.

He thus suggested the MSAR government should take a scientific approach to deal with the lack of professional drivers in the local transport industry.

Meanwhile, deputy general manager of Sociedade de Transportes Colectivos de Macau SARL (TCM), Chiang Peng Chan, perceives the local manpower would be sufficient to meet the demand of bus drivers if the three bus operators co-operate with the government to provide more training.

According to Mr. Chiang, TCM, in co-operation with the Labour Affairs Bureau, provided training for 23 new bus drivers last year.

On the other hand, the bus service contracts of the three operators are all due to expire in two years, with that of New Era expiring by the middle of the year.

The New Era manager said yesterday the company hopes the government could allow the operator to increase the number of buses operating during non-peak hours and holidays when they negotiate the contract renewal.

The Chinese Ministry of Commerce has appointed Ding Tian as the new Deputy Secretary-General of the Permanent Secretariat of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Macao), also known as Forum Macau.

According to the announcement of the organ, the new deputy head previously served the Department of Foreign Assistance of the Chinese Ministry.

It was stated that, being fluent in Portuguese, the new Deputy S e c r e ta r y - G e n e ra l h a s d e e p knowledge of Portuguese-speaking countries, given the fact that he has been posted in Cape Verde, Brazil and East Timor.

Forum Macau is led by one Secretary-Gen eral an d th ree Deputy Secretaries-General, that are respectively appointed by China, Portuguese-speaking countries and the MSAR government.

Earlier this month, former Deputy Secretary-General of the organ representing the MSAR government, Echo Chan Keng Hong, returned to the position after her resignation in November 2015. K.L.

Business Daily Thursday, January 19 2017 3

Macau Banking BNU launches first branch in the Mainland

AMCM: more local banks interested in Hengqin applications or other smart-phone device applications.

First Hengqin branch

President of MSAR’s monetary authority said local banks’ interests in expanding their businesses to Hengqin is boosted by the CEPA policy Annie Lao annie.lao@macaubusinessdaily.com

P

resident of the Monetary Authority of Macau (AMCM), Anselmo Teng Lin Seng, revealed a few local banks have shown interest in expanding their businesses to Henqqin.

Speaking to reporters yesterday on the sidelines of the opening ceremony of BNU’s new branch on the Mainland Island, the AMCM president said the support of the central government in

China and Macau Closer Economic Partnership Arrangement (CEPA) for economic co-operation has driven up local banks’ interest in setting foot in the country.

“Of course, all Macau banks want to set up a new branch in Hengqin given the opportunities available there.

And, it could act as a platform for the Macau banking industry in the Mainland,” he said.

But the official did not disclose which local banks are mulling expansion in Hengqin, claiming that banks expanding their business to

the Mainland would depend on their own actual commercial needs.

The president added that there would be more new financial regulations to be launched in Hengqin in due time given the fact that it is a free trade area of the country.

“The MSAR government is in communication with China’s central bank- the People’s Bank of China (PBOC) – on banking management so as to meet the demands from increasingly new businesses operating in Hengqin,” he said.

Asked about the future development of Macau’s online banking services, the AMCM director expects more diversified options for e-banking services would be available in the future as more banks are launching their own online banking

Meanwhile, unveiling the company’s first branch in Hengqin, the Chief Executive Officer of BNU, Pedro Cardoso, believes the new establishment will tie companies in the Mainland to those operated by Portuguese-speaking countries..

“The new branch in Hengqin is expected to provide financial services to companies from the Portuguese-speaking countries that operate in the Mainland, especially in the Guangdong province, with major cities such as Zhuhai, Zhongshan and Hengqin,” the CEO said.

“Also, we target to provide financial services to many of the Macau residents who have businesses and properties in those areas,” he added.

The company executive also pointed out that the objectives of the company’s new Hengqin branch are different from those of its Macau branches.

“Those in Macau primarily provide financial services to Macau local residents. However, the new branch in Henqgin focuses providing financial services to our customers who have businesses operating in the Mainland,” he noted.

According to the CEO, the new Henqin branch is allowed to operate businesses of three currencies.

“We are authorized to operate in Renminbi business in the Mainland.

In addition, we can also operate businesses in other currencies such as Macau Pataca and Hong Kong Dollar, which are also important in this region,” Mr. Cardoso said.

4 Business Daily Thursday, January 19 2017

Macau Subsidy

Opinion

Gov’t splashes MOP13.6 million to 24 media groups in Q4

The Government Information Bureau disbursed subsidies of MOP13.6 million (US$1.7 million) to 24 local media groups during the fourth quarter of last year, according to yesterday’s Official Gazette.

Three Chinese-language publishers enjoyed the highest amount of subsidies for their publications during the quarter. They are: Macao Daily News, Journal Va Kio and Hou Kong Daily, with each

Ashley Sutherland-Winch* Social Media Sleep Inhibitors New research out of the United Kingdom this week found that one in five young people wake up during the night and access social media. Professor Sally Power, Co-Director (Cardiff) Wales Institute for Social & Economic Research, Data & Methods (WISERD), conducted the research that looked at more than 900 school children between the ages of 12 to 15 years, who were asked to complete a questionnaire on their sleep and nighttime social media habits.

The students were asked about their bedtimes and waking times as well as how often they woke up at night to check social media. Participants were also asked about how happy they were with various areas of their life including school, friendships and appearance.

The findings of the study were published earlier this week in the Journal of Youth Studies and identified that one in five pupils reported “almost always” waking up to log onto social media, with girls much more likely to use social media during the night than boys.

Professor Power believes that the “use of social media appears to be invading the ‘sanctuary’ of the bedroom,” stating the number of young people affected by the lack of sleep is “small but significant.”

For many years now, researchers have pursued reasons why humans are so drawn to social media.

Popular studies have discovered that social media affects the brain in the same way that a hug does by releasing dopamine, a neurotransmitter that helps control the brain’s reward and pleasure centers.

People get a “rush” of dopamine when they post, “like” or share something online.

A similar response occurs in our brains every time we hear a notification for a text or email. Because our brains see this notification as a reward, it is challenging to ignore the pending communication. This reaction is why people continue to text while driving; they just cannot help themselves from responding.

The better solution is to turn off notifications, especially while driving; but simply turning off sounds does not negate the fact that we know texts, emails and “likes” could be occurring. More interestingly are the social media strategies that brands use to maximize the pleasure-causing dopamine release turning marketing into science.

Whether or not dopamine is to blame, our incessant need to connect with others immediately is plaguing our sleep patterns. There may be a few people that still count sheep in the night but for many, the draw to scroll through social media and count “likes” is just too strong. *Marketing and Public Relations Consultant and frequent contributor to this newspaper.

receiving MOP954,954. Three Portugueselanguage publishers also benefited from the subsidies, including Tribuna de Macau, Praiagrande Edições Lda that publishes Ponto Final, and weekly newspaper Jornal O Clarim, which received respectively MOP720,355, MOP706,671 and MOP410,782 from the government. In addition, media worker union Macao Media Workers Association was given MOP94,445 during the quarter for subsidising an exchanging event. C.U.

Ho Chio Meng, former Prosecutor-General

Ho Chio Meng trial

The multitasking driver Wiretap recording reveals the former ProsecutorGeneral had asked his driver “not to speak too much” prior to the latter being questioned by the anti-graft watchdog Nelson Moura nelson.moura@macaubusinessdaily.com

T

he city’s Court of Final Appeal continued the trial of the corruption case of former Prosecutor-general Ho Chio Meng yesterday, with his former personal driver Mak Hak Neng called to testify.

The former driver of the ex-official admitted yesterday that he had performed many other services for the former official during his 10 years of service (until 2016), such as transporting large amounts of cash and collecting rents from apartments under the name of the wife and brotherin-law of Mr. Ho. According to the prosecutors, bank statement books that belong to other suspects in the case, Mak Im Tai and Ho’s brother-in-law Lei Kuan Pun, were found in the ex-driver’s house during the investigations.

The driver explained yesterday that was because he was helping the two to receive rents for their apartments in Mainland China, adding he also did the same service for Mr. Ho’s wife, Chao Sio Fu. The former driver even admitted that he had received orders by the former prosecutor-general to collect the bankbook of his brother-in-law from the Commission Against Corruption (CCAC) building.

“Since the book wasn’t mine, I thought I should turn it [to Lei Kuan Pun] (…) Ho asked me to do it personally,” he said.

Keep quiet

During the hearing, prosecutors of the case presented a wiretap recording of a phone call made by Mr. Mak to the former Prosecutor-general in 2015, one day before he was to go to the CCAC to provide statements.

The recording shows the former major official telling Mr. Mak “not to talk too much” when questioned by the CCAC.

At the beginning, the former driver denied the man in the phone call was him, until the presiding judge Justice Sam Hou Fai threatened that he may be charged with providing false statements.

Transporting cash

According to Mr. Mak, he was ordered by the former official to transport cash from the MSAR to Mainland China through the Gongbei Border since 2006, of which the amount might have reached between HK$200,000 (US$25,785) and HK$300,000 monthly at one point. In addition, he was requested to convert the money to Renminbi and deposit it into a Mainland bank account under the name of Mr. Ho, he said.

Questioned by the prosecutors if he had encountered any problems crossing the border with the amount of money that exceeds the legal limit, the ex-driver said he had never had any problems.

Hotel expenses

In addition, two other witnesses also took the stand yesterday - the chief of the Financial Management Division of the Prosecutor’s Office, Leong Lai Ha, and a former assistant of the same department named Yu Ji Fei. During her testimony, Ms. Leong indicated the former driver had made at least 36 bookings of hotel rooms in Mainland China or Macau, of which the expenses were booked in the Office.

But the ex-driver said he had never stayed in any of the rooms, saying he made the bookings for the ex-prosecutor general and would deliver the room keys to the former official personally, without knowing who stayed in those rooms.

According to the prosecutors, expenses for these room bookings were paid by the Prosecutor’s Office as travel expenses.

Among the receipts presented

yesterday, one worth MOP3,000 shows the payment for a two-day stay for a man named Zhao Hong, in addition to the expenses of his spa and pay-per-view movies in the same period. In addition, another room receipt from the Landmark Hotel dated 2010 was signed by Mr. Ho himself at late hours.

