Thu, 26 January 2017 | 6pm 8 pm | Terrazza, Galaxy Macau
Two culture funds splash out MOP48 mln in Q4 Subsidies Page 5
Thursday, January 26 2017 Year V Nr. 1222 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Land disputes
Another letter from Seac Pai Van land concessionaries Page 2
Business
Club Cubic operator to open ‘Monkey Museum’ nightclub in Changsha Page 6
www.macaubusinessdaily.com
GDP
Taiwan reports 1.4 pct economic growth for 2016 Page 10
Ho Chio Meng trial
Ex-Office deputy chief says directly awarded contracts per orders Page 4
Debtor database delayed Gaming
The launch of the city’s junket proposed debtor database, which was originally slated for before Chinese New Year, would be postponed, confirmed the director of local gaming regulator Paulo Martins Chan, citing application procedures as possible reason for the delay, while its operator Macau Association of Gaming and Entertainment Promoters says February is now the new target to launch the system. Page 7
Sino-Luso Fund headquarters progressing
The plan is no plan
The government presented its planning for Zone B and Zone E1 to the Urban Planning Committee yesterday. But members felt dissatisfaction with the plans as details are lacking. Secretary Raimundo do Rosario admitted the flaws, yet said he does not have any details for the plans.
Establishment The establishment of the headquarters of the China and Portuguese-speaking countries Co-operation and Development Fund in the MSAR is under administrative procedures, said an executive member of Macao Trade and Investment Promotion Institute, Glória Batalha Ung. The member expects the project could be completed this year. Page 5
Japanese trade smiles
Urban Planning Page 3
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Commerce Japan posted a trade surplus in 2016, marking the first time in six years import costs haven’t outstripped those of exports, owing to a decline in energy prices, the Finance Ministry said yesterday. Page 11
2 Business Daily Thursday, January 26 2017
Macau Aviation
40 extra and charter flights for CNY greenlighted
A total of 40 extra and charter flights for the Chinese New Year have been approved, according to a press release of the Civil Aviation Authority yesterday. The extra and charter flights are operated by local flag carrier Air Macau, Shanghai-based Juneyao Air and Vietnamese budget airline Vietjet.
Of these additional flights, which are run between today and February 5, 25 connect the MSAR to Mainland China; six to Taiwan; four to Japan; three to South Korea; and two to Vietnam. AACM said the approvals aim to allow airlines to ‘increase their capacity to cope with the air transport demand from the outbound travels of Macau’s residents and the inbound travels of visitors.’ K.L.
Labour force
Fewer foreign workers The Labour Affairs Bureau (DSAL) released its latest data on the number of non-resident workers by sector of activity for the month of December 2016 Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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total of 177,638 nonresident workers were working in the MSAR with working permits (aka blue cards) as at the end of December 2016, a decrease of 2.2 per cent from the end of 2015, according to the official data released yesterday by the Labour Affairs Bureau (DSAL). Mainland China continued to be the main supplier of immigrant workers for Macau in the month, from which the number of workers totalled 113,408 people, a decrease by 2.5 per cent year-on-year. The other two major origins of the city’s non-resident workers were the Philippines and Vietnam, which saw 26,701 and 14,807 of their nationals working in the MSAR, increasing by 8 per cent and 0.5 per cent year-onyear, respectively. Hong Kong, which is now the fourth most important supplier of non-resident workers to the MSAR, used to be the third most important
supplier until October 2009, when immigrants from Vietnam surpassed it for the first time. Overall, the number of workers coming from Hong Kong decreased by nearly three fourths from 9,728 in December 2015 to 5,790 in December 2016. The other countries in the top-ten list of non-resident worker providers to the MSAR in December 2016 are all from Asia, and include Indonesia, Nepal, Thailand, Malaysia, Taiwan and Myanmar.
Sectors
As at the end of December 2016, the three sectors of economic activities that employed the highest numbers of immigrant workers were “Hotels, restaurants and the like” (49,990 people), “Construction” (34,613) and “Domestic help” (25,089). “Wholesale and retail,” as well as “Real estate activities and services provided to companies” were also important employers for nonresident labour force, hiring 19,877 and 18,972 workers respectively. DSAL noted in its report that 859
construction workers who were directly hired by the city’s gaming operators were counted in the sector of “Cultural and recreational
activities, lotteries, and other services” that employed a total of 13,341 non-resident workers as at the end of the year.
government’s failure to fulfil infrastructure requirements in the zone between the time that the land grants were awarded at the end of the 1980’s and in 2013, as well as the government’s freezing of the original landuse planning for the plots in order to conduct a new study of planning for the area in 1993. The city’s new land law mandates that a temporary or conditional land concession, which carries a validity of 25 years, can only become effective when the property project of a site is completed and is eligible for the
issuance of an occupation permit. For a site with the conditional land concession not yet effective and expiry date arriving, the site will have to be taken back by the government.
Land
The second letter A group of land awardees in Seac Pai Van published another statement in one month, urging the MSAR government to resolve the land law disputes Kam Leong kamleong@macaubusinessdaily.com
A group of land concessionaries of Seac Pai Van published a full-page statement in Chinese-language newspaper Macao Daily yesterday, urging the government to resolve the current land-law disputes. These land concessionaries complained again that the non-development of their awarded plots of land was due to the government’s urbanisation of Seac Pai Van and the absence of planning conditions issuances. ‘In 1993, given the urban development of Taipa, the then-government reckoned Seac Pai Van was no longer suitable for industrial uses and thus planned to change the planning for the area,’ the statement reads. It added the then-government assured the land awardees it would amend the land concession contracts and land-use terms for the concessionaires once it finished the change of the use of these land plots from industrial to residential. This is the second statement issued by Seac Pai Van land awardees in one month. Recently, they published an
open letter signed by ‘the land concessionaires of several land plots in Seac Pai Van’ in the same newspaper. The previous letter read that the non-development was due to the
‘Do as you ask’
According to the Official Gazette, since November last year, a total of 7 land plots in Seac Pai Van Industrial Zone saw their concessions declared invalid by the MSAR government. The Seac Pai Van concessionaries claimed in yesterday’s statement that they had been complementing the government’s needs for urbanising Seac Pai Van. ‘We have waited for 25 years [to develop the plots.] For the past 25 years, we paid rents, taxes and premiums on time. Some concessionaries have even applied financing from banks for land formation projects and have ceded some part of the plots for public roads,’ they wrote. ‘Some may think we are the liable parties as it is impossible not being able to complete a land development in 25 years time, perceiving our intention was to drive up the city’s land and housing prices. But was it really the concessionaries that delayed the land development?’ they queried. These awardees wrap-up the statement by requesting the government and the Legislative Assembly announce the original meaning of the new land law legislation, as well as urge the government to ‘come up with appropriate proposals to resolve the city’s current and future land problems.’
Business Daily Thursday, January 26 2017 3
Macau
Urban Planning
What’s the plan? Urban Planning Committee complains the government’s lack of plans in its planning for Zone B and Zone E1 Annie Lao annie.lao@macaubusinessdaily.com
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he majority of Urban Planning Committee members expressed concern over whether the government has made a comprehensive consideration in its planning for the reclamation areas of Zone B and Zone E1, due to the lack of details on public transportation and facilities in its provisional master plan for the two areas. A meeting was held by the Committee yesterday for the government to present its planning for the two reclamation zones.
According to the plan, a total of seven government office buildings and 2,000 housing units would be built on the east side of Zone B, that being opposite to MGM Macau on the Peninsula, which covers a total of 49 hectares. Meanwhile, Zone E1, which is adjacent to the Taipa Ferry Terminal and covers 53 hectares, will be developed to a plot housing primarily commercial and residential units, according to the plan. Committee member Wu Chou Kit, however, complained that the planning for Zones B and E1 does not contain sufficient details, suggesting the government cover more relevant
information for the two areas, such as the use of public facilities, electricity supply and water drainage system. “We have done three public consultations since 2011. The results for the latest consultation have not been finalized as I cannot see [the opinions] in this report. It does not outline the proposed use of space, sea and public facilities,” he pointed out. The member also urged that the government set up a solid implementation timetable for the planning as soon as possible. “It is taking too much time to implement the plan. [We aim to] resolve the increasing [land] demands from the city’s development through the reclamation projects,” Mr. Wu said. Another committee member, Leong Chong, also stressed during the meeting that the planning for Zone B does not take the city’s current public traffic issues into account. “Due to the high demand on new roads, the government should consider introducing water transport to ease the public road traffic,” Mr.
Leong opined. The Secretary for Transport and Public Works, Raimundo do Rosário, also admitted that the Land, Public Works and Transport Bureau (DSSOPT) has not yet done a formal planning for the two zones due to the lack of information and data gathered from other relevant departments. “I still don’t have sufficient information to answer the questions raised by committee members regarding public roads, pedestrian pathways and the design of a ventilation system,” the Secretary claimed. ‘Therefore, at this stage, the planning does not consist of many details.” In addition, the government official admitted the planning was not done by the most scientific measures. “Due to the urgency in planning, many things need to be done at the same time,” he said. But the Secretary has promised more information would be shared with the Committee as soon as his departments are able to gather further details from other parties.
4 Business Daily Thursday, January 26 2017
Macau Opinion
Ashley Sutherland-Winch* Real News Fake News Since midnight Saturday, it’s hard to find news articles that do not involve U.S. President Donald J. Trump. Frequently, stories include information regarding falsified reports or “alternative facts” from the White House and news media. Consumers have been wondering for months, what is real news and what is fake news, and now concerns are growing quickly. The world press, in today’s social media age, has the opportunity to present breaking news literally at their fingertips. Tweets from Twitter or posts on Sina Weibo can make international headlines in a matter of seconds. Telsyte’s recent Australian Digital Consumer Study found that “online news is now considered the most influential medium for Australian businesses and consumers, with one in three respondents accessing news through social media sites like Facebook and Twitter.” With the sheer volume of conflicting articles that are posted online, the question that is now being asked repeatedly by consumers is, “what is real and what is false?” Each person in the world has their “go to” media outlet for breaking news but now more than ever, social media exudes news posts at an ever-growing rate. A person who is browsing social media for updates on their colleagues’ new jobs, life announcements and new photos cannot stop the eyes from being inundated with links to news or articles on websites, some reliable and others less trustworthy - but how can an average consumer know the difference? Must we now accept that globally, we live in a “post-truth” era? A website that is gaining in popularity is Snopes.com. The website which began in 1995, started as a reference site for myths and urban legends, and has now become one of the internet’s most visited sites to “fact check” news. Now, more than ever, journalists are confronted with the challenging task of remaining competitive in a landscape that has become somewhat indifferent towards the principles upon which their practice is based. Consumers must become savvy and read multiple articles on a topic to confirm facts and sift through details. Social media platforms are also increasing their filters to decrease fake news that enters feeds. Facebook just announced its ‘Facebook Journalism Project”, to “establish stronger ties between the company and the news industry to collaborate with news organizations to equip people with the knowledge they need to be informed readers in the digital age. My best advice is to trust your intuition and read a lot of articles from reputable, well-established news sources. Responsible journalism absolutely exists and the truth is out there.
*Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Ho Chio Meng trial
‘We only followed the orders’ Prosecution accuses former deputy director of the Prosecutor’s Office, Elsa Cheang, to have broken the law as well by following the orders
Nelson Moura nelson.moura@macaubusinessdaily.com
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he city’s Court of Final Appeal continued to hear the corruption trial of former Prosecutor-General Ho Chio Meng yesterday, with the former Deputy Director of the Prosecutor’s Office, Elsa Cheang Hang Chip, continuing to provide testimony. The witness said that she felt “uncomfortable” with the way service contracts were awarded by the Prosecutor’s Office. According to the ex-Deputy Director, a separated supporting office is set up to only handle the contracts and public tenders that are awarded by the Office directly. She added many of the contracts were outsourced without following the standard procedures with the excuses of being “urgent and confidential”. The witness claimed she even sent a letter to the former top
Prosecutor in 2014, requesting to be excused from the contract awarding process. She said she always expressed her objective opinions to the ex-chief of the Prosecutor’s Office, Antonio Lai Kin Ian, but the latter would always dismiss them. But, she added she is not sure whether the orders of direct contract awards came directly from the former Prosecutor-General. Assistant Prosecutor-General, Chan Tsz King, questioned Ms. Cheang why she would have authorised contracts worth over MOP500,000 (US$62,580) even after she had addressed the matter with Mr. Lai. “This affects the reputation of the Prosecutor’s office. Why didn’t you question the Prosecutor-General about it? You violated the law too,” claimed the Assistant Prosecutor-General. Ms. Cheang responded that she wanted her superiors to “acknowledge the problem and solve it” as she believed that the superiors might “know more
about the matter than me”. “The Commission of Audit checks our expenses every year and they didn’t find anything irregular,” said Ms. Cheang. According to the accusation, the contracts authorised by Ms. Cheang include those granted to relatives of Mr. Ho and alleged business associate Wong Kuok Wai, although the witness said she wasn’t aware of any family relation between the parties. The presented contracts showed Mr. Ho’s brother-in- law, Lei Kuan Pun, was the owner of a parking lot, to whom a rental contract of MOP6,000 monthly was authorized by the Office for the use of the former driver of the ex-official, Mak Hak Neng.
The 16th floor
On the other hand, the Former deputy director was questioned again regarding the rental contracts of the units at the 16th floor of the Hotline Building, which the accusation considers was used by the former top official for his shell companies and associates’ office uses, apart from the use of a private sauna and resting room. Ms. Cheang claimed she did not consider the rooms “secretive” although ex-chief of the prosecutor’s office, Antonio Lai, had told her not to enter certain areas of the floor, given the fact that a judicial assistance department supporting confidential investigations was operating on the same floor. In addition, a former assistant of the Judicial Department, Chan Mok Leng, was also called to testify yesterday. The assistant, who had installed a computer in the resting room, said the room “looked like a hotel room with a minibar, living room, meeting room and sleeping room.” He added that he was told “not to tell anything about [the room] to anyone”. The trial will resume on February 6.
Economy
Guangdong seeks 7 pct GDP growth in 2017 This comes as a decrease on the 7.5 pct y-o-y growth seen last year Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com
The newly elected governor of the province of Guangdong is setting ambitious growth targets for 2017 after his election to the position on Monday. Governor Ma Xingrui noted his plans to revitalise the east, west and northern areas of the province which funnelled 20.45 million tourists into Macau, as announced on the China State Council’s website, aiming to achieve Gross Domestic Product (GDP) growth of 7 per cent year-on-year for the year, just shy of the 7.5 per cent year-on-year growth seen in 2016. The plans involve a RMB540 billion (MOP627 billion78.4 million) investment in key projects over the course of the year, with a focus on infrastructure, in particular regarding rapid transit networks, such as railways. Currently the neighbouring city of Zhuhai has two train stations that connect it to the rest of Guangdong province, passing through cities including Zhongshan and Shunde and connected principally to Guangzhou. Last year 44.1 per cent of all the tourists from the Mainland to the MSAR visited from Guangdong province. “Improving the rail systems, especially in less-developed eastern, western and northern Guangdong, can help to link these areas with the
Pearl River Delta and thus increase the efficiency of the whole province’s economic growth,” says Lin Jiang, head of Sun Yat-sen University’s public finance and taxation department, as cited on the site.
Plans
Governor Ma announced that a further focus of the provincial government during the year is research and development (R&D), with the governing body announcing for the first time the percentage of the GDP it’s anticipating to be made up by the sector – 2.65 per cent. Given the 7.5 per cent growth in GDP experienced last year, and the 7 per cent anticipated for this year, R&D’s contribution could reach RMB14.65 billion. “It shows that Guangdong attaches great importance to R&D, hoping to boost science and technology
development, and promote innovation,” commented Xin Pu, member of the Guangdong People’s Congress economic affairs committee, as quoted on the site. Last year, the province had the highest GDP of all provincial-level regions throughout China, at over RMB7.9 trillion. According to data from China’s National Bureau of Statistics, preliminary results for China’s overall GDP reached RMB74.41 trillion, as released on Monday. Of the 28 provinces in the Mainland, during the 2016-year, 21 of the provinces, municipalities and autonomous regions of the country achieved GDP growth over 7 per cent. The provinces of Tibet autonomous region, Chongqing and Guizhou were the leading GDP growth areas, with 11.5 per cent growth, 10.7 per cent growth and 10.5 per cent growth, respectively, with analysts noting that in the first two areas topping the list the “invisible hand of the government played a key role”.
Business Daily Thursday, January 26 2017 5
Macau Politics
Electoral commission for AL election formed
The other five members are prosecutor, Lai U Hou; president of the Civic and The electoral commission for this year’s Municipal Affairs Bureau, José Tavares; director of the Administration and Civil Legislative Assembly Election has Service Bureau (SAFP), Kou Peng Kuan; been formed, chaired by judge of the director of Financial Services Bureau, Court of Second Instance, Tong Hio Iong Kong Leong; and the Director Fong, according to a dispatch by the Chief Executive, Fernando Chui Sai On, of Government Information Bureau, Victor Chan Chi Ping. The year’s AL yesterday. The commission comprises election will take place in September. K.L six members including the president.
Trade
Headquarters of Sino-Luso development fund this year IPIM said that the project is currently undergoing administrative procedures Cecilia U cecilia.u@macaubusinessdaily.com
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acao Trade and Investment Promotion Institute expects the relocation of the headquarters of the China-Portuguese Speaking Countries Co-operation and Development Fund to the MSAR would be able to be completed within this year. According to Glória Batalha Ung, an executive member of IPIM, the establishment of the headquarters in the city is undergoing administrative procedures. “Last year, the Chinese Premier Li Keqiang confirmed the headquarters of the Fund to be set up in Macau […] a work force is created and supported by different government departments to focus on the headquarter set up,” said Ms. Ung on the sidelines of an IPIM’s introductory session of the Fund yesterday. The official added that the government department would provide assistance (such as providing information, receiving their documents as well as assisting them to resolve problems) to local companies that are interested in applying for the fund prior to the completion of the relocation. “We wish that we could respond to their enquiries within 10 working days,” Ms. Ung noted. The IPIM executive member added that the Fund also targets to assist the city’s SMEs, pointing out yesterday’s
introductory session aimed to provide more information to these companies. “Through [the] introduction session, we would like to let SMEs know what the Fund is all about, how to apply to the Fund,” the IPIM executive member said. She also revealed that IPIM is suggesting the Fund management company should consider the exploitation
of a new platform in order to allow more local SMEs to participate or access the Fund. “We will inform the public once solid ideas are produced,” Ms. Ung claimed. The US$1 billion China-Portuguese Speaking Countries Co-operation and Development Fund was established in 2013; it supports the development of finance and trading between Mainland China and Portuguese-speaking countries. Steven Lee, a managing director of local company New World
Development Co Ltd, told reporters that he planned to enquire whether the central government has any policies to assist Macau’s SMEs that are interested in trading with Portuguese-speaking countries. “We wish to import some meat from Brazil, but apparently there are only a few companies that are approved by the central government,” said Mr. Lee. “As such, we would like to ask the central government to provide new policies to open up more opportunities for us to trade with China and Portuguese-speaking countries.”
Funds
MOP48 mln in subsidies to cultural funds in Q4 2016 The two funds both received over MOP20 million each Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
The amount of funding distributed under two separate cultural funding initiatives - the Cultural Fund and the Cultural Industries Fund – totalled MOP48.1 million (US$6 million) in the final quarter of 2016, according to dispatches published in the Official Gazette yesterday. The two funds both received over MOP20 million each, however the Cultural Fund totalled nearly MOP26.8 million, about 25 per cent more than the Cultural Industries Fund received, at about MOP21.3 million for the quarter. In total, the Cultural Fund subsidized 476 groups, companies, families and individuals over the quarter. 158 of the recipients of the fund were families and individuals, including seven individuals who received MOP60,000 each for funding for the Program of Subsidies for the Production of Albums, in 2014. Associations that received subsidies
from the Cultural Fund amounted to double those of families and individuals, at 316, receiving a total of MOP17.9 million in funding. Of the associations, the Macau Culture and Art Industry Association was one of the largest recipients– which received a total of MOP383,200 to hold two ‘visual arts’ activities. The
General Union of the Neighbourhood Associations (UGAMM), also known as ‘Kai Fong’, also received MOP499,400 to conduct two cultural heritage activities, according to the dispatch, similar to the Na Cha Temple Association, who received one MOP469,800 subsidy for three cultural heritage activities. The only company to receive a subsidy under the fund was the Permanent After-Work Student Centre,
amounting to MOP250,000.
Cultural industries
In total, 46 groups received funding under the Cultural Industries Fund, with the largest amount of funding going to the Macau Celebrity Wax and 3D Museum. Located next to the Ruins of St. Paul’s, across from the Yellow Building which formerly housed Forever 21, the shop received MOP3.14 million in subsidies for the fourth quarter of last year, it’s first year of operation. The shop has figures of celebrities including David Beckham and Michael Jackson. The second-highest funded project was to 1220 Film Production Ltd, for a ‘Platform of Transmission service, International Sale and Cinematographic Post-Production and Access to the International Exposition Fair,’ according to the dispatch. One of the other recipients of the fund was Azalea Ho Import and Export Company Limited, to ‘Create a Creative Macau Design Brand Azalea Ho to be Internationally Known,’ according to the dispatch. The company received MOP1.67 million in funding during the quarter.
