Hot Summer, cool art Consigliere Pages 8 & 9
Friday, July 14 2017 Year VI Nr. 1339 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Curbing outflows
Insurance
Mainland outbound investment slumps Page 10
Commerce
Swiss Re to protect HK biz against Signal 8 typhoons Page 3
www.macaubusinessdaily.com Markets
Electronic goods trade with Zhuhai takes off Page 3
Gambling
Former junket LiNiu could be de-listed from Nasdaq Page 5
Australia protecting kids from betting ads Page 16
Consolidating The Delta Greater Bay Area
The Greater Bay Area is poised to become a global powerhouse. The workshop of the world is going upmarket. With some predicting its GDP could reach US$4.62 tln by 2030. Page 3
Silver screen sequel
An icon of a not-so-old Macau. The Capitol Cinema is expected to begin a new life by year-end, according to its developer. Litigation with vendors operating in the venue represents an obstacle. But not an insurmountable one.
Far horizons
Sino-Portugal A visit by the Chairman of the Standing Committee of the National People’s Congress, Zhang Dejiang. Strengthening the key role of Portugal in China’s ‘One Belt One Road’ strategy. A new Lisbon-Mainland air link is cementing relations. Page 4
Legend launches vision
Strategy Macau Legend Development is deploying a rich set of initiatives. Transporting the company to Laos and Cape Verde - without losing focus on ‘One Belt, One Road’, the MSAR – or Japan. Pages 6 & 7
Prosperous half year
Refurbishing Page 2
HK Hang Seng Index July 13, 2017
26,346.17 +302.53 (+1.16%) Worst Performers
AAC Technologies Holdings
+4.39%
Want Want China Holdings
+2.88%
MTR Corp Ltd
-0.45%
Cathay Pacific Airways Ltd
+0.31%
Sands China Ltd
+3.35%
Kunlun Energy Co Ltd
+2.53%
Geely Automobile Holdings
+0.00%
Link REIT
+0.33%
New World Development
+3.31%
Ping An Insurance Group Co
+2.46%
BOC Hong Kong Holdings
+0.00%
Bank of Communications
+0.35%
China Shenhua Energy Co
+3.03%
Sino Land Co Ltd
+2.21%
China Resources Land Ltd
+0.22%
Hong Kong & China Gas Co
+0.40%
Hong Kong Exchanges &
+2.96%
Sun Hung Kai Properties Ltd
+2.15%
CLP Holdings Ltd
+0.24%
Hengan International Group
+0.51%
27° 31° 26° 31° 26° 29° 26° 30° 26° 30° Today
Source: Bloomberg
Best Performers
Sat
Sun
I SSN 2226-8294
Mon
TUE
Source: AccuWeather
Trade Overseas shipments from the Mainland rose from a year earlier. Courtesy of global demand. And U.S. trade tensions kept in check amid ongoing talks. At home, resilient demand led to a rise in imports. Page 10
2 Business Daily Friday, July 14 2017
Macau Society
Capitol Cinema to open by year-end The developer has revealed that the expense of renovating the top floor of the cinema has exceeded the initial budget Cecilia U cecilia.u@macaubusinessdaily.com
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he Capitol Cinema is expected to open by year-end, according to local property investor and developer William Kuan Vai Lam. Previously, the developer claimed that the Theatre could be reopened by mid-year. Kuan also revealed that the expenses until now in renovating the space had reached MOP10 million (US$1.24 million). “The condition of the place is worse that we had [pr evi ou s l y ] r ea l is e d, ” Kuan told Business Daily, adding that the revamp will take another three to four months. In a recent interview with Business Daily, the businessman revealed the renovation of the property would cost between MOP20 million (US$2.5 million) and MOP30 million. Just for the refurbishment of the cinema on the top floor, the businessman was prepared to foot a bill of MOP3 million
for improving the conditions of the 380-seat auditorium and updating the equipment. Meanwhile, Kuan declined to comment on a lawsuit involving four vendors on the ground floor of the Capitol Cinema, but stated that “two things will be happening at the same time; the renovation and the judicial procedures”. The developer has been embroiled in legal disputes with four food vendors on the ground floor which have prevented the refurbishment of the entire building and have dragged on for years. Kuan and his company have formed a new management committee, suing the four vendors for “illegal occupation” of the common area of the theatre, while the four vendors claim they have been allowed to use the space to run their businesses since 1998 by paying monthly rental to the former property management company. One of the food vendors told Business Daily yesterday that they had recently won a lawsuit at the Court
of First Appeal, which ruled in favour of the legitimate rental contract. The food vendor added that the developer had proceeded to appeal the lawsuit, revealing that they were being sued in an individual case while the other vendors were grouped together in a separate court case. The food vendor indicated that they had not met with Kuan since being sued a number of years ago. Capitol Theatre has gradually slipped into dilapidation in recent times due to poor property management: most of the stores have been vacated except for a few merchants and food vendors on the ground floor whilst the gaming arcade has ceased operating. In addition to a 380-seat cinema on the fourth and highest floor, there are a r o u n d 1 0 0 - p l u s sh o p spaces in the property, of which most are currently vacant.