Ms. Leong added that most of these expenses were presented to her department as travel expenses for official visits or hosting guests without the original receipts.

“Of course if we knew the expenses were irrational, like spa expenses, the department wouldn’t have paid them,” she stated.

Female friends

In addition, the accusation suggested the former prosecutor would take female friends to the hotel rooms paid by the Office, presenting a room receipt signed by a woman surnamed Mo. Moreover, the phone book of the former driver of the ex-official was presented yesterday, showing names of different females written under different categories such as “red” and “air hostesses”.

Mr. Mak claimed some of these women were his friends while “others were from Mr. Ho”.

The name of Wang Xiandi was also written in the phone book. Ms. Wong, as mentioned by the accusation, was allegedly hired by the former top prosecutor to the Office for four years despite her lack of qualification for the role.

The former driver also admitted he had driven different females to hotels in Zhuhai and had helped Mr. Ho contact some of the women, but the defendant argued the names were included in the phone book many years before the hotel room receipts had been signed.

The other two witnesses from the financial division added yesterday the majority of the contracts outsourced by the Office in the past 15 years were awarded to the eight alleged shell-companies cited by the accusation, whilst checks for the services were mostly collected by the same people.

The trial continues today.

Business Daily Thursday, January 19 2017 5

Macau Tourism

‘We’ve got it all planned out’ The Macau Tourism Master Plan in June, a MOP1.44 bln budget, MGM Cotai delay “no impact” on tourism, focus on Brazil, Indonesia and Malaysia markets, amphibian tour buses, regional “multi-destination” project for PRD despite “nothing concrete” as to HKZM bridge effects on tourism and losses due to pataca peg to U.S. dollar – all in 2017 says MGTO director Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com

T

he city’s tourism body will be able to pull from funding for the 2017 year amounting to MOP1.44 billion (US$180 million) for its promotional efforts, according to its director Helena de Senna Fernandes.

The director, speaking at the Macau Government Tourism Office (MGTO)’s annual press conference, indicated that the amount comes from three sources. The largest of the sources is the Tourism Fund, which contributes a total of MOP987.73 million over the year, followed by the MSAR government budgeted tourism amount of MOP310.97 million. Both of these funding sources underwent a year-on-year drop, with the government sourced funding falling by 2 per cent and that of the tourism fund suffering a 12 per cent slash, according to the director.

However, the public investment plan (PIDDA) saw a 12-fold increase – reaching MOP144.8 million, according to the director, noting the change is “because we’ll have more projects to do this year and we’ll need to carry out promotions and products overseas”. Despite the increase in PIDDA, the director notes that the group will attempt to be more frugal in the coming year by “using the budget more efficiently” as well as through “different cooperation efforts”.

The group will refocus its efforts in the coming year on new tourism markets, in particular those of Malaysia and Indonesia, while also beginning a study on the Brazil market as a potential future contributor of “high-value visitors” which will “extend their average stay in Macau”.

The director notes that, regarding Brazil, “it’s very far away but it’s a country with great potential and much room for growth”, aiming to “build a bridge” between China and Brazil, via Macau.

Roads and maps

The group is planning their 2017 strategy according to four primary objectives: developing diversity of tourism products, enhancing service quality and incentive systems, using synergistic effects and destination promotion as well as strengthening and increasing co-operation with

international organizations.

The first of these is primarily comprised of the Macau Tourism Industry Development Master Plan, set to be released in June, according to the director, and encompassing new projects such as the Ka-Ho village development, the remodeling of the Tourism Activities Centre and Grand Prix Museum, relocation of the Wine Museum, and interestingly – increasing maritime tours with partners, even with amphibious vehicles, as well as the normal events the group runs yearly in the MSAR and abroad.

Regarding the maritime tours, the group is working with “one investor who wants to do this”. Although cruise ships are off the menu for now, “as the territorial waters of Macau don’t have the depth for international cruise ships, I think the cruises between Macau, Taipa and Coloane, for boats that don’t need a deep draft” will be feasible as the investor “has already conducted many studies on which type of boat to be used, trajectory and other parts of the operation.”

The director adds that MGTO has helped in setting up meetings with various departments to facilitate the operation “by the end of this year”.

A long year ahead

For land-based tour operations, the MGTO director will keep a closer eye

Corporate

CEM provides free household maintenance to elderly living alone CEM has teamed up with the Housing Bureau to provide free inspection and maintenance of household electrical installations to 22 senior citizens who live alone at Edifício D. Julieta Nobre de Carvalho, so as to enhance their power utilization safety and deliver greetings to them ahead of Chinese New Year.

This Community Program of CEM was debuted in 2000. Each year since then, CEM has collaborated with different local groups under the Program and sends its volunteer team of electricians to provide free inspection and maintenance of household electrical installations for senior citizens who live in solitude, under-privileged families, as well as people with special needs.

on tour operators – even conducting inspections at borders and checkpoints, as well as requesting more feedback from the sector, including asking the operators to provide and upload information to the group’s current information portal – Macau Tourism News Plus – which so far aggregates news and information from MGTO representatives in 20 countries and 10 languages.

To facilitate tourists to prolong their stay in Macau, as “after visitors arrive in Macau they don’t just want to stay in the hotel rooms,” the group will continue its recently initiated events, such as the IFFAM (International Film Festival and Awards Macau), although the director did not mention whether she would continue to head the festival this year.

The director also shared preliminary data relating to last year’s tourism industry, which shows that 90.3 per cent of all visitors to Macau came from the Greater China region – with 66.1 per cent from the Mainland, 20.7 per cent from Hong Kong and 3.5 per cent from Taiwan.

Regarding the second-largest market, the director notes that they “have spoken with our counterparts in Hong Kong”, however, regarding the completion and effect of the new Hong Kong-Zhuhai-Macau Bridge on local tourism, the director states

that “at this point we don’t have any information on its use”.

The bridge project, begun in 2009, is slated to be finalized in three years, however the director says there is a complete lack of data about how it will affect the local tourism industry, noting they don’t have details on “what type of vehicles [or] how many vehicles will be authorized to use this bridge”.

Noting that “because of this, on our side, we can’t move forward,” the director also laments that “we still don’t have anything concrete […] and eventually we will speak with our counterparts in Zhuhai,” adding that there are “still many things we can do in terms of promotion and in terms of facilitating the tourists to go to the three destinations”.

Regarding a proposal by University of Macau’s Professor Davis Fong, to interconnect the integrated resort properties in Cotai, the director notes that the MGTO is not “leading” the initiative. “There has to be the desire by each one of the hotels operating there,” says the director, “I believe these hotel operators will understand [the advantages] of their own accord.

Not all collaborations need to be led by the government”.

In line with this, one of the group’s objectives is to develop new tourism products with regional members of the China Maritime Silk Road Tourism Promotion Alliance as part of a “multi-destination” initiative and to link in with China’s Belt and Road initiative.

To help handle the increased expected tourism numbers, no 2017 visitor number estimations were provided as yet; MGTO will work to license 7 new three-to-five star hotels which have submitted for licensing, increasing the city’s overall capacity to about 45,000 rooms. An additional 620 rooms are set to be provided by 11 budget hotels. A five-star hotel is also set to open in February, notes the director (most likely Legend Palace).

The delay in opening MGM Cotai “will not have a negative impact on the tourism arrival market,” notes the director, as “tourism arrivals are influenced by many factors, not just rooms”. Factors exist such as the increasing value of the U.S. dollar, to which the pataca and Hong Kong dollar are pegged “so, in a way it has a negative impact on our tourism market,” says the director, pointing out the challenge “other regions or countries are also competing against us in terms of attracting tourists”.

“We need to work together and work harder. I’m optimistic but I’m also cautious,” states the MGTO head.

6 Business Daily Thursday, January 19 2017

Macau Property

Deborah Ho buys one Nova Grand unit feet and a saleable area of 1,258 square Hong Kong-based conglomerate Shun Tak Holdings Ltd announced yesterday a transaction of a residential unit of its new property project Nova Grand in Taipa to Deborah Ho, a daughter of local gaming tycoon Stanley Ho. According to the company’s filing with the Hong Kong Stock Exchange, the residential unit, covering gross floor area of 1,690 square

feet, was priced at HK$13.9 million (US$1.79 million); the company expects to gain HK$6 million from the sale.

Mr. Ho, along with (his three other daughters with his second wife) Pansy Ho, Daisy Ho and Maisy Ho - are the executive directors of Shun Tak Group.

Meanwhile, Deborah Ho is a daughter of Mr. Ho with his first wife. C.U.

Real estate

JLL: office & retail property markets to remain dim The property firm anticipates the two sectors will both experience decreases in capital values and rental prices this year Cecilia U cecilia.u@macaubusinessdaily.com

J

ones Lang LaSalle (JLL) said it is “cautiously optimistic” about the outlook of the city’s property market this year, due to the uncertain development of factors worldwide.

“The increase in the U.S. interest rate, Donald Trump’s takeover, the election of the next Hong Kong Chief Executive, MSAR government’s repossession of land plots upon the expiration of relevant concessions, central government’s control over capital [flow] as well as the weakening of Renminbi are factors that will directly affect the future setting of Macau’s real estate market,” said Gregory Ku, the managing director of JLL in Macau during yesterday’s year-end property review.

In particular, the firm predicts both the office and the retail property markets will see a decrease in their capital values, which are expected to fall by between 5 per cent and 10 per cent year-on-year, whilst average rents in the two markets are also anticipated to drop by some 10 per cent to 15 per cent year-on-year.

Vacancy rate rising

Alison Yip, the associate director of office leasing of the firm, noted the future completion of the city’s

government office buildings would make more private offices vacant in the year.

“According to the information released by the Land, Public Works and Transport Bureau (DSSOPT), the construction of the building for the Court of First Instance is slated for completion in 2017,” said Ms. Yip. “This building is expected to be able to fulfil the space demands of the Court of First Instance, which is currently renting its office spaces in The Macau Square.”

According to JLL Macau Office Index, the city saw a decrease of 7.5 per cent in the rental values of the office market during the fourth quarter of last year, whilst average rental values for Grade A offices also posted a decrease of 6.9 per cent year-on-year in the period.

Ms. Yip explained that the declines are due to the decreased office demands from offshore companies and gaming operators.