6 Business Daily Thursday, January 26 2017
Macau
Franchise
Cubic Opens nightclub in Changsha Sub-franchise agreement leads to first Monkey Museum nightclub in China
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he operator of the local nightclub Club Cubic is planning to open the ‘first Monkey Museum Night Club in China’, according to a release on the Hong Kong Stock Exchange. Luk Hing Entertainment Group Holdings Ltd, parent company to the local club, announced that it entered into an ‘exclusive franchising agreement’ with Yuri Holdings Co. Ltd, as previously announced on December 28, and has recruited
a sub-franchiser for the ‘monkey museum’ range of products offered by Yuri Holdings. According to the release, the ‘operation of monkey museum bar, lounge and night club’ will be the ‘first monkey museum night club in the PRC [People’s Republic of China]’, and will be set up in Changsha City, in the Hunan Province. Luk Hing and Yuri have entered into the sub-franchising agreement with the ‘independent third party and an operator of night clubs and
bars’ in the Hunan Province. Receivables under the agreement will include: ‘all franchising fee’s from the sub-franchisee including ‘a one-off non-refundable start-up joining fee’ and ‘monthly fees based on the revenue of the night club’, in exchange for being eligible to use the trademark of the monkey museum night club ‘for an initial period of eight years’. Luk Hing will receive ‘a portion of the franchising fees in return for its services’, notes the release. Monkey Museum was founded in Korea by Lee Seunghyun, an ‘internationally renowned artist and singer’ and a member of Korean pop
group Big Bang, which has performed in Macau. Lee himself had performed in Cubic in both 2015 and 2016, with the club noting it ‘may continue to engage Mr. Lee to perform in our Club Cubic in the future’. ‘Mr. Lee is also our cornerstone investor for the listing of our shares on the Growth Enterprise Market of the Stock Exchange,’ notes the release. The agreement is part of the Luk Hing’s effort to ‘diversify its sources of revenue by leveraging on its expertise in offering premium clubbing and entertainment experience to customers through operating Club Cubic in Macau’. K.W.
Markets
HNA Group to acquire SkyBridge Capital
SMEs
BOC Macau offers financing to SMEs with casino contracts The Macao Chamber of Commerce and the Macau branch of Bank of China (BOC Macau) have signed a co-operation agreement for the latter to provide financing services to local SMEs that are awarded procurement contracts from local gaming operators. According to broadcaster TDM, BOC Macau will provide financing up to MOP1 billion (US$125 million) for these SMEs under the first stage of the co-operation scheme. “Local SMEs need the financial
support from local banks in order to grow their business,” said the chairman of the Chamber Ko Hor Nin, as quoted by the news outlet. “The Chamber hopes to co-operate with the local banks to resolve the financial difficulties that local SMEs face when doing businesses here.” According to the broadcaster, BOC Macau has provided financial services to over 30,000 local SMEs as at the end of the last year, of which total loan amounts reached over MOP25 billion. A.L.
Corporate
Grand Hyatt kicks off CNY celebrations
Grand Hyatt Macau has started its series of celebrations for the Chinese New Year. Until January 27, calligraphy artist Master Un Meng will be in the Lobby Boutique showcasing his talent as he creates unique blessing inscriptions for guests and visitors to take home. In addition, on Friday, the hotel will set off
HNA Group Co Limited is expanding its portfolio in the global asset management business by acquiring a majority stake in SkyBridge Capital, an alternative investment firm founded and co-managed by Anthony Scaramucci, an adviser to Donald Trump, reported China Daily. According to the same report, SkyBridge announced that it has signed an agreement with Chinese billionaire Chen Feng’s HNA Capital (US) Holding and RON Transatlantic EG to sell the majority of its shares in a deal that is expected to be closed in the second quarter of 2017. Though the detailed financial transactions were not disclosed, Bloomberg reported that the deal includes at least the SkyBridge Alternatives Conference (SALT) it organizes every year in the U.S. and Asia, which is valued at about US$200 million (MOP1.6 billion). SkyBridge’s senior management and investment teams will remain intact, while Scaramucci will step down. HNA is the parent company of
Hainan Airlines Co Ltd., China’s largest private airline. Its assets are now valued at more than RMB600 billion (US$87 billion/MOP696.7 billion), prior to the first acquisition of SkyBridge. SkyBridge Capital has US$12 billion in assets under management or advising, offering hedge fund investing solutions to individual investors and institutions, hedge fund advisory services, customized separate account portfolios, and a long-only mutual fund, according to the company. S.Z.
Corporate
firecrackers and fireworks to dispel evil and bring good luck, whilst shooting off a very long firecracker - with 30-meter long golden dragons and 5 Southern lion dances to welcome the New Year on Saturday. From Saturday until next Monday, the hotel will also arrange ‘God of Wealth’ to give blessing and Lai See to its guests.
Grand Lapa Macau wins energy saving contest
Grand Lapa Macau was awarded as the Champion of the Macau Energy Saving Contest 2016, a six-month contest jointly organised by Companhia de Electricidade de Macau (CEM) and the Energy Sector Development Office (GDSE). “This has been one of our annual
directives for many years,” said Rutger Verschuren, General Manager of the hotel. “The hotel has upgraded all outdoor pools’ heat pumps, which helped us to acclimatise the water more efficiently. Also, our lift upgrade enabled us to save 50 per cent more energy.” The hotel’s sister property Grand Coloane Resort was also awarded as 2nd runnerup in the contest.
Business Daily Thursday, January 26 2017 7
Macau Gaming
DICJ licenses 126 junket operators for this year
A total of 126 VIP promoters have been licensed by the Gaming Inspection and Coordination Bureau (DICJ) this year, according to yesterday’s Official Gazette. The number, compared to 141 licensed junket operators as of January last year, represents a decrease of 10.6 per cent. Of these licensed junket operators this year, 110 are companies
and 16 are individuals. The local gaming regulator updates the list of the city’s gaming promoters at end-January each year. Over the weekend, the director of DICJ, Paulo Martins Chan, said the reasons for the denials of some license renewals were due to the failure of their accounts meeting requirements, adding that the regulator would carry out special audits on the accounts of other VIP operators following the Chinese New Year. K.L.
Gaming
The wait is not yet over DICJ Director said the launch of junket-proposed debtor database system will be delayed, while the operator of the system now hopes to unveil the new initiative in February Cecilia U cecilia.u@macuabusinessdaily.com
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irector of the Gaming Inspection and Coordination Bureau (DICJ, Paulo Martins Chan, said the launch of the junket-proposed debtor database system will be delayed. “What I know is they [the Macau Association of Gaming and Entertainment Promoters] have postponed the launch of the database system,” the DICJ Director said on the sidelines of the opening ceremony of the Responsible Gambling Information Kiosk 3.0 yesterday. Asked by reporters the reasons for the postponement, the gaming regulator head, suggesting reporters enquire the association itself,
conjectured that the delay might be owing to the issues that had arisen during the trial operation of the system or the application procedures. Meanwhile, Kwok Chi Chung, President of the Macau Association of Gaming and Entertainment Promoters (MAGEP) confirmed to Business Daily that the launch of the system will face delay, yet added the association now hopes to launch the system within February. “Everything is ready and we are now just awaiting the approval from Office for Personal Data Protection”, said Mr. Kwok.
Gaming machines
On the other hand, the DICJ director said the Bureau is already working to tighten its regulations for the city’s gaming machines. “Such as auditing
and counting […] we have updated these procedures to facilitate [our supervision] and made the guidelines more rigorous,” he said. The MSAR government said in its 2017 Policy address that the gaming regulator would complete bills amending the current regulations on the supply systems and requirements of gaming machines, gaming equipment and gaming systems this year. With the Chinese New Year
Legend Palace applying gaming operation
The DICJ Director revealed yesterday gaming concessionaire Sociedade de Jogos de Macau Holdings (SJM) had already filed an application for running gaming business inside the soon-to-beopened Legend Palace Hotel at the Fisherman’s Wharf. “We are still evaluating and conducting research,” he said. “We will inform you once things are settled.”
approaching, Mr. Chan expected a positive performance would be recorded for both mass market and the VIP sector, although the market is normally quieter than usual during the first few days of the Chinese New Year holiday. “I know that many of the hotels are fully booked during this Chinese New Year holiday, therefore I am very optimistic over the performance of the gaming sector,” he said.
The new casino-hotel project, developed by Macau Legend Development Ltd, completed its construction last September and is to offer a total of 233 new rooms to the city. Currently running gaming business under the SJM license in its properties, Macau Legend said in its interim report released last September that it would expand its self-run VIP business to the Legend Palace Hotel when it is opened.
8 Business Daily Thursday, January 26 2017
Greater China Small-cap firms
Great rebalancing has gone missing from stock market Authorities put a focus on boosting borrowing costs to reduce leveraged bets in financial markets Kana Nishizawa
I
t was supposed to be the face of new China -- a stock market in the technology hub of Shenzhen designed to nurture future stars like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Yet the ChiNext market set up in 2009 is proving a dud, at least when measured against the old-economy heavy Shanghai Composite Index in recent months. That’s in face of economic data that show how the new growth drivers -- consumption and services, where private companies dominate -- are in good shape. What helps explain the divergence is the move by policy makers to rein in
liquidity in late 2016, part of a broader effort to reduce a record build-up in leverage. That’s put pressure on the private sector businesses that lack the kind of privileged access to cheap financing enjoyed by big state-owned enterprises -- all the more so given their higher stock valuations relative to earnings. And the old-line players have seen their earnings improve as commodity prices come back. “There’s funding uncertainty for some of the smaller private companies -- it’s always the big boys that get favoured and bailed out and it’s the smaller ones that are having a hard time,” said Uwe Parpart, Hong Kong-based chief strategist at investment bank Capital Link International Holdings Ltd. The underperformance was clear in Tuesday trading, when the ChiNext gauge slumped 1.4 per cent, led by technology firms including Gosuncn Technology Group Co., a supplier to the telecommunications industry, and Allwinner Technology Co., which
designs semiconductor chips for tablets and smart phones. By contrast, the Shanghai Composite rose 0.2 per cent, with cement makers and an oil-pump maker among the winners. China’s policy makers face the conflicting priorities of reducing leverage that approached the equivalent of 250 per cent of the economy’s size in 2015, and sustaining growth at a minimum of around 6.5 per cent. A shift toward stimulus spending early last year, along with some industrial capacity cuts, helped to send producer prices up the most in more than five years in December. That in turn has driven a rebound in industrial companies’ profits.
Less support
With the economic growth stabilizing, authorities put a focus on boosting borrowing costs to reduce leveraged bets in financial markets in the final months of 2016, efforts that may carry through this year, in the view of a number of economists.
“There is less support for small caps from the government than big cap names, which tend to be SOEs,” said David Cui, a strategist at Bank of America Corp. in Singapore. China’s onshore small-capitalization companies “will probably underperform the broader market, or the major caps, for the foreseeable future,” he said. But don’t count the ChiNext out for the count, analysts say -- ultimately China’s growth will be driven by the more-nimble private enterprises catering to the needs and evolving tastes of the nation’s swelling middle class. “Shenzhen is by far the more interesting market, by a factor of 10, and it is definitely the future of China,” said Mark Matthews, Singapore-based head of Asia research at Bank of Julius Baer. Inflation and increasing pricing power served as tailwind for old economy shares last year, “but long term do you really want to be in Chinese steel and coal? I don’t think so.”