Running for election
When asked whether the legal dispute might pose a negative impact upon the property developer’s run for the Legislative Assembly, Kuan said “this is not only about me first of all; I’m just one of the many parties of the cinema”. Being the first time he
has co-operated with incumbent legislator Angela Leong On Kei, Kuan perceived that the co-operation would help in the run for a seat. “We have common ideas
on things [...] and we can complement our different shortcomings,” remarked Kuan. Kuan has twice attempted to run for a seat in the Legislative Assembly. advertisement
Business Daily Friday, July 14 2017 3
Macau Greater Bay Area
Final plan by year-end The Greater Bay Area is one of several interregional city clusters China is planning for the next few years to foster development Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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hina’s National Development and Reform Commission (NDRC) has announced it aims to finish compiling a plan on the development of five interregional city clusters, including the Greater Bay Area, by year-end, The Star Online reported. After a two-week period of public consultation on the planning development of the Greater Bay Area held in the Macau SAR, the local government forwarded its draft proposal to the Commission before the end of June. The ‘Framework Agreement on Deepening Guangdong-Hong Kong-Macao
Co-operation in the Development of the Bay Area’ was signed in early July. The executive deputy head of the China Centre for International Economic Exchanges (CCIEE), Zhang Xiaoqiang, was referred by The Standard as saying that the area – which, more specifically, comprises Macau, Hong Kong and nine cities in Guangdong Province – is expected to have the highest GDP of all bay areas worldwide by 2030. The executive deputy added that it is also anticipated that the Greater Bay Area would become an advanced manufacturing centre, and an important global hub of innovation, finance, shipping and trade. The combined GDP of
the localities of the Greater Bay Area amounted to RMB9.35 trillion (US$1.37 trillion/ MOP11.08 trillion) in 2016, while the entire GDP of Mainland China stood at RMB74.41 trillion. Current estimates suggest that the GDP of the Greater Bay Area could increase by as much as US$4.62 trillion by 2030, thereby becoming
the world’s most important bay area development, ahead of Tokyo, New York, and San Francisco bay areas, according to The Standard.
Take five
In addition to the Guangdong-Hong Kong-Macau Greater Bay Area, the other four interregional city clusters NDRC plans to finish
compiling this year include: - Western Taiwan Straits Economic Zone, embracing Fujian and neighbouring areas; - Guanzhong Plain urban cluster, including major cities in Shaanxi Province; - Lanzhou-Xining cluster located in Gansu and Qinghai provinces; and - Hohhot-Baotou-ErdosYulin cluster in Inner Mongolia Autonomous Region and Shaanxi Province. According to the deputy director of the NDRC’s China Centre for Urban Development, Shen Chi, China will continue to compile such plans, aiming to complete a total of 19 city cluster plans by 2020, according to information on The Star Online. The same news outlet reported that China claimed it had already compiled six such city clusters last year and has eight more in line for the coming two years.