“Last year, we saw many of the gaming operators end their leasing contracts of offices located in commercial buildings and move back to their own properties once their [new] Cotai property construction completed,” she said.

For the sales market, the capital values of the office market also dropped by 14.3 per cent year-onyear for the whole year of 2016, whilst

that of Grande A office posted a bigger decline of 15.9 per cent compared to 2015.

But the agent revealed that some multinational insurance companies were considering acquiring their own office properties for their business operations.

JLL estimated the city’s office vacancy rate was at 8 per cent at the end of 2016, which remained unchanged from the end of 2015.

10-year record low in retail units’ transaction

Meanwhile, in terms of the retail property market, some 405 transactions were recorded by the firm for the first three quarters of 2016, which according to Oliver Tong, Associate Director of Retail of the company, is the lowest sales number in the past decade. In addition, the JLL Macau Retail Index also shows that the average capital values of these retail properties recorded a drop of 15.2 per cent year-on-year for the whole year of 2016.

Moreover, average rental prices of the properties also slashed by 20.6 per cent year-on-year. The drop, however, can be explained by the softer attitude of some landlords in asking rentals and their positive willingness to offer tenants relatively big discounts, Mr. Tong said.

The real estate agent also cited data from the Statistics and Census Bureau (DSEC), indicating the downturn of the retail property market last year resulted from the decreased retail sales in the period, in particular, in the retail sales of vehicles and luxury

goods such as watches and jewellery.

Mr. Tong forecasts the retail property market, in terms of rents and selling prices, to remain weak in the year ahead. “Macau’s retail sector remains weak and may face further impact as the recent depreciation of China’s Reminbi may dampen Mainland Chinese tourists’ spending in Macau,” said the agent.

Rebounded home transactions

On the other hand, the head of residential, Jeff Wong, reported that the average capital values for high-end and mass-to-medium residential properties experienced a 7.8 per cent and 5.3 per cent growth year-on-year for last year, respectively.

Mr. Wong indicated the pre-sale consents granted to projects such as Oscar Crescent, Sky Oasis and Nova Grand boosted the rebound of the city’s housing market.

On the leasing side, average rental values for high-end and mass-to-medium residential properties, however, dropped by 9 per cent and 7.6 per cent vis-à-vis the previous year, respectively.

The decrease in the number of non-resident workers in the city coupled with the rise in the new supply due to the new completions in 2015 were factors that led to the negative growth in the resident leasing market, explained Mr. Wong.

Meanwhile, JLL predicts the capital values of high-end residential and mass-to-medium residential properties would both remain stable this year, but the rental market might fall no more than 5 per cent over the year.

“The mass-to-medium residential market is expected to be supported by the continuous demands,” said Mr. Wong. “However, the sell-through rate will likely slow down due to the increasing competition caused by the on-going supply.”

Interest rate

From left to right: Oliver Tong, Jeff Wong, Gregory Ku and Alison Yip

The property agent also pointed out that the increase in the U.S. interest rate would not have any significant impact over local buyers’ confidence in properties.

“Investment banks estimate this year’s overall interest rate to increase by around 0.5 to 0.75 per cent,” said Mr. Wong. “Although the growth would not create any great impact and buyers might not experience significant impact, the thought of worrying the changes in the [interest] rate would at certain extent influence the property prices.”

Business Daily Thursday, January 19 2017 7

Macau Rich list

Local moguls reshuffled on Forbes rich list

A

lthough undergoing a reshuffle since the downturn experienced in the local economy, moguls from the SARs are climbing back up the ranking in Forbes’ Hong Kong’s 50 richest people.

Highest ranked comes Chow Tai Fook founder Li Ka-shing, ranked first on the list, and worth about

HK$30.3 billion (US$3.8 billion), whose closest follower on the list with ties to Macau is ailing Joseph Lau, worth HK$15.5 billion due to his real estate empire, despite the La Scala debacle. Coming in sixth is Lui Che Woo, founder of Galaxy Macau, who’s worth is estimated at HK$11.2 billion. Lower down the billionaire list, with roughly a third of Lui’s fortune, is

Pansy Ho - whose Shun Tak and MGM Macau businesses left her ranked in 16th place, with HK$4.3 billion.

Pansy comes just two positions above SJM’s Angela Leong, who’s worth an estimated HK$4 billion.

A number of positions below sits Melco Crown Chairman Lawrence Ho, at 42nd and estimated to be worth HK$1.43 billion after a rocky start to

Studio City.

The billionaires’ fortunes seesawed over the past few years, with Lui Che Woo’s seeing one of the biggest increases on the rich list last year, as his wealth increased 40 per cent, notes Forbes. Pansy Ho also saw her wealth increase nearly 20 per cent in the year, in anticipation of MGM Cotai’s opening in the third quarter. K.W.

Gaming

Analysts estimate MGM Cotai opening on or ahead of October 1 The analysts do not think the delayed launch of the new integrated resort will affect the operator’s long-term outlook.

Kam Leong kamleong@macaubusinessdaily.com

After casino-operator MGM China officially announced postponing its launch date for MGM Cotai to the second half of the year, analysts now believe the new casino-resort will open its doors no later than October 1.

“Based on our on-theground checks…we believe the project can still open in August or September (ahead of October Golden Week),” wrote JP Morgan analysts in their latest research note.

M e a n w h i l e, T e l s e y Group estimates the casino

operator will pick October 1 as the project’s opening date.

On Tuesday, MGM China said in a filing to the Hong Kong Stock Exchange that delaying the opening date from the second quarter this year is due to the complexity of the design of the project, as well as to its commitment ‘to a successful opening that reflects the demands of the current market’.

Nevertheless, analysts from Telsey Group, led by David Katz, believe the postponement was just a rally of the company, noting: ‘The delay in opening the MGM

Cotai property is likely a strategic positive, in that a later opening should meet a stronger market and more competitive landscape.’

JP Morgan analysts led by D.S. Kim also perceive ‘the delay is unlikely to impact the company’s fundamentals, the news to us is largely a non-event’.

The analysts added they

still hold a positive outlook for the gaming operator.

‘Admittedly, MGM may lack positive stock-specific catalyst in the near term, considering the project delay,” wrote Mr. Kim. ‘However, we are OW on MGM for the medium to long term, as we believe the stock offers a compelling combination of best-in-class execution, substantial multi-year profit growth, and attractive medium-term value.’

Telsey group echoed a similar view, saying: ‘the announcement does not alter our positive thesis given the overall positive earnings momentum and relatively attractive valuation.’

Over the past weekend, the company’s CEO, Grant Bowie, told reporters that the company was targeting to unveil the casino-resort

during the third quarter of the year, adding it had not made any decision on the number of gaming tables that it is to apply for from the regulator for the project.

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

On the other hand, JP Morgan analysts added in their note that they are still bullish on the city’s gaming sector.

‘We believe the industry has entered a genuine upturn in demand, profit, and cash flow, which in turn should drive sustainable earnings upgrades and allow investors to enjoy predictable returns,’ they wrote.

8 Business Daily Thursday, January 19 2017

Greater China Official GDP

Growth seen steady amid heavy government support Retail sales, a gauge of domestic consumption, probably grew 10.7 per cent

C

hina’s economy likely grew by a steady 6.7 per cent in the fourth quarter, the same pace as in the previous three quarters, supported by higher government spending and record bank lending that has stoked concerns about debt risks, according to a Reuters poll of 62 economists.

The world’s second-largest economy also likely grew around 6.7 per cent for 2016 as a whole - roughly in the middle of the government’s target range - as a stimulus-fuelled construction boom breathed new life into its long ailing “smokestack” heavy industries.

But economists agree China faces increasing uncertainties in 2017, with a housing frenzy showing signs of cooling and the impact of previous stimulus measures expected to fade.

China’s already sluggish exports also could come under fresh pressure if U.S. President-elect Donald Trump takes a more protectionist stance on trade.

Economists in the poll estimated GDP grew 1.7 per cent quarter-onquarter, versus 1.8 per cent in the third quarter, though only 15 analysts gave sequential forecasts.

“While Chinese growth looks

stable into early 2017, a more marked slowdown by the second quarter appears inevitable,” Gene Frieda, global emerging markets strategist at asset management giant PIMCO, said in a note this week.

“Growth has been stabilized only after massive fiscal and credit stimulus. China’s total government and private sector debt will likely surpass 285 per cent of GDP this year, a 90 per cent increase since 2008.”

The forecast 6.7 per cent growth rate would still be near the slowest quarterly pace since the global crisis, and China’s weakest annual expansion in 26 years.

A surprisingly strong reading on Friday would likely boost global financial markets, particularly commodities, which have already been buoyed by record China imports of crude oil, iron ore, copper and soybeans in 2016.

A weak outcome, however, would likely raise the risk of more capital outflows, putting more pressure on the yuan currency, which last year hit 8-1/2 year lows. China recently tightened curbs on outflows as its foreign exchange reserves fell to near six-year lows.

“The recent uptick in higher frequency economic indicators

means that risks are tilted towards the upside. A 6.8 per cent year-on-year print cannot be entirely discounted,” said Chester Liaw, economist at Forecast Pte Ltd in Singapore.

But Beijing’s decision to double down on spending to meet its official growth target may have come at a high price, as policymakers will have their hands full this year trying to defuse financial risks created by an explosive growth in debt.

China will lower its 2017 economic growth target to around 6.5 per cent from last year’s 6.5-7 per cent, policy sources said, giving them more room to push reforms to contain debt and housing risks.

The central bank could slightly tighten credit conditions to help rein in debt risks and encourage companies to deleverage, but it’s unlikely to rush to raise interest rates despite an expected pick-up in inflation, policy insiders said.

Analysts see a cooling property market as a potential drag on growth this year, after many local governments imposed or tightened restrictions on home purchases to tame speculation which some fear is feeding a property bubble.

Steady December expected

Data for December industrial output, retail sales and investment will be released along with GDP, and are expected to show the economy carried

good momentum into 2017.

Industrial output likely grew 6.1 per cent from a year earlier, easing from a 6.2 per cent rise in November as China ordered some heavily polluting factories to shut to reduce choking smog in the north of the country.