Stock valuations
Jordi Visser, who runs investments at US$1.3 billion hedge fund Weiss Multi-Strategy Advisers, says of Shenzhen’s market: “I still think it’s going to do very well in the coming years.” And he notes that many of China’s new-economy tech giants aren’t included in that market -such as New York-traded Alibaba, the country’s biggest online retailer. Shenzhen-based Tencent is listed in neighbouring Hong Kong. For now, valuation levels make buying into the ChiNext a hard sell for some investors. The gauge of mostly small-cap technology companies trade at 38.7 times reported earnings -- more than double the ratio for Shanghai, according to data compiled by Bloomberg. “Valuation is still high -- so it’s not like you can simply go in and buy anything on ChiNext and say you’re buying into the new economy,” Tai Hui, chief Asia market strategist at JPMorgan Asset Management, told reporters in Hong Kong this month. “These are high-volatility stocks that still need a lot of professional research and insight.” Bloomberg News
Globalization
EU calls for Beijing to take ‘concrete’ steps in opening market In June 2016, the European Chamber of Commerce in China warned that foreign companies face an increasingly hostile environment in China The European Union urged China yesterday to make “concrete progress” in opening its markets to global investment, after Chinese President Xi Jinping decried protectionism in a speech at the recent World Economic Forum in Davos, Switzerland. “A speech is a speech and actions are actions,” said Hans Dietmar Schweisgut, EU Ambassador to China, adding that he would be “surprised” if Xi was unable to translate words into action. At Davos last week, Xi called for “inclusive globalization” and for global unity, saying “self-isolation will benefit no-one”, two days before the inauguration of U.S. President Donald Trump.
During that week, China’s cabinet issued measures to further open the economy to foreign investment, including easing limits on investment in banks and other financial institutions. No further details were provided, nor a timetable for their implementation. So far, the EU has not seen “sufficient signs that China will be willing to grant reciprocity of market access to European companies,” Schweisgut told reporters in Beijing. In June 2016, the European Chamber of Commerce in China warned that foreign companies face an increasingly hostile environment in China, with fewer than half its members saying they planned to expand operations in the world’s
second-largest economy. Billionaire investor Wilbur Ross, Trump’s choice for commerce secretary, has called China the “most protectionist” country in the world, and said China’s officials “talk much more about free trade than they actually practice.”
“A speech is a speech and actions are actions” Hans Dietmar Schweisgut, EU Ambassador to China Trump has previously criticised China’s trade practices and threatened to impose punitive tariffs on Chinese imports, and while he did not mention China at his inauguration,
he pledged to put “America first” in a nationalist speech. Schweisgut played down chances of a trade war between China and the United States, saying it would be “self-defeating” and that to speculate about the risk is to “look too far down the road”. China has said it is confident it can resolve trade disputes with the new U.S. government, though some state media and government advisors have warned that U.S. aircraft manufacturers, automobile companies and agricultural products could be caught in the cross-fire of increased trade tensions. When asked whether Europe saw any opportunities in China’s warnings of punitive measures against the U.S., Schweisgut said this was “interesting speculation” but that he did not know enough about Trump’s trade policy plans to comment. Reuters
Business Daily Thursday, January 26 2017 9
Greater China Banking
In Brief
Headhunters seek national experts as capital under strain Rising bad loans, falling profitability and tighter Basel III financial regulations are straining bank capital Denise Wee
Even as investment banks cut jobs across Asia, they’re hiring staff to help China’s lenders reinforce buffers against a financial crisis. Difficulty finding bankers with Chinese language skills and relevant expertise is also forcing firms to “retool” existing employees with training, global headhunting firm Sheffield Haworth said. There’s never been more at stake after Chinese lenders raised a record US$62.8 billion selling dollar bonds in 2016. Rating companies say they will need to sell more debt with equity characteristics to replenish capital this year. “Banks are keen to hire financial institution specialists within their debt teams as many anticipate a potential wave of hybrid capital issuance,” said William Bown, a Hong Kong-based executive director for global banking at Sheffield Haworth. “Historically, the specialists with knowledge of bank capital have been flown in from markets like Europe or Australia. But banks increasingly have to make do with less, and ideally they want a single banker with knowledge of the product who is fluent in Mandarin.” Rising bad loans, falling profitability and tighter Basel III financial regulations are straining bank capital. Outstanding credit swelled to 264 per cent of gross domestic product in 2016, Bloomberg Intelligence estimates. Moody’s Investors Service and S&P Global Ratings said higher leverage is amplifying credit risk, while Fitch Ratings Ltd. said poorer loan quality and shadow banking curbs
will increase fundraising pressures. “The credit story for Chinese banks is deteriorating, with more bad loans,” said Mark Young, Singapore-based head of Asia-Pacific financial institutions at Fitch. “Regulatory requirements in China are evolving and there is increased recognition of risks in off-balance-sheet products such as wealth management products and the need to top up capital as a result.” Last year, 59 per cent of fees for underwriting dollar bonds in Asia ex-Japan came from financial issuers, the most since 2003, New York-based Freeman & Co. estimates. U.S. currency debt offerings by banks in the region climbed in 2016 to US$89.1 billion, 49 per cent of total bonds, Bloomberg-compiled data showed. The proportion was 61 per cent for China’s lenders, the data showed. Sales of dollar debt for capital that complies with Basel III standards rose 8 per cent to US$12.7 billion in Asia ex-Japan, although there was a lull in such issuance from China after a binge in 2015. Bigger banks will also have to start selling Total Loss-Absorbing Capacity debt, designed to make key lenders safer by ensuring they fund themselves with securities that can absorb losses in a crisis. Underwriters are preparing for the bonanza. Mizuho Securities Asia Ltd. hired Pramod Shenoi as head of debt capital markets for the financial institutions group for Asia-Pacific
excluding Japan in December. Natixis SA drafted in David So as an executive director for debt capital markets in November as part of its ambition to expand in that area, Alain Gallois, chief executive officer, corporate & investment banking for Asia-Pacific, said in an e-mailed response to questions. “The timing of the expansion coincides with a period of increased clarity for TLAC implementation,” he said. “Such themes are recognized as particularly pertinent to financial institutions in the Asia-Pacific given the mix of global systemically important banks and high-profile borrowers.” Fitch said that the 15 Chinese commercial banks it rates have announced plans to raise the equivalent of US$65 billion in additional Tier 1 notes by the end of 2018. Chinese banks’ nonperforming ratio rose to 1.76 per cent for the quarter ended Sept. 30, 2016, the highest since 2009, according to China Banking Regulatory Commission data. The central bank plans to encourage lenders to issue more dollar offshore, according to people familiar with the matter, to curb declines in foreign currency reserves. “We expect the Chinese banks to dominate and account for a large proportion of global additional Tier 1 issuance,” said Young of Fitch. Bloomberg News
Chinese ambassador
Cooperation with the U.S. expected to continue in Trump era The Chinese envoy listed a range of areas where the two countries can continue and deepen cooperation, including trade and finance China and the United States are expected to continue cooperation under the new U.S. administration led by Donald Trump, the Chinese ambassador to the United States said Tuesday. Although the Trump administration has yet to formulate its China policy, the general trend of China-U.S. cooperation cannot be reversed as it is “the only right choice” for both countries, said Cui Tiankai on the side-lines of a Lunar New Year reception at the Chinese Embassy. Cui noted that such cooperation is in the interests of both China and the United States, the world’s two top economies and permanent members of the United Nations Security Council. He also expressed the hope that the two sides can maintain the multi-layer dialogue and exchange mechanisms, which were created in the past years. Tangible progress has been achieved over the years in China-U.S. joint efforts to build a new model of relationship based on nonconfrontation, nonconflict, mutual respect and winwin cooperation, Cui said. The Chinese envoy listed a range of areas where the two countries can continue and deepen cooperation, including trade, finance, security, energy, infrastructure and mutual investment, as well as some regional and global issues.
Cui expressed the hope that the two sides could open up new areas for cooperation as their interests are increasingly intertwined. On the South China Sea issue, Cui emphasized that it is only a dispute on territorial and maritime rights between China and certain ASEAN members, rather than a geopolitical competition between China and the United States. Citing progress being made in the talks on formulating the Code of Conduct in the South China Sea and maritime cooperation, Cui said countries from outside the region should support such efforts to restore tranquillity instead of creating new hurdles. Asked about the China-U.S. trade frictions, Cui said China is firmly opposed to fighting a trade war with
the U.S. side because both will suffer as a result. “Currently, the world economy needs a strong engine to lead to stronger development and faster growth, it’s inescapable responsibility for China and the United States to do this, rather than heading toward a trade war,” the ambassador said. On the decision by the Trump administration to quit the Transpacific Trade Partnership (TPP), Cui refuted the notion that China will take over the U.S. role as the global leader who makes the rules of trade in the future. “I think this is a misleading notion, because international trade rules cannot be made by the United States or China alone, and rather, they should be made and implemented by all nations in the world,” Cui said. On the Taiwan issue, Cui reiterated that the one-China policy, adopted by previous eight U.S. governments, is the political foundation for China-U.S. relations and is “nonnegotiable.” Xinhua
Trump administration has yet to formulate its China policy
State media
Trade war with the U.S. is a lose-lose A trade war between China and the United States would harm both countries, the overseas edition of the state run People’s Daily said on Wednesday, reflecting concerns over the protectionist, and anti-China stance taken by new U.S. President Donald Trump. “If a trade war developed between the two countries, both China and the U.S. would be negatively impacted,” the newspaper said in a commentary. “In the end neither side would win, it would bring harm to other countries and that harm would be brought to others without benefits to the U.S. or China.” Corporate
Evergrande gets nod for spin-off of property assets China Evergrande Group said it had received approval from the Hong Kong bourse to spin off its property projects, paving the way for the country’s largest developer to proceed with a backdoor listing of those assets in Shenzhen. The injection of assets into Shenzhen Real Estate is aimed at taking advantage of much higher valuations commanded on the mainland due to a large pool of retail investors - making it easier for heavily indebted Evergrande to raise funds. Evergrande still needs to finalise details with Shenzhen Real Estate and obtain approvals from shareholders, Chinese regulators and Shenzhen government bodies. Tariffs
U.S. declares Mainland truck, bus tires dumped The U.S. Commerce Department said on Monday it made a final finding that bus and truck tires from China were dumped at below market prices and were unfairly subsidized. The department determined final subsidy rates ranging from 38.61 per cent to 65.46 per cent and antidumping margins ranging from 9 per cent to 22.57 per cent, it said in a statement. In 2015, U.S. imports of more than 8.9 million truck and bus tires from China were worth US$1.07 billion, the statement said. The International Trade Commission, which must find damage to U.S. industry for the tariffs to remain in effect, is expected to release its conclusion on March 6. Overcapacity
Major steel city allocates funds to slash production China’s major steel making city of Tangshan will continue to channel funding this year to help reduce excess steel and iron production, authorities said. A total of RMB100 million (about US$15 million) has been earmarked this year to support the steel and iron industries in further cutting overcapacity, according to Tangshan government in the northern province of Hebei. The funds will be used to support those workers made redundant to find new jobs, as well as assisting firms with restructuring and upgrading. It will be also used to reward steel and iron enterprises that meet this year’s capacity-cut targets.