Retail sales, a gauge of domestic consumption, probably grew 10.7 per cent, versus November’s 10.8 per cent.

Car sales have been a notable strong point in China, jumping 13.7 per cent in 2016 thanks to a tax cut on smaller cars, though the incentive will be reduced this year.

Fixed asset investment growth in 2016 is expected to expand 8.3 per cent year-on-year, half the pace seen just a few years ago. State investment largely had to take up the slack as private investment sank to record lows.

China’s economy has been generally stable at the start of 2017, continuing its “steadying and good” momentum from the second half of 2016, China’s head of economic planning said last week.

“In 2017, we expect growth to remain stable in the first half, as expansionary fiscal spending should offset the drag from a cooling property sector,” economists at Nomura said in a note.

“That said, the longer-term slowdown story remains intact, driven by structural economic forces such as China’s demographic dynamics, high leverage and decreasing capital returns.”

Chi n a’ s c o r p o rat e d ebt has climbed to 169 per cent of GDP and international institutions have repeatedly urged Beijing to act quickly to tackle the problem in order to avoid a financial crisis. Reuters

Business mood

U.S. lobby says Mainland protectionism fuelling foreign business pessimism The share of companies that identified China as a top three global investment priority dropped to 56 per cent this year Michael Martina

More than 80 per cent of members of a U.S. business lobby in China say foreign companies are less welcome than in the past, a survey released yesterday showed, with most saying they have little confidence in China’s vows to open its markets.

Th e A m e r i c a n Ch a m b e r o f Commerce in China’s annual survey reinforces growing pessimism in the foreign business community, as it grapples with a slowing Chinese economy and complains of increasing protectionism.

The chamber’s report comes a day after China’s President Xi Jinping gave a speech at the World Economic Forum (WEF) championing open markets, and Beijing unveiled proposals to reduce restrictions on foreign investment in China.

Business circles are particularly concerned over the future of U.S.China commercial ties as Presidentelect Donald Trump prepares to take office, having pledged to brand China a currency manipulator and threatened to impose tariffs on its

goods.

“More companies are slowing investments and deprioritising China as an investment destination due to slowing growth and increased concerns over barriers to market entry, the regulatory environment, and rising costs,” the chamber said.

If China took action, including removing “discriminatory barriers” to foreign-invested companies a n d i n v est m e n t r est ri cti o n s,

the chamber’s members would “significantly increase investment”, it said.

The share of companies that identified China as a top three global investment priority dropped to 56 per cent this year, compared with a peak of 78 per cent in 2012, the chamber said, calling it a record low.

Eighty-one per cent of the 462 companies included in the survey, among them U.S. and multinational firms, said foreign business was less welcome in China than in the past, up from 77 per cent in 2016.

Foreign businesses in China, as well as foreign governments, have long complained about a lack of

market access in China and restrictive policies that run counter to its pledges to free up markets.

Though President Xi’s speech at the WEF in Davos painted a picture of China as a “wide open” economy, more than 60 per cent of the chamber’s members had “little or no confidence that the government is committed to opening China’s markets further in the next three years”.

Respondents estimated on average that China’s economic growth for 2017 would be 6.1 per cent, below what sources have told Reuters would be a government target of around 6.5 per cent.

The survey, with responses compiled both during and after Trump’s November election victory, showed 72 per cent of members felt that positive U.S.-China relations were “critical” to business, but only 17 per cent thought they would improve in 2017.

Chamber chairman William Zarit said some of its members would go to Washington in early February, months ahead of an annual lobbying trip, to engage with the Trump administration.

“We certainly are not going there to lecture the administration, but we are there to share our ideas on ... a more constructive path forward,” Zarit said at a briefing on the survey.

China has warned that it will be tough for its foreign trade to improve this year, especially if a Trump administration and other political changes limit export growth. Reuters

Business Daily Thursday, January 19 2017 9

Greater China World Economic Forum

In Brief

In Davos, Xi makes case for leadership role He also urged all signatories of a landmark climate deal agreed in Paris roughly one year ago to stick to the agreement Noah Barkin and Elizabeth Piper

Chinese President Xi Jinping offered a vigorous defence of globalisation on Tuesday, pushing back against the “America First” rhetoric of incoming U.S. president Donald Trump and signalling Beijing’s desire to play a bigger role on the global stage.

Xi’s speech to political leaders, CEOs and bankers at the World Economic Forum in Davos was a first by a Chinese leader and marked a possible shift in the global political landscape as western democracies struggle with the rise of populist nationalism.

China, a one-party communist state that maintains tough restrictions on foreign investment, would seem an unlikely champion of free markets at an event that has become synonymous with global capitalism.

But with Trump promising a more protectionist, insular approach and Europe preoccupied with its own problems, from Brexit to terror attacks, China sees an opportunity to fill what could become a vacuum in global economic leadership.

Speaking before a vast audience that included U.S. Vice President Joe Biden, Xi likened protectionism to “locking oneself in a dark room” and cutting off all “light and air”.

“No one will emerge as a winner in a trade war,” Xi said in the nearly hour-long speech.

Real estate mogul and former reality TV star Trump, who will be inaugurated as U.S. president on Friday, campaigned on a promise to confront China more aggressively on trade and renegotiate or ditch multilateral trade agreements.

His entourage has accused China of waging economic war against the United States.

But Xi pushed back against the accusations of unfair trade practices, saying Beijing would not devalue its currency for competitive advantage, as Trump has repeatedly accused it of doing in the past.

Xi also urged all signatories of a landmark climate deal agreed in Paris roughly one year ago to stick to the agreement, a clear message to

Trump, who has criticised the deal and indicated he may pull the United States out of it.

“Looking to China”

In a sign of China’s ambitions, more than half a dozen senior Chinese government figures joined Xi in travelling to Davos in the Swiss Alps this week, a bigger and more high-level delegation than in previous years.

A large number of WEF panels are focused on Asia, including one entitled “Asia Takes the Lead”.

“In a world marked by great uncertainty and volatility the world is looking to China,” WEF founder and chairman Klaus Schwab said before welcoming Xi to the stage.

Key Points Xi warns against trade war in apparent message to Trump He is first Chinese president to appear at WEF Appearance comes amid rising tensions with Trump team China economy worries ease but big risks remain Former Swedish Prime Minister Carl Bildt, reacting to Xi’s speech on Twitter, said: “There is a vacuum when it comes to global economic leadership, and Xi Jinping is clearly aiming to fill it. With some success.”

Ian Bremmer, president of political risk consultancy Eurasia Group, tweeted: “Davos reaction to Xi speech: Success on all counts.

Miles away from any official Chinese speech before”.

Xi’s appearance comes at a time of rising tensions between Beijing and Trump, who broke with decades of precedent last month by taking a congratulatory telephone call from the president of Taiwan, which Beijing sees as part of China.

Last week Trump said America’s “One China” policy was up for negotiation, triggering a furious response from state-run Chinese newspapers

who said Beijing would be forced to “take off the gloves” if Trump did not change his rhetoric.

Although Xi painted a picture of China as a “wide open” economy, his government has come under mounting criticism from trading partners for its continued restrictions on foreign investments at a time when its staterun firms are aggressively pursuing acquisitions in Europe.

In an apparent nod to these criticisms, China’s cabinet announced ahead of Xi’s speech that it would take steps to ease limits on investment in banks and other financial institutions. But no further details were provided, nor a timetable for their implementation.

Some officials, speaking on condition of anonymity, suggested that China was simply manoeuvring to take economic advantage of what appears to be a growing divide between the United States and Europe.

Big question mark

“Today, I think there is a big question mark as to how China pivots in this world,” Bob Moritz, global chairman of PricewaterhouseCoopers, told Reuters in Davos.

“Will they be more regional or global in their mind-set and, more importantly, in their negotiations?

It’s something we are going to have to watch over the next 12 months.”

Fears of a hard economic landing in China roiled global markets during last year’s WEF meeting.

Those concerns have eased but the International Monetary Fund warned on Monday about on-going risks to the Chinese economy, including its high reliance on government spending, record lending by state banks and an overheating property market.

Xi tried to send a reassuring message, saying the economy had entered a “new normal” driven by household consumption. Despite a sluggish global economy, he said China’s economy was likely to have grown by 6.7 per cent in 2016.

But some economists in Davos remain cautious.

“China is still one of the biggest risks, and I think the only reason it is not at the top of the list is that the United States has become such a locus of uncertainty,” said Kenneth Rogoff, an economist at Harvard University.

Reuters

Technology

HKSAR to boost innovation The Hong Kong Special Administrative Region government (HKSAR) will introduce several measures to enhance innovation and technology, including requesting universities to conduct more translational research projects and encouraging re-industrialization, Hong Kong Chief Executive Leung Chun-ying said yesterday. Innovation and technology are no slogan, and they create new impetus for economic and social development, Leung said in the last annual policy address during his tenure. He said Hong Kong’s application of innovation and technology notably trails the Chinese mainland in various aspects.

Infrastructure

Xinjiang to spend heavily on new roads Northwest China’s Xinjiang Uygur Autonomous Region will spend more than RMB200 billion (US$29.2 billion) building or improving roads this year, according to local authorities. Constructions of the roads, with a total planned length of 82,300 km, will start in 2017 including nearly 7,300 km of expressways and 41,800 km of rural roads, according to the regional transport department. Gao Jianghuai, the Communist Party of China chief of the department, said that authorities would work to assure that a skeleton of 10,000 km of expressways would be finished by 2020.

Mainland football

Authorities aim at US$114 mln in revenue for 2017 Chinese football authorities have announced plans to receive RMB780 million in revenue next year in the course of developing the country’s most popular sport. The Chinese Football Association (CFA) published their 2017 budget on Tuesday. It was the first time that the CFA made their budget public. According to the CFA Work Report of 2016, which was released in a conference held in central China’s Wuhan, the projected revenue for 2017 is RMB780 million (about US$114 million), two per cent points higher than 2016, while the estimated expenditure went up by 45 per cent, reaching RMB670 million (about US$98 million).

Cooperation

MOU on agriculture with Serbia

China’s President Xi Jinping delivers a speech in the Congress Hall on day one of the 47th Annual Meeting of the World Economic Forum (WEF) in Davos. Lusa

China and Serbia on Tuesday signed a memorandum of understanding on cooperation in agriculture. The MOU was signed in the Serbian capital Belgrade by visiting Chinese Minister of Agriculture Han Changfu and his Serbian counterpart Branislav Nedimovic.

China and Serbia will enhance cooperation in agricultural investment and technological development, especially in the areas of meat processing and vegetable and fruit processing, Han told reporters after the signing. “Regarding trade of agricultural products, we welcome the imports of safe and quality products from Serbia, which not only gives Chinese customers more choices, but also benefits Serbian farmers,” he said.

10 Business Daily Thursday, January 19 2017

Greater China

Real estate

Home prices surge most in 5 years Average new home prices in 70 major cities rose 12.4 per cent in December from a year earlier Yawen Chen and Elias Glenn

P

rices of new homes in China grew last year at the fastest rate since 2011, but moderated enough in December to calm fears of a speculative bubble bursting with disastrous economic consequences.

The price moderation will come as a relief to China’s leaders as they wrestle with economic targets for 2017.

Sources have told Reuters that Beijing is prepared to accept a more modest growth target of 6.5 per cent this year as leaders tackle a mountain of debt built up over years of heavy official borrowing to fund stimulus campaigns.

China depended heavily on the surging real estate market and government stimulus to drive economic expansion in 2016. Now it is widely expected to report on Friday that it met its annual GDP growth target of 6.5 to 7 per cent.

Analysts say two forward-looking figures -- household loans and house sales -- have been indicative of the cooling trend in the property market.

“There’s usually a two to three months’ lag between housing transactions and prices. And housing sales really began to fall quite precipitously

in November,” said Jonas Short, head of investment bank NSBO’s Beijing office.

Average new home prices in 70 major cities rose 12.4 per cent in December from a year earlier, compared to November’s record 12.6 per cent rise, data from the National Bureau of Statistics (NBS) showed.

National monthly growth cooled to 0.3 per cent versus 0.6 per cent in November, the NBS said.

Twelve 12 of 15 markets that had been singled out by authorities as overheating had price falls, a significant increase from November.

“Slow growth or slight price declines are exactly what the government wants,” said Short.

Robust prices

China’s leaders have pledged to strictly limit credit flowing into speculative buying in the housing market in 2017, which would allow it to focus on defusing explosive growth in corporate debt.

Those sentiments have been echoed by some local government heads, although local authorities are not always seen as eager to follow Beijing’s property clampdowns due to the hefty revenues they garner from land sales.

China’s average home prices are forecast to rise 4.1 per cent in 2017,

while growth in property investment would rise 5.4 per cent, a stateowned newspaper reported earlier this month, citing the Chinese Academy of Social Sciences.

But authorities will be walking a fine line between curbing excessive price gains and clamping down too hard on a sector which accounts for about 15 per cent of the economy.

After 2016’s record surge, further sharp gains may also require more aggressive policy curbs, adding to risks of a price crash and a sharp knock for the economy.

While supply in popular big markets remained low, China’s commercial housing inventory totalled 691 million square metres in November 2016, a mere 0.01 per cent drop from the same time a year earlier, adding to headaches of policymakers who set destocking in smaller cities as a priority last year.

Still unaffordable

Yesterday’s data showed eye-popping price rises in 2016, despite a slowdown in growth late in the year.

Prices in Shenzhen, Shanghai and Beijing prices rose 23.5 per cent, 26.5 per cent and 25.9 per cent from 2015.

“To buy a house in Shanghai, I definitely can’t do it alone, I’d need my parents to help,” said 28 year-old Barret Xu, a designer in Shanghai.

Even in some of China’s second-tier cities, investors are becoming wary

of the potential risks from very high prices.

In Hefei, a long-time top price-rise performer, average new home prices rose 46.3 per cent in 2016, yesterday’s data showed, despite posting a 0.2 price decline on a monthly basis in December.

A Hefei homeowner who only gave his last name as Zhou, who already has three properties in the city, said prices have skyrocketed and he is not willing to bet further on that market.

Key Points Dec new home prices +12.4 pct y/y vs 12.6 in Nov Monthly growth cooled to 0.3 pct vs 0.6 pct in Nov Relief for policymakers but may drag on economy High prices seen as unaffordable for homebuyers “The average prices are about 20,000 yuan per square metre and prices are still rising at about 1,000 yuan per month. It’s way to high, Hefei is just barely a second-tier city,” Zhou said.

“The rich people from Zhejiang province and Shanghai can afford to buy tens and hundreds of houses here, but the locals can’t afford that,” he said. Reuters

Business Daily Thursday, January 19 2017 11

Greater China Funding

Capital curbs push firms to risky, costly dollar bonds Both the Shanghai and Shenzhen stock exchanges have tightened bond issuance rules for real estate firms since October Samuel Shen and John Ruwitch

China’s efforts to support its currency and cool its hot property market are encouraging more Chinese companies, including many state firms, to take on extra cost and risk by raising foreign-currency bonds in Hong Kong and other offshore locations.

Despite the yuan’s nearly 7 per cent slump against the dollar in 2016, Chinese companies including state-owned Bank of China raised a record US$111 billion in offshore dollar bonds, according to data from Dealogic, up from US$88 billion in 2015.

JPMorgan analysts, using their own dataset, are forecasting another rise this year, even though many economists expect the yuan to fall further, making the loans more expensive to service and repay.

The list includes issuers who need dollars to pay for overseas acquisitions and deals but are unable to use their yuan after China tightened its grip on capital outflows last year to support the currency.

“It’s getting increasingly difficult to move money out,” said Shen Weizheng, fund manager at Ivy Capital, which invests in stocks and bonds in Hong Kong. “So for Chinese companies eager to invest overseas, the dollar bond market becomes an easier funding avenue.”

State firms are also doing so because the government has made it easier for them to tap offshore markets, and there is pressure on them to bring more dollars onshore, investment bankers said.

Some property firms have also been left with little choice but to raise money offshore as government measures to contain a property bubble have included lending restrictions onshore.

Both the Shanghai and Shenzhen stock exchanges have tightened bond issuance rules for real estate firms since October, and regulators have repeatedly urged Chinese lenders to restrict property lending.

Chinese property developers have US$7.9 billion in loans falling due in 2017, according to Thomson Reuters data, which could push more into offshore markets if they need refinancing.

On top of the exchange risks, the borrowers also have to swallow much higher borrowing costs.

China Evergrande Group pays a 7 per cent yield on its dollar bonds in Hong Kong, but just 3 per cent in China, while China Aoyuan Property Group raised US$250 million through three-year bonds in early January, paying 6.35 per cent, almost double the average yield on yuan bonds onshore.

Despite the cost, more issuers are lining up for after the Chinese New Year in late January.

A fund manager at Invesco Asset Management in Hong Kong said his firm had signed confidential agreements with 10 Chinese issuers to become their cornerstone investor.

register their offshore debt issuance plans with China’s central planning agency, but last year it allowed 21 SOEs to proceed without registration.

China’s local government financing vehicles (LGFV) have also joined this growing band of bond issuers in Hong Kong.

Key Points Chinese firms issuing more dollar bonds, further rise forecast Trend influenced by government curbs on capital outflows Real-estate lending curbs also push firms to offshore market Dollar bonds bring higher servicing costs plus forex risk Last January, Jiangsu NewHeadline Development, a financing vehicle of the Lianyungang municipal government in Jiangsu Province, issued US$200 million of 3-year bonds paying interest of 6.20 per cent.

NewHeadline, the first LGFV to sell offshore bonds, could have issued yuan bonds onshore paying around 5 per cent, without the risk of the exchange rate moving against them.

“I asked them: your fundamentals are not bad, so why are you willing to raise funds at a higher cost?” said a fund manager who subscribed to the bonds. “They said there was a political target to raise overseas money.”

A NewHeadline official told Reuters the purpose was to “boost our overseas branding, so that more foreign investors know us”. She didn’t say why the company, which is mainly involved in infrastructure and water treatment in China, wanted overseas branding.

A stream of LGFVs followed in NewHeadline’s footsteps, and the company is mulling a second offshore bond this year.

The attractive yields, combined with investors’ expectations of a rising dollar, led to an increasing number of funds targeting dollar bonds in China last year.

That fuelled a fivefold increase in the outbound funds held in a scheme set up a decade ago to let domestic investors invest overseas, even as Beijing has suspended approvals for new quota for the scheme as part of its capital curbs.

Quota holders can now rent out their quota for twice the price they could last year, such is the demand.

Reuters

Fast track

An underwriter who helps Chinese firms issue dollar bonds said stateowned enterprises (SOEs) were keen to issue dollar bonds partly because “the central government is encouraging them to bring dollars back to China, and SOEs are not very sensitive to borrowing costs”.

The government fast-tracked approvals for bringing dollar bond proceeds back onshore for several state firms, in a bid to ease depreciation pressure on the yuan and slow the pace at which the country was burning through currency reserves.

Previously, all SOEs needed to

SFC

Hong Kong regulator sues StanChart, UBS over 2009 timber IPO It was the second-biggest market for new listings last year with US$25.2 billion of deals Benjamin Robertson

Hong Kong’s securities regulator has filed a lawsuit against Standard Chartered Plc, UBS Group AG and audit firm KPMG LLP over an initial public offering by China Forestry Holdings Co. in 2009.

The Securities and Futures Commission is seeking unspecified damages for minority shareholders related to alleged “market misconduct” by the defendants connected to China Forestry’s IPO prospectus, and the company’s financial statements for 2009 and for the first half of 2010, according to documents filed with Hong Kong’s High Court on Jan. 16.

Standard Chartered and UBS were joint sponsors of China Forestry’s US$216 million first-time share sale in November 2009, while KPMG was its auditor, data compiled by Bloomberg show. The two banks had previously disclosed potential regulatory action for their work on unspecified IPOs in Hong Kong. UBS said the SFC move could result in its suspension from working on first-time share sales in the city.

Spokesmen for Standard Chartered, UBS, KPMG and the SFC declined to comment.

The regulator has been tightening

oversight of the banks that underwrite IPOs after some deals saddled investors with losses in recent years.

Hong Kong was the second-biggest market for new listings last year with US$25.2 billion of deals, trailing only the U.S., data compiled by Bloomberg show.