10 Business Daily Thursday, January 26 2017
Greater China Official data
Taiwan’s GDP grows at best pace in nearly 2 years Momentum showed signs of cooling, with the economy growing at half the pace of the previous quarter Jeanny Kao and J.R. Wu
T
aiwan’s economy grew at its fastest pace in nearly two years in the fourth quarter on strong demand for its technology products, but rising global trade protectionism is clouding the outlook. While the trade-dependent economy has recovered from a brief recession in late 2015, its fortunes could deteriorate again on trade frictions, especially between the United States and China, its two largest trading
partners. The withdrawal of the United States from a broad trans-Pacific trade pact could have wider implications for Asian exporters such as Taiwan. “The impact and subsequent measures by the United States’ protectionist policy of backing out of the Trans-Pacific Partnership will be watched,” Jack Huang, an official with the Directorate General of Budget, Accounting and Statistics told a news conference yesterday. Gross domestic product expanded
2.58 per cent in the October-December quarter from a year earlier, up from 2.03 per cent in the prior quarter, but was slower than 3.1 per cent forecast in a Reuters poll. Momentum showed signs of cooling, with the economy growing at half the pace of the previous quarter, by a seasonally adjusted annualised 1.89 per cent. The economy managed to grow 1.4 per cent in 2016, faster than 0.72 per cent the previous year, helped by strong exports at the year-end, but this looks unlikely to be sustained due to global uncertainties and weak growth in Taiwan’s key export markets. Taiwanese manufacturers produce a vast array of hi-tech goods that are a key engine of growth for the
economy. Exports grew in the final quarter of last year, while export orders and industrial output have both been positive since August. Domestic demand was driven in the fourth quarter by capital formation primarily from investments in the semiconductor sector, but private and government consumption remained weak, the data showed. Taiwan President Tsai Ing-wen, however, has vowed to restructure the economy and use proactive fiscal policy to expand infrastructure investment to raise domestic demand.
Key Points Q4 preliminary GDP +2.58 pct y/y, below f’cast +3.1 pct 2016 GDP +1.4 pct, faster vs +0.72 pct in 2015 Taiwan president has vowed proactive fiscal policy “There is some space for the government to provide some investment and consumption,” said Emily Dabbs, economist with Moody’s Analytics in Australia. She noted that while manufacturing activity and hiring improved in the fourth quarter, the gains didn’t translate to better wages nor consumer spending, which may indicate businesses are not yet confident about their outlook. Capital Economics’ Senior Asia Economist Gareth Leather expects growth to slow over the coming quarters. “The election of Donald Trump represents an additional downside risk to the export outlook,” he said. Taiwan’s long-term economic planner, the National Development Council, has estimated GDP to average 2.5 per cent to 3 per cent between 2017-2020. Reuters
Outflow
Merchants Bank tightens rules for mainlanders opening HK accounts Opening accounts in Hong Kong is also getting more difficult for Chinese individuals China Merchants Bank (CMB) will next week sharply tighten eligibility rules for mainlanders to open accounts at its Hong Kong branches, the latest move by Chinese lenders to curb capital outflows as Beijing steps up efforts to temper a slide in the yuan.
‘In November, China’s forex watchdog started vetting outbound payments worth US$5 million or more’ Starting Feb 1, applicants for account opening at CMB’s Hong Kong branches, as well as at Wing Lung Bank, controlled by CMB, must have assets at the bank averaging RMB5 million (US$727,018.93) each day over the past three months, a 100-fold increase from the RMB50,000 threshold previously, CMB said in a notice. The notice, distributed by CMB’s headquarters to its nationwide outlets that handle applications from
mainland clients, was obtained by Reuters, and confirmed by the bank’s client service department. Chinese banks, under pressure from the country’s foreign exchange regulators, have already taken a series of measures to restrict capital outflows, in a bid to ease depreciation pressure on the yuan. The yuan fell nearly 7 per cent against the dollar last year, the biggest decline since 2009 as worries about the economy and expectations of a
faster pace of U.S. interest rate increase triggered an outflow of funds. In November, China’s forex watchdog started vetting outbound payments worth US$5 million or more, and starting Jan 1, individuals purchasing forex at banks were banned from using the money for investment purposes, such as buying overseas properties and certain types of insurance. Privately, wealth managers say once the money is in Hong Kong accounts, it would be difficult for regulators to track how the money is used afterwards. But opening accounts in Hong
Kong is also getting more difficult for Chinese individuals. Mainland applicants need to wait for four to five months to open Hong Kong accounts via Industrial and Commercial Bank of China (ICBC), according to ICBC’s Shanghai branch, and three of the city’s outlets. CMB, which already strengthened approval for mainlanders’ Hong Kong account openings last December, said that starting next month, the bar would be further raised. “Clients who don’t meet the asset requirement (of RMB5 million) are banned from this business,” according to the notice. Reuters
Business Daily Thursday, January 26 2017 11
Asia Trade
Japan exports up for first time in 15 months Exports to China, Japan’s largest trading partner, rose 12.5 per cent in December Tetsushi Kajimoto
J
apan’s exports rose for the first time in 15 months in December on strong sales of electronics and car parts, a positive sign for the export-reliant economy even as U.S. protectionism threatens to hurt trade across the region and dent external demand. Ministry of Finance data showed yesterday that exports rose 5.4 per cent year-on-year in December, compared with a 1.2 per cent annual increase expected by economists in a Reuters poll. It followed an annual 0.4 per cent decline in November. The volume of shipments also rose 8.4 per cent from a year earlier, up for a second straight month, underlining a pickup in external demand. The trade data should be welcome news for the Bank of Japan, which is seen maintaining an upbeat view on the world’s third largest economy at a policy review next week on prospects of improving global growth. However, worries about protectionism under U.S. President Donald Trump have raised uncertainty over the outlook as he formally withdrew the United States from the Trans-Pacific Partnership trade deal on Monday, distancing America from its Asian allies. “Global demand is firming up as emerging markets in Asia are catching
up with a recovery in advanced economies,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “If debate on protectionism leads to an unwelcome rise in the yen, that would dampen the momentum towards a pickup in Japan’s exports though.” BOJ Governor Haruhiko Kuroda last week offered an optimistic view on global recovery prospects, indicating the central bank will maintain its upbeat economic and price forecasts when its board conducts a quarterly review of projections on Jan. 30-31. The BOJ chief also dismissed concerns that protectionism could spread and undermine global trade.
For the whole of 2016, Japan posted a trade surplus of 6.8 trillion yen (US$59.95 billion) with the United States, down 4.6 per cent from 2015, with U.S.-bound car shipments rising for a second straight year. In December, the value of exports to the United States, Japan’s second largest trading partner, rose 1.3 per cent year-on-year, the first increase in 10 months led by shipments of automobiles and car parts, the MOF data showed. Exports to China, Japan’s largest trading partner, rose 12.5 per cent in December to 1.3 trillion yen, a record amount, helped by shipments of car parts and electronics equipment. Analysts note the fall in the yen at the end of last year had helped boost exports. Imports fell 2.6 per cent on-year in December, versus
the median estimate for a 0.8 per cent annual decrease, resulting in a trade surplus of 641.4 billion yen - the fourth straight month of surpluses. On the whole the main risk to the outlook for the region stems from external headwinds, analysts say.
Key Points Exports +5.4 pct yr/yr in Dec vs forecast +1.2 pct Dec imports -2.6 pct yr/yr vs forecast -0.8 pct Trade surplus with U.S. at 6.8 trln yen in 2016 Weak yen, global demand brightens recovery prospects Worries over protectionism under Trump clouds outlook “Several headwinds to trade remain including trade protectionism and the likely slowing of Chin’s property sector,” said Vaninder Singh, Asia economist at RBS, in a note to clients. Reuters
Repeat of trade war
All the same, investors are wary about prospects for global trade as Trump has criticised Japan - along with his primary target China - for running trade surpluses with the United States. Earlier this month, Trump took aim at Toyota Motor Corp, warning the world’s largest automaker that it would face a “big border tax” if it exported Mexico-built cars to the U.S. market. All of this has raised concerns about a repeat of the trade friction that escalated in the 1980s between Tokyo and Washington.
Tourism
Thailand to fully open e-visa service in 2018 A Global Summit will take place in Bangkok from April 26 to April 27 Thailand will launch the first phase of e-visa service later this year and will open its e-visa service fully in 2018, said the kingdom’s Tourism and Sports Minister Kobkarn Wattanavrangkul this week in a press conference. The minister said the process of opening e-visa service takes time as it involved different ministries. E-visa service is expected to facilitate international travellers’ entry to the country, which welcomed some 32.59 million foreign tourists in 2016. Chinese are the biggest visitors to Thailand, accounting for about 30 per cent of all foreign tourists, but Chinese tourists still need paper visa and wait in long queues in customs to entry the country. E-visa will be a major topic during World Travel & Tourism Global Summit 2017 which is going be held in Thailand’s capital Bangkok, said David Scowsill, President and CEO of World Travel & Tourism Council, during the press conference about the event. Scowsill said many international travellers still need paper visa right now and so his council is encouraging
governments around the world to open e-visa service to facilitate travel. The Global Summit will take place in Bangkok from April 26 to April 27, which global leaders from travel and tourism private and public sectors will come to the Thai capital to explore the theme of “Transforming
our World” and how the sector’s contribution to sustainable development can be maximized. According to the press conference, there will be discussions on how to balance security with travel facilitation, the growing internationalization of Chinese tourism during the summit. “Hosting the global summit reflects Thai government’s commitment to growing Travel & Tourism in a
sustainable manner and Thailand’s role as the sector’s leader in ASEAN,” said Kobkarn, adding that Thailand will be a platform for global leaders from the sector to explore opportunities here in order to put ASEAN onto the “world travel map.” She also said the plan of a “Schengen-style” visa for CLMVT countries, namely Cambodia, Laos, Myanmar Thailand, Vietnam and a such visa for all ASEAN members is still under discussion.