Seeking compensation

UBS ranked 18th in arranging Hong Kong IPOs last year, down from 11th in 2015, the data showed. Standard

Chartered shut its equity capital markets business in 2015, as part of a broader exit from institutional equities to cut costs.

The SFC also sued China Forestry, its former Chairman Li Kwok Cheong and former Chief Executive Officer Li Han Chun, the court documents show.

The regulator is seeking compensation from the defendants to “restore” independent minority shareholders who had bought China Forestry stock and held the equity at the time trading was suspended in January 2011, according to the court documents.

China Forestry has been halted

from trading since then and was in the process of delisting after financial irregularities were discovered.

Liquidators were appointed for the logging company in June 2015 by a court in the Cayman Islands, where it is incorporated.

‘Banks that sign off on listings in Hong Kong will be held accountable if offer documents contain untrue statements’ The liquidators, Borrelli Walsh, last April filed a writ of summons against Standard Chartered, UBS and other advisers on the IPO, alleging offenses including breach of contract and misrepresentation.

In October 2013, the Hong Kong securities regulator introduced a new system under which banks that sign off on listings, known as sponsors, will be held accountable if offer documents contain untrue statements.

It has also warned that bankers on such deals can be held criminally liable. Bloomberg News

12 Business Daily Thursday, January 19 2017

Asia Private poll

Japan’s economy seen growing moderately A separate Reuters poll showed analysts expect the yen will be around 120 yen per dollar at the end of this year Kaori Kaneko

J

apan’s economy is expected to grow at a slightly faster pace in the fiscal year starting in April than projected last month, but there is heightened uncertainty over the outlook as U.S. President-elect Donald Trump prepares to take office, a Reuters poll showed.

While a weaker yen is supporting Japan’s export-driven economy, analysts are cautious given risks that Trump’s policies might trigger a reversal in the yen-dollar rate.

The world’s third-largest economy is expected to expand 1.1 per cent in the next fiscal year, led by public spending, a softer yen’s boost to exports and improving global growth, according to a poll of 38 analysts taken Jan. 5-16.

That’s up slightly from last month’s

fiscal year projection of 1.0 per cent growth, and down slightly from the 1.2 per cent forecast for this fiscal year through March.

“We expect the economy will perform well as the global economy is improving, which helps Japan’s exports, and the yen weakened more than previously expected,” said Yoshiki Shinke, chief economist at Daiichi Life Research Institute.

Shinke said the Japanese economy would also benefit from global inventories being run down at a faster rate, fostering a pick up in worldwide factory production.

“The risks for Japan lie in whether the new U.S. administration leans towards protectionism and if it takes a policy of weakening the dollar,” he said.

Analysts also said higher inflation in the United States could hurt emerging

economies, and Japan, as funds seek out higher yielding U.S.-dollar assets.

Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management, estimates Japan’s economy will get 0.3-0.4 percentage point boost from the U.S. economy under the new administration and much of that will likely appear next fiscal year.

The yen has strengthened again after weakening to 118.66 to the dollar on bets of tax cuts, higher spending and a faster pace of U.S. rate increases under Trump.

“Considering interest rate differentials between Japan and the U.S., the yen’s depreciation could progress, but if the protectionism in the U.S. strengthens, the yen could rise,” said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute.

Among 27 analysts who responded to an extra question on the yen, about 85 per cent said the government would not tolerate a yen-dollar rate beyond 130 yen. And most said a weaker yen beyond that level would hurt the Japanese economy.

A separate Reuters poll showed analysts expect the yen will be around 120 yen per dollar at the end of this year.

BOJ outlook

The Reuters poll projected the Bank of Japan (BOJ) will keep its -0.1 per cent interest rate imposed on some excess bank reserves at least until the first quarter of 2018.

About 40 per cent of the analysts who responded to a question on the BOJ’s next policy action expect the central bank to start unwinding its super-loose monetary policy, the poll showed. That is up from 32 per cent in the last survey.

“The risks for Japan lie in whether the new U.S. administration leans towards protectionism and if it takes a policy of weakening the dollar” Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute The core consumer price index, which includes oil products but excludes fresh food prices, is forecast to rise 0.8 per cent for the fiscal year starting April and 1.0 per cent for fiscal 2018, the poll showed.

The BOJ expects consumer prices to rise by 1.5 per cent in fiscal 2017 and by 1.7 per cent in fiscal 2018, according to forecasts it issued in November. Reuters

Green campaign

Philippines cancels permits of 4 more mining projects A separate mining audit has led to the suspension of 10 mines with 20 more at risk Enrico Dela Cruz

The Philippines has cancelled the environmental permits for four more mining projects, including one planned nickel venture, as the world’s top nickel ore supplier deepens a months-long crackdown on the resources sector.

The Southeast Asian nation has been reviewing hundreds of environmental compliance certificates (ECCs) including those granted to mines. That is separate from an environmental audit of the country’s 41 operating mines whose results are set to be released on Jan. 31.

The four revoked ECCs include one for Norwegian firm Intex Resources’ proposed US$2.5-billion nickel mine on Mindoro island in the central Philippines.

Environment and Natural Resources Secretary Regina Lopez told a media briefing the project would damage the environment as it would

Business Daily is a product of De Ficção – Multimedia Projects

be located on a watershed.

“Everyone there, the politicians, the church, the academe, they vehemently did not want mining there,” she said.

A member of staff at Intex’s Manila office declined to make immediate

comment, saying the branch was waiting for an official response from headquarters in Norway.

Lopez, a committed environmentalist, in December cancelled the ECCs of three nickel mines as part of the clampdown.

Firebrand Philippine President Rodrigo Duterte has backed Lopez’s aggressive campaign against mines causing environmental harm,

warning shortly after taking office in June last year that the country could survive without a mining industry.

The three other ECCs cancelled on Wednesday were for a gold mine, a coal producer and an iron and copper project.

Key Points Cancelled permits include those for nickel, gold, coal miners Philippines has now revoked permits of four nickel projects Minister says to release results of mining audit on Jan. 31 A separate mining audit has led to the suspension of 10 mines with 20 more at risk. The clampdown stoked worries about supply of nickel from the Philippines last year, helping spur a 14-per cent rally in global prices.

The Philippines’ nickel ore shipments to top market China dropped 11.6 per cent to 28.8 million tonnes in January-November. Reuters

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

Business Daily Thursday, January 19 2017 13

Asia In Brief Inc protection

Japan will work to minimise Brexit impact

GDP forecast

India’s cash crunch seen biting into economic growth Eight of the 13 forecasters said the social cost to the poor and small businesses from the currency ban will be eclipsed by underlying benefits in the long-term Krishna Eluri

India’s economy lost momentum in the final three months of 2016 after Prime Minister Narendra Modi’s ban on high-value notes hurt consumption and businesses but it is set to pick up this quarter, a Reuters poll found.

Having posted growth of above 7 per cent for six consecutive quarters, India’s gross domestic product is expected to have expanded just 6.5 per cent in the October-December quarter - the weakest in nearly three years.

The poll also suggested growth would remain below 7 per cent in the first quarter of 2017, at 6.9 per cent.

India’s GDP for the fiscal year to March 2017 is expected to grow 6.9 per cent, according to the poll of over 20 economists. That is higher than the International Monetary Fund’s estimate of 6.6 per cent.

“If the demonetization exercise has led to some permanent supply-side disruptions, growth could be weaker for longer,” wrote Pranjul Bhandari,

chief economist for India at HSBC, in a note.

The Nov. 8 announcement of the ban on high-value notes, which coincided with Donald Trump’s U.S. Presidential election victory, has caused major disruptions in the cash-reliant economy.

Industrial and services output have been hobbled, with a survey earlier this month showing private sector activity contracted in December.

“Lower growth for at least two quarters means that the output gap will take longer to close, suggesting that the revival of the investment cycle, which is already very weak, could be pushed out even further,” added Bhandari.

Still, a majority of economists answering a separate question said they were confident or somewhat c o n f i d e n t t h e g o v e r n m e n t’ s demonetization drive would boost consumption and investment in the longer-term.

A slight majority, nine of 15 economists, said the initial aim of removing unaccounted money from

the system will not be achieved. Eight of the 13 forecasters said the social cost to the poor and small businesses from the currency ban will be eclipsed by underlying benefits in the long-term.

In a surprise move, the Reserve Bank of India chose not to cut its repo rate in December to combat the fallout from the demonetization, keeping it steady at 6.25 per cent.

Inflation hit a two-year low in December, with consumer prices rising 3.41 per cent, well below the RBI’s near-term target of 5 per cent

by March 2017.

Key Points Economy to grow 6.9 per cent in fiscal year ending March 2017 Central bank to cut rates to 6.00 pct by end-March 2017 It is expected to hover between 4.1 and 5.2 per cent from now to mid2018, giving the RBI room to make further rate cuts.

But analysts expect the central bank to make only one rate cut over the poll horizon, tipping a 25 basis point cut at its upcoming Feb. 8 meeting, a week after the government presents the federal budget for the 2017/18 financial year. Reuters

Westpac poll

Australia consumer sentiment flat Expectations for the economic outlook over the next 12 months bounced 2.5 per cent A measure of Australia’s consumer sentiment barely budged in January as pessimists continued to outnumber optimists even as people thought it was a good time to splash out on big-ticket items, a survey showed yesterday.

“The absence of a rebound in January is a disappointing result” Elliot Clarke, Westpac senior economist

Yesterday’s survey of 1,200 people from the Melbourne Institute and Westpac Bank found consumer sentiment edged up just 0.1 per cent in January, failing to recover much from December’s 3.4 per cent drop.

That left the index at 97.4, a meagre 0.2 per cent higher than in January last year.

“The absence of a rebound in January is a disappointing result, particularly when one factors in

the cumulative 10 per cent gain for Australian equities over the past two months and, to a lesser extent, a nascent improvement in the pace of job creation,” said Westpac senior economist, Elliot Clarke.

He thought there could be a lingering drag from news in December that the economy shrank by 0.5 per cent in the third quarter, the first contraction since 2011.

A weekly survey of consumers from ANZ and Roy Morgan has shown a rebound in sentiment at the start of the year, but that was not replicated in the Westpac poll.

The sub-indices in the Westpac survey were also very erratic in January.

The measure of family finances compared to a year ago dropped a sharp 7.6 per cent, but that for family finances over the next 12 months rose 0.3 per cent.

Expectations for the economic outlook over the next 12 months bounced 2.5 per cent, but the assessment of economic conditions for the next five years fell 1.4 per cent.

One bright spot for retailers was the measure of whether this was a good time to buy major household items which rebounded by 4.9 per cent in January.

By demographics, all the weakness came in those who rented their homes, while sentiment for those with mortgages or who owned outright rose sharply. Reuters

Japan will work with Britain and the European Union to minimise the impact on Japanese firms and the global economy when Britain leaves the EU, the country’s top government spokesman said yesterday. Chief Cabinet Secretary Yoshihide Suga told a news conference that the government would continue to closely monitor Brexit developments. Britain will quit the EU single market when it leaves the European Union, Prime Minister Theresa May said on Tuesday in a decisive speech that set a course for a clean break with the world’s largest trading bloc.

Prices

Malaysia inflation rate unchanged Malaysia’s consumer price index in December rose 1.8 per cent from a year earlier, government data showed yesterday. The figure was slightly below the 1.9 per cent growth forecast in a Reuters poll, and matching the 1.8 per cent rise in November.

December’s inflation rate was driven by higher prices of food and housing and utilities, data from the Statistics Department showed. Annual inflation reached a seven-year peak of 4.2 per cent in February 2016, before moderating as the effects of a goods and services tax imposed in April 2015 faded.

Commodities

Indonesia palm output likely dropped Indonesia’s crude palm oil (CPO) output likely fell slightly in December, ending a seven-month run of gains in the world’s top producer of the commodity used in everything from chocolate to biofuels, a Reuters survey showed. A year-end decline in output would be in line with earlier predictions that production would likely peak in November after steadily recovering from drought brought on by an El Nino weather pattern in 2015 and the start of 2016. CPO production in the Southeast Asian nation likely eased to 3.22 million tonnes in December from 3.31 million tonnes in November.

Development

Yangon region gov’t drafts agricultural plan Myanmar’s Yangon region government is drafting a master plan for development of agricultural mechanization to be implemented within three years, the official Global New Light of Myanmar reported Wednesday. Yangon Region Chief Minister U Phyo Min Thein told a workshop on promoting agricultural sector on Tuesday that the regional government has earmarked about 8 billion kyats (US$6.15 million) to spend on the development of agricultural mechanization in the region as part of revitalization efforts for farmland. He called for efforts to upgrade the agricultural sector with the use of modern ways to boost the weakening agricultural production.

14 Business Daily Thursday, January 19 2017

International In Brief Strategy

HSBC to shift staff from Britain to Paris after Brexit HSBC will move staff responsible for generating around a fifth of its UK-based trading revenue to Paris following Britain’s exit from the European Union, Chief Executive Stuart Gulliver said yesterday. “We’re not moving this year and maybe not even next year,” Gulliver said in an interview on the side-lines of the annual meeting of the World Economic Forum in Davos.

“We will move in about two years time when Brexit becomes effective,” Gulliver added. HSBC, Europe’s biggest bank, has all the licences it needs for such a move, Gulliver said.

Angola

Oil tax revenue shrinks to under €5 billion in 2016 The tax revenues of Angola’s state-owned oil company Sonangol from crude oil exports were under €5 billion in 2016, missing the government’s estimates which had been revised down in September. A finance ministry report about the oil sector said that Sonangol generated 840 billion kwanzas (almost € 4.8 billion) in tax revenues in 2016, when the revised state budget, approved in September, reduced the expected revenue to 968 billion kwanzas (€5.5 billion). Prior to this revision, the government has set the figure for revenues from Sonangol in 2016 at 1,16 trillion kwanzas (€6.6 billion).

Bribery

Brazil’s Odebrecht settling cases in 12 countries Brazil’s largest engineering conglomerate Odebrecht SA plans to reach settlements in all 12 countries where it has admitted to paying bribes to obtain contracts, two sources with knowledge of the matter told Reuters on Tuesday. The family-owned firm signed a US$1.94 billion leniency deal with U.S., Swiss and Brazilian prosecutors in December for its involvement in a massive bribery and political kickback scheme and is striving to survive as a multinational concern by negotiating deals in a dozen other countries where it operated.

Portugal’s prime minister, António Costa. Lusa

Portugal Prime Minister

Budget deficit in 2016 ‘should be no more than 2.3 per cen of GDP’ As well as a stronger economy, Portuguese state finances have in recent months benefited from a one-off amnesty for tax and social security debtors

P

ortugal’s prime minister, António Costa, said on Tuesday that the most recent data point to the 2016 public sector budget deficit having been no more than 2.3 per cent of gross domestic product, and so “comfortably” below the limit set in agreements with the European Union authorities.

Costa was addressing parliament at the start of the first fortnightly debate of this year.

“With the numbers that we already have available, I can guarantee today, in this assembly, that the 2016 deficit will not be greater than 2.3 per cent,” he said. “In other words, and as I have repeatedly said, the deficit was comfortably below the limit set by the European Commission.”

On this point, the prime minister criticised the right-of-centre opposition and the critics of the strategy outlined by his minority Socialist government over the past year.

“Against all predictions of disaster, against all the prognoses of plans B, C or Z, Portugal has met its commitments” António Costa, Portugal’s prime minister

Luxury markets

Swiss watchmakers cautiously optimistic Swiss watchmakers expect to at least stabilise sales this year after two years of decline as the important Chinese and U.S. markets show signs of turning the corner, executives said at an industry event on Tuesday.

Luxury watchmakers have been grappling with a combination of weak demand in their biggest markets, Hong Kong and the United States, and Chinese tourist shoppers avoiding Europe for fear of militant attacks. Recent comments from executives suggest the worst may be behind them, however. Exports of Swiss watches fell 10.4 per cent in the first eleven months of 2016, but exports to mainland China returned to growth in July.

“Against all predictions of disaster, against all the prognoses of plans B, C or Z, Portugal has met its commitments, without it having the need to resort to amending budgets or additional measures,” he said.

He also contrasted the current situation with the budget problems of the government’s right-of-centre predecessor, saying that “in four years and eight amending budgets, not once did they meet their objectives” and that “they left the country a long way from being able to leave excessive deficit proceedings” imposed by the EU. “They were wrong when they repeated for four years that there was no alternative, they were wrong when the guaranteed that we would need a plan B, with more taxes and less income, in other words, when they asked us to give up [the idea of] changing policy and to continue their policy,” he said. “What a deficit of no more than 2.3 per cent proves can be summarised simply: the former government, in cutting pensions,

salaries and benefits and increasing taxes, missed all its deficit targets, in every year.”

The prime minister quoted a former president of Portugal, Jorge Sampaio, who famously said that “there is more life beyond the budget” and cited positive results in the real economy.

“Exports have reached a new record and private investment has increased,” he said. “The best and most promising results are in the

labour market, with employment growing by more than 2 per cent, and unemployment at levels we haven’t seen since 2009.”

In October, he noted, the jobless rate was 10.6 per cent, down from 12.4 per cent a year earlier.

This year, he went on, will see a 20 per cent increase in public investment form last year - above all in education, health and security, as well as urban rehabilitation and transport.

As well as a stronger economy, Portuguese state finances have in recent months benefited from a oneoff amnesty for tax and social security debtors that brought in more than half a billion euros by the end of the year. Lusa

Business Daily Thursday, January 19 2017 15

Opinion Business Wires

Bangkok Post Confidence in this year’s continued economic growth has risen, according to the latest survey by the Federation of Thai Industries (FTI) and the National Institute of Development Administration (Nida). The survey on the economic and industrial outlook in 2017 covered 45 major industries and 10 industrial institutes with respondents from more than 1,000 companies. Kamphol Panyagometh, Nida’s vice-president for research and consulting services, said 34.7 per cent of the respondents were confident that the economy will continue to grow in 2017.

Taipei Times The government wants state-run companies to increase their investment in research and development (R&D) to 1 per cent of their annual revenue as a way of boosting innovation and increasing the number of engineering jobs, the Ministry of Economic Affairs (MOEA) said yesterday. “R&D is the key to competitiveness across industries. We plan to amend the law to ‘push’ state-run firms to invest more in R&D,” Industrial Development Bureau Director-General Wu Ming-chi said. State-run firms should serve as spearheads to encourage local companies, especially firms in traditional industries, to seek innovation through R&D investment, Wu said.

Latest yuan chaos creating more distortions

I

The Times of India State Bank of India on Tuesday raised US$500 million through an international bond sale of five-year bonds at coupon of 3.306 per cent per annum and getting oversubscribed three times. “The pricing offers a spread of 145 bps over the fiveyear US treasury, which is equivalent to a price of 99.744 per cent yielding 3.306 per cent per annum,” SBI said in a note late evening after successfully closing the issue through its London branch. The order book came in at US$1.5 billion for an offer of US$500 million, SBI said.

The Korea Herald Labour Minister Lee Ki-kweon urged big businesses yesterday to employ more youth in the first half of the year as the sluggish economy is expected to further worsen youth unemployment. Lee made the call during a meeting with leaders of the country’s top 30 conglomerates after the jobless rate for youth climbed to a record 9.8 per cent last year. “In order to ease conditions in the youth job market, which is expected to become severe in the first quarter, and reduce gaps in the labour market, we need the top 30 conglomerates to play a leading role,” he said.

n the first week of 2017, the offshore yuan surged by a record amount against the U.S. dollar over two days, interbank borrowing costs soared and volatility intensified. The following week, pretty much everything reversed. It’s a familiar pattern that exemplifies the contradictions bedeviling China’s currency.

Policy makers have expended much effort trying to internationalize the yuan, notably by pushing the International Monetary Fund to include it in its Special Drawing Rights basket. They also want to control the yuan’s value, fearing that a freely floating currency would destabilize the financial system.

These goals are in obvious tension. But the government’s efforts to resolve that tension are only causing more distortions, as investors and companies find ways to game the system. This month’s gyrations are a case in point.

As with monetary policy, the name of the game in foreign exchange is expectations. If Chinese investors expect the yuan will depreciate against the dollar, they’ll try to move their money out of the country. With economic growth sluggish, financial bubbles proliferating and few domestic investment opportunities, that’s a sensible expectation.