‘Chinese are the biggest visitors to Thailand, accounting for about 30 per cent of all foreign tourists’ According to the World Travel & Tourism Council, it is the global authority on the economic and social contribution of Travel & Tourism. The council works with governments and international institutions to promote sustainable growth and has global summit which brings together delegates to discuss opportunities, challenges and issues facing the industry. Xinhua
12 Business Daily Thursday, January 26 2017
Asia In Brief Currency
S.Korea, Malaysia agree to extend swap agreement South Korea’s central bank said yesterday it agreed with its Malaysian counterpart to extend an existing currency swap agreement between the two countries. The new arrangement, unchanged from the previous pact that lets either country swap 5.0 trillion won (US$4.29 billion) for 15 billion ringgit (US$3.38 billion), will be valid from Wednesday to Jan. 24, 2020, the Bank of Korea said in a statement. South Korea and Malaysia signed their first swap agreement in 2013, which was valid for three years. It was set to expire last October, but officials from both countries agreed to extend the swap. Key products
Vietnam to see declining export revenue Vietnam is expected to pocket US$14.6 billion from exports in January 2017, down 12 per cent from the previous month, said Vietnam Customs yesterday. The declines were attributed to decreases in export revenue of most of the country’s key export items including cell phones and accessories, garment textile, computers, electronic products and accessories, footwear, machinery, spare parts and tools, seafood, wood and wood products among others. Specifically, Vietnam is estimated to earn US$2.5 billion from exports of cell phones and accessories in the first month, down 7.1 per cent from December 2016. C.bank gov
Indonesia should import food if necessary Indonesia’s central bank governor said yesterday the government should import food in case of natural disasters or weather-induced crop failure to keep inflation within target. Governor Agus Martowardojo said plans to raise government-controlled prices for power, liquefied petroleum gas and fees for vehicle registration would push the inflation rate up to more than 4 per cent this year compared with 3.02 per cent in 2016. He also noted that gasoline prices could rise due to higher global oil prices, which might pressure prices of food. “Open up imports if necessary,” Martowardojo told reporters after a joint news conference with government officials. Results
LG Elec books first quarterly loss in six yrs South Korea’s LG Electronics Inc yesterday reported its first quarterly operating loss in six years in October-December due to its worst mobile performance. Its fourth-quarter loss reached 35 billion won (US$30.06 million), in line with its guidance earlier this month, said LG Electronics, the world’s second-largest television maker behind Samsung Electronics Co Ltd. That was LG’s first loss since the third quarter of 2011 and its biggest since the fourth quarter in 2010. The firm expects a significant improvement in operating income in the January-March quarter compared with the previous quarter, but did not elaborate.
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Quarterly data
S.Korea economy falters as consumption, construction slump In annual terms, GDP rose 2.3 per cent in the fourth quarter
S
outh Korea’s economic growth retreated further in the last quarter of 2016, the Bank of Korea said yesterday, as a sharp slowdown in construction investment and private consumption took hold in the face of a deepening political crisis. The quarter was marked by an influence-peddling corruption scandal involving President Park Geun-hye, who was impeached by South Korea’s parliament, with a final determination by a court to follow. The outgoing chief judge at the Constitutional Court said yesterday the court should make its impeachment ruling before March 13 because two of the nine judges, including himself, are retiring soon. A presidential election will be automatically triggered within 60 days of the court’s decision if she is removed. South Korea’s special prosecutors plan to investigate more companies after their probe of Samsung Group named the group’s leader, Lee Jaeyoung, as a suspect in the corruption scandal that led to Park’s impeachment. The political upheaval has raised fears of policy paralysis and may have weighed on consumer sentiment, which fell for a third month through January. Growth was just 0.4 per cent in seasonally adjusted terms on-quarter, slowing from a 0.6 per cent in the September quarter and a 0.8 per cent gain in the June quarter, the Bank of
Korea said yesterday. The 0.4 per cent growth in seasonally adjusted terms topped the median forecast of 0.3 per cent from a Reuters survey of 17 economists. Construction investment fell by a seasonally adjusted 1.7 per cent during the October-December period after a 3.5 per cent jump three months earlier, while private consumption expanded just 0.2 per cent, slumping from a 0.5 per cent rise in the September quarter.
Key Points Q4 GDP +0.4 pct s/adj q/q (Reuters poll +0.3 pct) Q4 GDP +2.3 pct y/y (Reuters poll +2.2 pct) Consumption barely averts decline, construction slips BOK sees exports of semiconductors, displays to propel capex Facilities investment increased 6.3 per cent on-quarter, jumping from a 0.2 per cent rise three months earlier. “A decline in private consumption was the biggest factor in lowering the growth rate even as facilities investment improved,” Chung Kyu-il, a director at the BOK, said at a news conference, noting private consumption made up 49.5 per cent of GDP. Chung added that exports of semiconductors, displays, and other electronic components will continue to improve and drive facilities investment this year, although the shipping and shipbuilding sectors may drag on
growth as they undergo corporate restructuring. In annual terms, GDP rose 2.3 per cent in the fourth quarter, down from a 2.6 per cent rise in the third quarter. The economy expanded 2.7 per cent in 2016 from a year earlier, matching the bank’s growth target and edging up after a 2.6 per cent rise in 2015. “While 2.7 per cent expansion is a notable pick-up, the construction investment failing to grow shows domestic demand is sluggish,” Kim Doo-un, a Seoul-based economist with Hana Financial Investment said. “An expansion of 0.4 per cent (on-quarter) is quite low given that it’s the weakest in a year and a half,” he added. Exports failed to lift growth in the December quarter, slipping by 0.1 per cent after rising 0.6 per cent in the previous three months. By sector, manufacturing led the overall growth with a 1.8 per cent gain on-quarter, while agriculture and fisheries declined 2.8 per cent. Services remained unchanged from three months earlier. The central bank said earlier that private spending would be weaker in 2017 as uncertainties arising from the influence-peddling corruption scandal affect consumer sentiment. Credit costs rising in line with U.S. interest rates will increase the burden of household debt repayment, putting private consumption growth at risk. The BOK sees gross domestic product growth at 2.5 per cent this year, driven by a recovery in exports and facilities investment, even if global trade growth weakens on the fear or the reality of deepening protectionism. 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 26 2017 13
Asia Prices
Australia inflation surprisingly subdued The annual pace did pick up to 1.5 per cent but undershot expectations Wayne Cole
Australian consumer prices rose by less than expected last quarter while core inflation stayed stubbornly stuck at all-time lows, a subdued result that keeps alive some chance of yet another cut in interest rates. Yesterday’s data from the Australian Bureau of Statistics showed the consumer price index (CPI) rose 0.5 per cent in the fourth quarter, from the previous quarter, missing forecasts of a 0.7 per cent increase. The annual pace did pick up to 1.5 per cent, from 1.3 per cent, but again undershot expectations. The biggest price rises in the quarter were for tobacco, petrol, domestic holiday travel and accommodation. Falls were seen for travelling abroad, accessories and waters, soft drinks and juices. Key measures of underlying inflation that drive monetary policy also
held around 1.5 per cent, well short of the Reserve Bank of Australia’s (RBA) target band of 2 to 3 per cent. “It keeps the prospect of another rate cut well and truly alive,” said Shane Oliver chief economist at AMP Capital. “We are thinking in May. These numbers highlight the downside risks to inflation in Australia and the risk that it will take longer to get back to target.”
A major worry for the RBA has been that a damaging cycle could develop where slowing inflation led consumers and businesses to lower their inflation and wage expectations, which in turn drove actual inflation down further. Wage growth has already braked to its slowest in two decades, with most industries paying less than 2 per cent more. Yet there have been signs recently that the greatest danger may have
passed. Surveys of consumer inflation expectations have turned up, with the Melbourne Institute’s weighted mean climbing 0.4 percentage points in January to 2.6 per cent. Market expectations of what the five-year outlook for inflation will be in five years time have also moved markedly higher, spiking to 2.78 per cent last week from 2.48 per cent at the start of October. “It supports the view that consumer inflation expectations have stabilised, easing concerns in the middle of last year that expectations were at risk of becoming unanchored,” said Tapas Strickland, an economist at NAB. Reuters
Expectations turn for the better
The RBA already assumes it will take up to two years for inflation to move back within its target band and has repeatedly warned of the risks in trying to get it there sooner. In particular, there are concerns further easing would only encourage more debt-funded speculation in the housing market, inflaming prices and stressing the banking system.
The RBA already assumes it will take up to two years for inflation to move back within its target band
Digital payment
Banks seen saving US$2 billion in Thailand e-payment roll out Asian neighbours including India and Singapore are also promoting cashless transactions to boost efficiency and curb illicit financial flows Chanyaporn Chanjaroen
Thailand is due to roll out a national digital-payment system that levies much smaller transaction fees than the nation’s banks. Yet lenders expect the network to help rather than hinder them financially. Commercial banks could save some 77 billion baht (US$2.18 billion) in the next 10 years as the so-called PromptPay service curbs the use of cash, according to Thai Bankers’ Association Chairman Predee Daochai. That will exceed the revenue loss from money transfers and payments by 20 billion baht, he said. “The revenue loss impact will not be significant,” Predee, also a president of Kasikornbank Pcl, said Tuesday in written responses to questions. Over 30 million registrations for PromptPay are expected by the end of 2017, he added. Thailand plans to unfurl the network this quarter after a delay to fix glitches. Modernizing the national payment system is seen as one way of helping to lift the economy out of a period of subdued growth. Asian neighbours including India and Singapore are also promoting cashless transactions to boost efficiency and curb illicit financial flows. “As the country is moving towards a digital economy, e-payment is an
imperative,” Predee said in separate responses. “Members of the association worked together to introduce a fee scheme for PromptPay which is very low compared to existing services.” PromptPay transfers of less than 5,000 baht are free, with the levy for the biggest transactions capped at 10 baht. In contrast, inter-bank fund transfers of up to 100,000 baht cost between 25 baht and 120 baht at Kasikornbank. “PromptPay will put a lot of pressure on banks’ fee income in the early period of implementation,” said Thananchai Jittanoon, an analyst at UOB Kay Hian Securities (Thailand) Pcl in Bangkok. “It may cut banks’ fee income by about 5 per cent. But in the long term, lower cash transactions will benefit most banks with falling costs of transportation and insurance.” The fall in fees and costs may offset each other, though the uptake of PromptPay will take time as the network’s delay has affected people’s confidence in it, Thananchai said. Sluggish economic growth, nonperforming loans and more recently the risk to fees from PromptPay are among challenges for Thai banks. The SET Banking index has declined about 23 per cent in the past two years, compared with a 1 per cent drop in the benchmark SET index. PromptPay has some similarities to India’s Unified Payments Interface, as both are government backed. But the UPI cashless payment platform has struggled to gain traction, with just 2 million registered users as of early December last year. There are about 20 million registrations for PromptPay so far, according to the Thai Bankers’ Association, in a country with a 68 million population. PromptPay was meant to have been implemented at the end of October, but the start date was pushed back to allow for more testing. The Bank of Thailand and commercial banks are working on the roll out. Users will be able to transfer funds using mobile phone or national identification numbers linked to bank accounts. Consumers, businesses and the government are expected to use the network.