The People’s Bank of China is in the awkward position of trying to alter that expectation.

Since Aug. 11, when the central bank surprised the world with a devaluation of 3 per cent, it has been trying to steer the yuan lower without letting investors make a one-way bet. Its solution has been to engineer periodic liquidity crunches. The yuan lending rate in Hong Kong has repeatedly spiked, even reaching 200 per cent a year ago.

These crunches pushed the yuan higher, raised borrowing costs and imposed some losses on investors. But they did nothing to reset expectations about the yuan’s long-run trend. As of November, yuan deposits in Hong Kong had shrunk almost 40 per cent from their peak in December 2014, declining by an average of 3 per cent a month since August 2015.

After all the turmoil earlier this month, the onshore yuan -- which is more tightly controlled by the PBOC and state-owned banks -- remains essentially unchanged. The two rates are drifting back toward parity, signalling an end to the transient surge. Once again, the PBOC has been unable to reset expectations.

By now, investors have caught on to this pattern.

Almost as fast as the offshore yuan and interest rates surge, they fall back to a long-run trend and the yuan resumes its slow and steady decline.

Because hedge funds and other investors use sophisticated strategies to guard against these fluctuations, the liquidity crunches are no longer

“

Christopher Balding a Bloomberg View columnist

imposing significant losses on them. That means they can quickly resume short-selling the yuan.

Arbitrage opportunities have also arisen. When the yuan trades at a premium onshore, for instance, state-owned companies can instruct an offshore subsidiary to import products from the onshore parent, paid for in yuan. The parent company converts the yuan into dollars at the preferential onshore rate, then uses those dollars to import another product from the subsidiary. This trade is one reason for the large statistical discrepancies between China and its key trading partners.

Capital controls, the other main way the government is trying to manage the yuan, are causing similar distortions.

Chinese companies have proved amazingly adept at using the more liberal current account to disguise capital outflows. Some are selling yuan-denominated wealth-management products to fund overseas acquisitions using special-purpose vehicles.

This gives an investor partial ownership of a foreign asset and thus passes on expected depreciation gains. The company takes the money out of China, but the investor receives the benefit of international diversification.

Expect more of this kind of thing.

China is left with a shrinking range of options. It could engage in a prolonged tightening of the offshore yuan. But that would require a months-long effort to reduce liquidity and raise interest rates, which would pose serious risks for indebted Chinese companies and lead to more distortions and gamesmanship. It would also end hopes of the yuan being a major international currency any time soon.

Another option is to crack down further on yuan outflows. But a raft of such measures over the past year has had little effect. Regulators would have to consider more radical options, such as enhanced restrictions on current-account transactions, which they so far have been loath to pursue. Doing so could cause widespread economic dislocations -- and might not work.

With its current strategy, the government is trying to split the difference. Yet with more yuan leaving the country, and foreign-exchange reserves dwindling, the clock is ticking. China has to decide what is more important: an international currency, which will require greater capital mobility and relatively free price determination, or control over the yuan’s value, which will require increasingly draconian restrictions.

It can’t have both. Bloomberg View

Chinese companies have proved amazingly adept at using the more liberal current account to disguise capital outflows

”

16 Business Daily Thursday, January 19 2017

Closing Airlines

Vietnam launches new route with China’s Taipei and Da Nang with Singapore. linking with Hong Kong Vietnam-based low-cost carrier Jetstar Pacific launched yesterday a new regular international air route linking Vietnam’s central Da Nang city and China’s Hong Kong.

This is the third international air route of the joint venture between Vietnam Airlines and Australian Qantas Airways in the popular tourist attraction of Da Nang, after two air routes linking Da Nang

The first flight on the new air route will take off on March 27 with flight frequency of three times a week on Monday, Tuesday and Saturday, reported the state-run news agency VNA. In 2016, Da Nang welcomed nearly 1.7 million foreign visitors among over 10 million international arrivals in Vietnam, up 31.6 per cent year-on-year. Reuters

Real estate

Hong Kong “mini” flats boom as govt fails to rein in prices Property prices have surged nearly 50 per cent to historic highs since Hong Kong leader Leung Chun-ying took office Venus Wu

F

or part-time furniture mover Kong Ngai-lam, 26, home is the bottom half of a bunk bed inside a tiny room that fits little else.

Nearly 200,000 Hong Kong residents like him call a wire cage or bed in partitioned apartments their home.

Making housing more affordable was among outgoing Hong Kong leader Leung Chun-ying’s top priorities when he took office in 2012, but his administration has been unable to rein in skyrocketing prices that have added to discontent in the city.

“Over the past four years, despite a number of measures by the current-term government which has successfully curbed external, investment and speculative demands, the difficulty in achieving home ownership remains an unresolved problem,” Leung said in his swansong policy address yesterday.

High property prices and rents posed “the gravest potential hazard to the Hong Kong community as many families have no choice but to live in subdivided units, even in industrial buildings,” Leung added.

Property prices have surged nearly 50 per cent to historic highs since he took office, according to government data, and tiny living spaces have become increasingly common.

About 100,000 people under the age of 35, including children, make

up half of those occupying such partitioned units, a government report showed. Non-government organisations say the real numbers are higher.

These units, measuring half the size of a standard carpark space at an average of 62.4 square feet, are getting more expensive too.

Median rents surged 10.5 per cent to HK$4,200 (US$520) in 2015, official data showed. The figure is greater than the 8.4 per cent rent increase in private homes over the same period.

Kong now pays US$250 monthly rent for his bed space in the cluttered apartment shared with 10 others. A handwritten note warns of eviction if rental payment is late: “We are not the Salvation Army,” it says.

There are no legal guidelines in Hong Kong restricting how small apartments can be, nor any on rent control.

“The biggest issue in Hong Kong is we don’t have any legal restrictions, so the landlords can do whatever they want,” said Kong’s social worker and community organiser at the Society for Community Organization, Sze Lai-shan.

Mosquito-sized flats

“Mini flats” or “mosquito flats” are a growing trend as developers target first-time buyers who have given up hope of ever owning a decent-sized home.

Emperor International Holdings will build flats as small as 5.7 square

metres, though the measurements exclude kitchen and bathroom; Chun Wo Development Holdings has plans for a residential building catering to young first-time buyers with 11.9 square metres units.

“Hong Kong’s real estate has gone so expensive, that’s why (developers) are making flats smaller and smaller to make them affordable,” said Edina Wong, senior director of residential services at property consultancy Savills.

Hong Kong’s richest man Li Kashing recently said the trend made him feel “uneasy”, even though a residential complex built by his Cheung Kong Property Holdings offers flats smaller than 18.6 square

meters. One unit in September sold for HK$2.8 million (US$360,000).

Thomas Lam, senior director at Knight Frank, expects small flats to remain popular in the short run as long as prices remain high and tightening measures such as higher stamp duties stay in place.

But a mini apartment is not for everyone.

Freya Tseng, 27, who advises her family on property investments, has stayed away from mini flats.

“If you buy it for yourself, the quality of life will be too low and you won’t be happy living there. If you buy it for investment purposes, it doesn’t have any reserve value,” Tseng said. “It’s a joke.” Reuters

Energy

Requirements

Crime

Two more nuclear reactors in Japan pass checks

China tightens regulation Ex-traders in Singapore over investment by state firms guilty of cheating banks

Japan’s Nuclear Regulation Authority (NRA) approved an assessment yesterday to restart two reactors in Saga Prefecture, western Japan, although public concern remains regarding the safety of the plant if operator Kyushu Electric reboots the reactors.

The NRA has been hearing concerns in the region about the plant’s safety, since the draft assessment on the rectors being restarted was being compiled over a three-year period.

The NRA believes that tighter safety regulations implemented in the wake of the 2011 Fukushima Daiichi nuclear disaster, however, have been adhered to and, along with some serious provisos, the Nos. 3 and 4 units of the Genkai plant, will be the second Kyushu Electric-operated plant to go back online, following its Sendai plant.

The Genkai facility will mark the fifth nuclear plant overall that has passed the NRA’s safety requirements and have received provisional approval to restart their reactors.

However both official opposition to the restarts and pubic sentiment remains a stumbling block for the plants’ operators with both parties citing continued safety concerns which have made the restarting of the reactors an arduous and protracted process for the utilities and the government of Japan. Xinhua

Chinese regulators yesterday released revised regulations on investment by central state-owned enterprises (SOEs), introducing a “negative list” approach in the supervision of investment projects.

The State-owned Assets Supervision and Administration Commission of the State Council said it will release a negative list detailing two categories of investment projects -- those that are off-limits for entry and those that demand special regulation.

For projects that are not on the list, central SOEs may make investment decisions on their own.

There are currently more than 100 state firms directly regulated by the central government.

The new rules also set stricter requirements for state firms’ overseas investment, stipulating that such investment should focus on the firms’ main business.

In principle, central state firms are not allowed to conduct non-core business investment overseas, according to the regulation, which aims to enhance risk control for overseas assets.

China’s central SOEs made total profits of RMB1.23 trillion (around USD$179.6 billion) in 2016, up 0.5 per cent year on year, earlier official data showed. Xinhua

Two former currency traders from Deutsche Bank AG and HSBC Holdings Plc were convicted of cheating the banks by making false trades.

Former HSBC senior dealer Ivan Chng and exDeutsche Bank trader Toh Hway Khuan pleaded guilty in separate hearings in Singapore’s High Court yesterday. The men both admitted to using their banks’ accounts in 2009 to get preferential rates on the dollar. The cases are unrelated and the men will be sentenced at a later date.

Chng, 48, was charged in 2015 with 149 counts of buying and selling about US$800 million and unlawfully making about S$230,000 (US$160,000).

He pleaded guilty to 25 of the charges. Toh, 51, was also charged in 2015, with 39 counts of buying and selling more than US$250 million and unlawfully making about S$140,000.

The duo’s trades were a deception and were to the detriment of the banks, prosecutors said in court. Prosecutors sought a three-month jail term for Toh and six months for Chng to deter those in the financial industry from making personal gains through deceitful means. Both men failed to disclose their beneficial ownership in the trades.

Bloomberg News