The value of transactions via mobile and Internet banking in Thailand rose by more than a quarter to 3.2 trillion baht in the six months through September 2016, the latest data from the Bank of Thailand show. But cash remains the dominant medium for transactions compared with nations such as South Korea,
the U.K. or Sweden, according to a central bank presentation. Fees for money transfers and payments account for about 2.5 per cent of Thai banking industry revenue, and half of this will be affected by PromptPay, Predee said. He expects registrations to climb as the service goes live. Bloomberg News
14 Business Daily Thursday, January 26 2017
International In Brief Brexit
EU says U.K. banks must stick to its standards U.K banks risk losing their privileges to do business in the European Union, unless the government in London agrees to abide by financial regulation decided in Brussels even after Britain leaves the bloc, the head of the group of euro-area finance ministers said. “It is unthinkable that the EU will allow U.K.-based financial institutions full access to do business in the internal market without a sustainable coupling of future dynamic U.K. standards to the EU framework,” Eurogroup chair Jeroen Dijsselbloem said in a speech Tuesday in Brussels. “At the same time I realize that, given the promise of full sovereignty, this will be a hard truth to accept in Britain.” GDP
Angola posts growth of 0.1 pct in 2016 The Angolan economy is expected to have posted growth of just 0.1 per cent of Gross Domestic Product (GDP) in 2016, but the budget deficit was lower than expected, according to preliminary figures from the Government issued on Tuesday in Luanda. The Angolan government revised its projection for real growth down from 3.13 per cent to 1.1 per cent of GDP. However, the director of the Office for International Relations and Studies of the Ministry of Finance gave preliminary figures for public accounts in 2016, which point to real economic growth of just 0.1 per cent.
Watchdog
Panama Papers show global corruption got worse in 2016 Declines were driven by “massive and pervasive” public-sector corruption Patrick Donahue
R
ev e lations o f taxevasi o n a n d m o n e y laundering networks on a global scale in the socalled Panama Papers helped make the world appear more corrupt last year, according to graft watchdog Transparency International. The Berlin-based organization said there were more falling scores than rising ones on its 2016 Corruption Perceptions Index, published yesterday. A lower score means a country is seen as more corrupt. Declines were driven by “massive and pervasive” publicsector corruption, the watchdog said in an e-mailed statement. The Panama Papers data-leak also prompted a wave of anger at wealthy individuals and companies using well-established methods of evasion. “It is still far too easy for the rich and powerful to exploit the opaqueness of the global financial system to enrich themselves at the expense of the public good,” Transparency International said. The organization’s president, Jose Ugaz, also pointed to countries w i th i n c r easi n g l y a u t o c rat i c governments as places where the perception of corruption has been
on the rise. Turkey, where President Recep Tayyip Erdogan has sought to tighten his grip on power, scored 41 points on the CPI scale of zero to 100, down from 50 three years earlier. Hungary, where Prime Minister Viktor Orban has been criticized for increasing authoritarianism, fell to 48 from 51 a year earlier.
“In countries with populist or autocratic leaders, we often see democracies in decline and a disturbing pattern of attempts to crack down on civil society, limit press freedom and weaken the independence of the judiciary” Jose Ugaz, President of Transparency International
‘Professional enablers’
“In countries with populist or autocratic leaders, we often see
democracies in decline and a disturbing pattern of attempts to crack down on civil society, limit press freedom and weaken the independence of the judiciary,” Ugaz said. The U.S. dropped two points to 74. In its release about the 2016 index, Transparency didn’t mention the election of Donald Trump as president in November. But in a separate statement last week, it said Trump’s government appointments were “rife with potential conflicts of interest.” Qatar fell 10 points to 61 after the scandal over the bidding process by which the tiny, energy-rich Gulf country won the rights to host one of the biggest global sports tournaments, soccer’s 2022 FIFA World Cup. Transparency called on governments to go beyond anticorruption legislation to “deeprooted systemic reforms,” including public registries to track corporate ownership and stiffer punishments for “professional enablers” of tax evasion and fraud. Transparency’s ranking has become a benchmark gauge of perceptions of corruption and is used by analysts and investors. The usual champions -- Denmark (90 points), New Zealand, Finland and Sweden -- maintained their positions at the top of the 2016 list. Somalia ranked last for the 10th year in a row, with 10 points, followed by South Sudan and North Korea. Bloomberg News
Environment
Trump tells EPA to cut climate page from website U.S. President Donald Trump’s administration has instructed the Environmental Protection Agency to remove the climate change page from its website, two agency employees told Reuters, the latest move by the newly minted leadership to erase ex-President Barack Obama’s climate change initiatives. The employees were notified by EPA officials on Tuesday that the administration had instructed EPA’s communications team to remove the website’s climate change page, which contains links to scientific global warming research, as well as detailed data on emissions. Portugal
Govt. working on solutions for expats to vote online Portugal’s Foreign Minister said on Tuesday the Government is working “on concrete solutions” to allow online voting for expatriates, a measure called for in a petition signed by over 4,000 people delivered to parliament. Electronic voting for Portuguese communities outside the country “is part of the Government’s programme,” said Augusto Santos Silva on Tuesday, who welcomed the initiative of the citizens in the “We are also Portuguese” petition, which was delivered to parliament on Monday. The Minister said the Government was working “on concrete solutions” and noted that the different parliamentary parties were “preparing their own proposals.”
Turkey, where President Recep Tayyip Erdogan (pictured) has sought to tighten his grip on power, scored 41 points on the CPI scale of zero to 100, down from 50 three years earlier
Trade deal
Mexico may leave NAFTA if renegotiation unfavourable President Peña Nieto said he will aim to preserve tariff-free commerce under NAFTA in talks with the new U.S. government Mexico could pull out of the North American Free Trade Agreement if a renegotiation of its terms does not benefit Latin America’s second-largest economy, Economy Minister Ildefonso Guajardo said on Tuesday. “There could be no other option. Go for something that is less than what we already have? It would not make sense to stay,” Guajardo said when asked on television if Mexico could pull out of the trade deal with Canada and the United States. “The strategy for this treaty needs to be one in which everyone wins. It’s impossible to sell it here at home if there aren’t clear benefits for Mexico,” he added. U.S. President Donald Trump has vowed to withdraw from NAFTA, which took effect in 1994, if he cannot renegotiate it to benefit American interests.
Trump formally withdrew the United States from the Trans-Pacific Partnership on Monday and said he would renegotiate NAFTA “at the appropriate time.” Guajardo and Foreign Minister Luis Videgaray will hold talks with senior Trump advisers this week in Washington over trade, security and immigration. Mexican President Enrique Pena Nieto and Trump will meet at the end of January. Videgaray said later on Tuesday that abandoning the treaty was always an option, but it was not what the Mexican government was aiming for as it sat down to discuss NAFTA. “It has to proceed from a winwin premise; it has to be something positive for Mexico, not something that damages the country,” Videgaray said in Mexico’s Senate. Peña Nieto said on Monday he will aim to preserve tariff-free commerce
under NAFTA in talks with the new U.S. government, calling for the competitiveness of North America
“The strategy for this treaty needs to be one in which everyone wins. It’s impossible to sell it here at home if there aren’t clear benefits for Mexico” Ildefonso Guajardo, Mexico’s Economy Minister to be strengthened. NAFTA and other trade deals became lightning rods for American voter anger in the industrial heartland states that swept Trump to victory in the Nov. 8 election. Reuters
Business Daily Thursday, January 26 2017 15
Opinion
China IPO boom makes Guotai Junan’s timing opportune
How America’s Asian allies can survive Trump
Nisha Gopalan Bloomberg Gadfly
I
nvestors in China may rue Beijing’s clampdown on capital outflows but as the frenzied buying of domestic initial public offerings shows, there’s never been a better time to underwrite one. That’s good news for Guotai Junan Securities Co., which plans to raise as much as US$2 billion from a listing in Hong Kong that could be one of the city’s biggest since Postal Savings Bank of China Co. went public in September. Investors tend to rate brokerages more highly than bad-loan plagued Chinese banks, which typically trade at less than one time book. Citic Securities Co. in Hong Kong trades at a multiple of 1.2, for example, but the premium isn’t saying much. Securities firms face a whole slew of challenges, including intense competition and falling commissions. China had a staggering 8,861 brokerages as of Sept. 30, versus 5,785 at the start of 2014. Plus, in a market renowned for its booms and busts, share-trading firms often get called on by authorities to rescue tanking stocks. Guotai Junan says it contributed about RMB17 billion (US$2.5 billion) to the government’s ba i l o u t f u n d i n 2015, equivalent to one-fifth of its net billion US$ assets at the time. Expected first-time Combined with share sales a d i sa p p o i n t i n g in China this year showing so far for a trading link between Hong Kong and Shenzhen, it’s little wonder brokerages aren’t posting glowing earnings. Luckily for Guotai Junan, which is also listed in Shanghai, the IPO market in China is buzzing. Around the same time Beijing limited the use of yuan for offshore acquisitions and cracked down on other capital outflows, it started accelerating share-sale approvals. New listings on the mainland have always been hot because of a rule limiting valuations to 23 times earnings, forcing companies to sell shares at levels below their listed peers. They’ve become hotter still as real estate lags and other investment avenues dry up. The amount of funds raised from first-time sales in Asia’s largest economy is expected to reach the highest in six years in 2017, touching 225 billion yuan, according to the median estimate in a Bloomberg survey of analysts. Buying shares of brokerages in Hong Kong as opposed to China is a cheaper way of getting exposure to the boom: Haitong Securities Co. trades at 1.3 times price-to-book in Hong Kong and 1.7 times in Shanghai. Guotai Junan will have its work cut out competing with more established players for a piece of the underwriting pie. It still makes most of its money from broking, be it margin finance or commissions from trading stocks. For the nine months to Sept. 30, over half of Guotai Junan’s revenue came from its brokerage operations and 18.4 per cent from investment banking, exchange filings show. Still, so long as the yuan continues to be weak, it’s a safe bet that investors will pile into IPOs on the mainland. Last year, when Shanghai stocks fell 12.3 per cent, new shares rocketed 430 per cent on average in their first month of trading, the most since at least 1999, data compiled by Bloomberg show. Those figures are bound to put a tailwind behind any brokerage. Bloomberg Gadfly
32.8
J
udging by US President Donald Trump’s behaviour since his election, and by the explicitly isolationist message of his inaugural address, it seems safe to assume that his administration’s foreign policy will upend many long-held assumptions about America’s role in the world. This may be particularly distressing to America’s Asian allies. It is far too soon to say what, exactly, Trump’s presidency will mean for Asia. The spectrum of possibilities is broad. Trump may reverse President Barack Obama’s strategic “pivot” toward Asia, leaving the region in chaos. He may maintain a focus on Asia, but with a more militarized approach. Or he may join with China to create a kind of G2 of the world’s largest powers. In any case, it seems clear that after decades of broad continuity – since President Richard Nixon and his national security adviser, Henry Kissinger, made their surprise trip to China in 1972 – America’s policy toward China is open to question. Countries that depend on US security guarantees for their defence – such as Japan, South Korea, and Australia – are highly concerned. Many Asian countries, through deep and predictable political engagement with the US, have grown accustomed to America’s commitment to their security. And, in contrast to multilateral security arrangements like NATO, America’s Asian alliances are founded on individual bilateral pacts. As a result, these countries are particularly vulnerable to Trump’s vicissitudes. Bilateral alliances maximize the control that a great power can exert over smaller allies, whereas multilateral arrangements distribute power and influence more evenly. And that is exactly how it works in Asia, with the US at the centre of a hub-and-spoke system, with other countries connected only through that centre. That structure, known as a star network, works well for coordinating activity or accumulating resources. As political scientist Victor Cha argued before the election, changes in regional capabilities, the emergence of new threats and challenges, and the diffusion of connectivity in the twenty-first century argue for a new, more multilateral security structure in Asia. Trump’s suspicion of multilateral institutions – and his unwillingness to absorb the costs of persuasion, side payments, and organization that centralized leadership demands – makes that shift all the more pressing. Instead of falling into despair, America’s Asian allies should take matters into their own hands and start networking. By building and institutionalizing ties among themselves, US allies in Asia can reshape their regional security network from a US-centric star to a mesh-like pattern, in which they are as connected to one another as they are to the US. Such a system can strengthen stability for unsteady times, in three vital ways. First, if the US falls short on meeting its regional commitments – for example, to engage in capacity building with partners confronting China’s aggressive assertion of territorial claims in the South China Sea – networked partnerships can help allies to compensate. Already, Japan, Australia, and South Korea provide security assistance to Southeast Asian countries on a bilateral basis. A multilateral coordination mechanism would enable these countries to harmonize their efforts, thereby boosting their capacity to advance their shared security interests, even if US resources and
“
Anne-Marie Slaughter President and CEO of New America
Mira Rapp-Hooper a Senior Fellow of the Asia-Pacific Security Program at the Center for a New American Security
leadership dwindle. Moreover, if allies in Asia are sceptical of US intentions, networked partnerships can give them the leverage to demand greater transparency. The US regularly discusses sensitive defense and human-rights issues relating to North Korea with its allies in Japan and South Korea, but only separately. That leaves these countries dependent on the US for both information and capabilities. By grappling with North Korea in a trilateral setting, however, South Korea and Japan could triangulate the information they receive from the US and increase their agency in formulating a response. Their recent GSOMIA intelligencesharing agreement is a meaningful step to promote such transparency through networking. Similarly, such a networked approach could put Asian countries in a much stronger position to restrain the US if the Trump administration took destabilizing actions in the region, such as by exacerbating tensions with China. Already, Trump has raised doubts about his commitment to the “one China” policy – including by accepting a congratulatory phone call from Taiwan’s president after the election – and threatened to impose high tariffs on China, which he has accused (wrongly) of devaluing its currency to gain an unfair trade advantage. If Trump continues along this path, China has declared, it will respond in kind. None of this would be good for US allies. Of course, if one of America’s relatively small allies tried to confront the US over its actions, it would face high costs and a low chance of success. But if multiple allies worked together, through international institutions and multilateral dialogue, they might be able to persuade Trump’s administration to change course, without harming their own vital interests. The good news is that America’s Asian allies would not have to start from scratch. Over the last several years, some networking has been occurring organically. Japan has concluded bilateral economic and security agreements with the Philippines and Australia. The Association of Southeast Asian Nations is not just a deeply networked organization; it has also been actively cultivating relationships with its Northeast Asian neighbours through a set of bilateral and multilateral agreements. The Obama administration recognized this trend. In 2016, it began to promote the idea of a “principled security network” in Asia – a tagline that is unlikely to survive Trump’s presidency. Obama has also held trilateral meetings with Japan and South Korea. Mesh networks are highly resilient, because no individual node is critical to the structure’s survival – even if one link breaks, the structure survives. The logic is used in designing everything from fences to fishing nets. It is time to apply it to Asian security arrangements. If they take the right steps, America’s Asian allies may emerge from the Trump era more resilient and secure than ever. Project Syndicate
Instead of falling into despair, America’s Asian allies should take matters into their own hands and start networking
”
16 Business Daily Thursday, January 26 2017
Closing Smog
Half Mainland cities plagued by air pollution
air pollution, with air quality index (AQI) readings exceeding 300 yesterday. Another 12.8 per cent of these cities, including the More than half of the Chinese cities monitored by the Ministry of Environmental Protection, especially northern metropolitan Tianjin, were experiencing heavily polluted air, with AQI readings between 201 those in northern China, reported air pollution and 300, said the ministry. yesterday. Moreover, the air in 9.8 per cent of cities, including About 57.8 per cent of Chinese cities monitored Beijing, was moderately polluted, with AQI readings by the ministry, including Beijing, reported varying between 151 and 200. degrees of air pollution, Wednesday morning, according to real-time data on the ministry’s website. The data also revealed 28.1 per cent of the cities, including Changchun in northeastern Jilin Province, Of the 338 cities monitored by the ministry, 7.1 per cent, including Shijiazhuang the capital city of Hebei had slightly polluted air, with AQI readings between Province, which neighbours Beijing, reported serious 101 and 150. Xinhua
Political scandal
Woman at centre of South Korea scandal shouts out her innocence She was brought into the special prosecutor’s office on an arrest warrant after refusing to answer several summons Joyce Lee and Jack Kim
T
he woman at the centre of a corruption scandal gripping South Korea angrily protested her innocence on Wednesday, shouting that she had been made to confess as she was forcibly summoned for questioning. Choi Soon-sil, who has been indicted for meddling in state affairs through her friendship with impeached President Park Geun-hye, made the protest at the special prosecutor’s office, before being pushed into an elevator by correctional officers. The dramatic scenes came as the outgoing chief judge of the Constitutional Court urged the bench to wrap up Park’s impeachment trial by March 13, when the retirement of another judge will reduce the ninejudge court to seven and could raise questions about the verdict. His comments were the clearest indication of the timing of a decision on Park, either to remove her from office with an election to be called 60 days later, or for her to be reinstated. Park was impeached amid the influence-peddling scandal that has engulfed her administration over recent months. If the impeachment is upheld, she will become the first democratically elected leader to be removed from office. Choi was brought into the special prosecutor’s office on an arrest warrant after refusing to answer several summons.
“I am being forced to confess committing crimes jointly with the president,” she shouted to reporters. “I don’t deserve to be treated like this. And my baby and my grandson,” she said as guards pushed her into the elevator. The special prosecutor’s office dismissed her protests. “Regardless of such groundless claims of hers, the special prosecutor will thoroughly carry out the investigation by law and principle,” office spokesman Lee Kyu-chul told a regular briefing, adding that Choi was trying to discredit the investigation.
Key Points Woman at centre of scandal says she was forced to confess Seven-judge ruling could invite questions of legitimacy-sources If Park ousted, election for successor to take place within 60 days As part of their investigation, prosecutors are looking into Samsung Group’s sponsorship of the equestrian riding career of Choi’s daughter, Chung Yoo-ra, 20, who was arrested in Denmark after being sought by South Korean authorities. Chung has been accused of criminal interference related to her academic record and other unspecified charges. Park was impeached by parliament in December after accusations that
Reform drive
she colluded with Choi to pressure big businesses, including Samsung, to donate to two foundations set up to back the president’s policy initiatives. Park, 64, remains in office but has been stripped of her powers while she awaits her fate. Park, Choi and Samsung have all denied wrongdoing. Prosecutors said yesterday they had summoned Samsung Group President Kim Jong-joong and Samsung C&T Corp President Kim Shin for questioning as witnesses. The prosecution has now summoned seven different executives at Samsung Group or an affiliate of the country’s top conglomerate and have so far identified two of them – leader Jay Y. Lee and Samsung Group Vice Chairman Choi Gee-sung – as suspects in the widening graft scandal. Chief Judge Park Han-chul, who retires on Jan. 31, urged the Constitutional Court to wrap up the impeachment trial by March 13, when the retirement of another judge will reduce the nine-judge bench to seven. Speaking on the ninth day of the hearing, the chief judge said the retirement of two judges may distort the impartiality of the court. “If another judge’s seat is vacated, that is not just a matter of one vacated seat but could distort the outcome of the decision,” he told a public hearing. The court has previously stressed the need to balance a speedy resolution of the crisis with proper deliberation, but this was the first time the court has mentioned a specific timeline. Seven sitting judges are the minimum required by law to rule on an impeachment, with six needed to vote to uphold the motion for Park
Forex
Choi Soon-sil, a close friend of South Korean President Park Geunhye, arrives at the office of special prosecutors in Seoul, South Korea yesterday. Lusa
to be removed. Sources with intimate knowledge of the court’s inner workings told Reuters that seven judges, for a landmark ruling such as this, were too few and could invite questions of the ruling’s legitimacy, especially if it is not unanimous. The sources declined to be identified due to the sensitivity of the matter. Reuters
Inc morale
Beijing courts energy trader PBOC official defends reserves Global uncertainty squeezes in bid to revamp state firms use to keep yuan steady German business confidence China is roping in one of the world’s biggest independent energy traders to help revamp its sprawling and inefficient state-owned enterprises (SOE). Xiao Yaqing, the head of China’s State-owned Assets Supervision and Administration Commission, met with Han Jin, the president of Mercuria Asia Group in Beijing on Jan. 24, according to a statement on SASAC’s website. The regulator said it hopes the trading company will help it reform government-controlled firms and raise their profitability. Revamping state-owned enterprises is critical to President Xi Jinping’s policy of moving the US$10 trillion economy away from an over-reliance on debt-fuelled infrastructure investment and exports to one powered more by services and consumer spending. The so-called SOEs, spanning from power companies to train makers to banks, have traditionally been a source of political patronage and economic power for the Communist Party. China has embraced mergers for the overhaul, with deals worth billions announced since late 2014. SASAC hopes that Mercuria will also help raise the SOEs’ risk-control capabilities, Xiao was cited as saying in the statement. Bloomberg News
A senior official at China’s central bank has defended authorities’ rapid use of foreign exchange reserves to keep the yuan currency stable, saying the benefits “outweighed the drawbacks”, according to a state newspaper. “The use of foreign reserves has kept the yuan stable and prevented market overshooting,” the Ren Min Zheng Xie Bao paper quoted Yi Gang, a vice governor of the People’s Bank of China (PBOC), as saying. The paper is owned by political advisory body the China’s People’s Political Consultative Conference (CPPCC), of which Yi is a member. The yuan fell 6.6 per cent against the dollar last year, its biggest loss since 1994, under pressure from sluggish economic growth and a strong dollar, which have spurred capital outflows. China has spent US$1 trillion in foreign reserves in the past two years as it tried to stabilize the faltering currency, the newspaper said. China’s foreign reserves shrank to near six-year lows in December, but held just above the critical US$3 trillion level, sparking speculation over how long authorities would be able to continue defending the currency. Reuters
German business confidence fell in January, a survey from the Munich-based Ifo institute showed yesterday, with firms less optimistic about the future as the world faces increasing geopolitical uncertainty. The Ifo business confidence index stood at 109.8 points in January, a fall of 1.2 points to its lowest level since the 109.5 reading in September. Analysts surveyed by Factset had predicted a slight increase to 111.3 points. “The German economy made a less confident start to the year,” Ifo president Clemens Fuest said in a statement. “Companies expressed greater satisfaction with their current business situation, but are less optimistic about their six-month business outlook.” The Ifo sub-index measuring present conditions inched up slightly, but the future expectations barometer slipped by more than two points, from 105.5 to 103.2. Firms in all four sectors Ifo surveys -manufacturing, construction, wholesaling, and retail -- reported lower confidence. AFP