Insurance
First insurance product to cover Signal 8 in Hong Kong Swiss Re Corporate Solutions has introduced the first insurance product to cover loss resulting from tropical typhoon Signal 8 in Hong Kong, Chinese language news outlet Epoch Times has reported. Dylan Bryant, CEO North Asia at Swiss Re Corporate Solutions, indicated that the new product would be extended to Macau in the future. Many of the current insurance products do not compensate for loss resulting from typhoons. The new insurance products rolled
out by Swiss Re enable insurers to obtain compensation within 30 days after loss or extra cost spent for operations during a storm. The CEO said the new product can be used by all sorts of businesses, in particular by those such as transportation and finance, in which business might be forced to halt or extra expenditure is needed when a storm occurs. Regarding the insurance premium, the CEO indicated that different businesses would need different
Trade
Electronic goods trade between Zhuhai and Macau rocketed in H1 In the first half of this year, a total of 138,300 of electronic goods were being traded at the Cross Border Industrial Zone between Zhuhai and Macau, amounting to RMB23.36 million (MOP27.71 million/US$3.45 million), according to data released by Zhuhai Entry-Exit Inspection & Quarantine Bureau (ZEEIQ). The number of products and the amount that generated both registered a substantial increase of 1,321 per cent and 2,036 per cent year-on-year. In order to shorten the time for
inspection, the Chinese Bureau rolled out ‘5+1 working days’ in order to allow instant services to firms as well as the simplification of inspection procedures. Firms, consumers and supervisory authorities can use WeChat to scan QR codes on parcels to obtain information about the products and also prevent counterfeit products. In addition, e-commerce platforms can be used to purchase sample products online and sent to a third party for inspection in order to ensure the quality of the products.
Casualty
Non-resident worker found dead on construction site A non-resident construction worker found collapsed on a construction site on Cotai near the Rua da Patinagem was confirmed dead upon arrival at hospital, according to Judiciary Police (PJ). Apart from burn marks found on his chest, the deceased showed no other suspicious injuries. The PJ have forwarded the case – which they believe was an industrial accident - to the Labour
Affairs Bureau (DSAL) for follow-up procedures. Last month, two fatal industrial accidents occurred on the construction sites of the new facilities for the Public Prosecutor’s Office (MP) and Grand Lisboa, respectively. According to DSAL data, in the first three months of 2017 some 1,723 workers suffered occupational accidents, with 188 cases related to construction.
strategies, suggesting that restaurants could choose to cover for weekends in order to reduce the impact upon business.
He added that some firms might need to pay extra for employees to work when typhoon Signal 8 is issued, incurring extra expenses. advertisement
4 Business Daily Friday, July 14 2017
Macau Opinion
Bilateral co-operation
Pedro Cortés*
China and Portugal agree on route and Road
Give life to The 13!
Signing of parliamentary co-operation and route connecting Lisbon and Macau in pipeline marks first visit of China’s top legislator to Portugal
It is very difficult to understand what is going on with the project for purportedly the most luxurious hotel in the world. It was supposed to open some time ago. A huge investment has already been made. There is an entire fleet of red Rolls-Royces already acquired. There are plans to make it a different product from what we already have in Macau. A true diversification of the mass market and of traditional VIP rooms. There are entertainment venues which will make it exclusive. Well, in my view, there is a recipe for success for attracting the high end of global society. And then? Then, it seems the Government does not want this. Gaming tables have yet to be approved – for God’s sake, there are new gaming areas approved every single week: is it so difficult to green light a new product which may carve out a niche by attracting the world biggest names? As a super luxury product, of course, it is not for all bourses. But, to a layman like myself, wouldn’t it be good for Macau’s reputation to have this mystery solved once and for all? There are companies which have already invested a huge amount of money. Surely, they have done that because the Macau Government has promised that it would have gaming tables. No reasonable person can believe that this was not the case. So, what is the Government waiting for? To decline gaming tables for super rich people? To deny that a different and high-end product be put into operation? To not collect the taxes that it will generate? It is hard to believe that when the plans were approved there was not in place a casino area. Macau needs products like The 13. Even more, in this part of the world this number is not as unlucky as in Western catholic countries. As a matter of fact “1” in the tens means definite and “3” sounds like life, living or birth. Not even this can be used as an excuse to not allow the opening of the red diamond hotel. So, if there is still someone who reads this column – I am sure most of you are already focused on elections – please give a definite “1” life “3” to The 13! *lawyer and frequent contributor to this newspaper.
Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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hina and Portugal are strengthening bilateral co-operation regarding the Belt and Road initiative, Xinhua reported yesterday. During his first official visit to Portugal, Zhang Dejiang, Chairman of the Standing Committee of the National People’s Congress (NPC), said in a meeting with Portuguese Prime Minister António Costa that Portugal is a strategic propeller for the development of the Belt and Road project given its ideal geographic location. Claiming that Portugal is an active supporter of the initiative, the Portuguese Prime Minister said that the country welcomes more investment from Chinese companies, and will provide a fair and more convenient business environment for them. Costa added that Portugal is ready to deepen co-operation with China in several areas, including energy, agricultural goods and infrastructure, as well as culture, education and tourism. During the visit held between Monday and Wednesday of this week,
Zhang also met with Portugal’s President, Marcelo Rebelo de Sousa, and Portuguese counterpart Eduardo Ferro Rodrigues. China’s top legislator, and third highest ranked Chinese official, told Rodrigues China’s NPC is willing to elevate co-operation between both countries’ legislative bodies, as well as pushing forward their strategic partnership, China Global Television Network (CGTN) reported. A memorandum of understanding was signed between the two parliamentary institutions, according to O Público.
Airborne
A celebration was also held during Zhang’s visit to Portugal to mark the launching of a new flight route between Lisbon and Hangzhou via Beijing to kick off on July 26, 2017. Portugal’s Prime Minister heralded it as “the new silk route of the 21st Century,” Economia reported online earlier this week. The route will be operated by Beijing Capital Airlines (BCA), a subsidiary of Hainan Airlines Group (HNA), a shareholder of Portuguese airline TAP. The same news outlet said that a route connecting Lisbon and Macau is also in the pipeline, citing an official source of the Secretary of State for Tourism claiming “negotiations are underway at this moment.”
Chairman of the Standing Committee of the National People’s Congress of People’s Republic of China Zhang Dejiang (L) accompanied by the Portuguese President Marcelo Rebelo de Sousa (R). Lusa
Personal data
Paying a price for disclosing gambling debt Chairman of Macau Gaming Information Association found guilty in new case of ‘name and shame’ casino debtor website Sheyla Zandonai sheyla.zandonai@macaubusiness.com
The Chairman of Macau Gaming Information Association (MGIA), Charlie Choi Kei Ian, has been found guilty of violating Macau’s privacy laws as well as failing to comply with a Judiciary Policy (PJ) order to delete information on gamblers who have incurred debts from the website Wonderful World, Inside Asian Gaming (IAG) reported this week. Speaking to Business Daily, the PJ said Choi was also found guilty of defamation charges filed by one of his former employees, to whom Choi should now pay financial compensation. Current local laws on personal data protection forbid public disclosure or publication of such types of information. Contacted by Business Daily, the Office for the Protection of Personal
Data (GPDG) did not provide details on the nature of the personal data allegedly disclosed by Choi at Wonderful World by the time this story had gone to print. In his defence, MGIA’s chairman claimed during the criminal process that he does not own the website, and therefore cannot shut it down,
according to IAG. During the hearing, adjudicated at the Court of First Instance, Choi also denied allegations levelled during the testimony by Lai Wen Qu, the nephew of Yuanhua Group owner Lai Changxing, who claimed Choi told him over the telephone that he was going to upload clients’ data onto the website. According to previous reports, Choi had already being charged on similar allegations in 2015, for publishing personal information from players registered on another platform, 99world.com, who had failed to honour their gambling debts.
What a wonderful world
Wonderful World Group Limited is an Android developer that has been active since 2014. Its current mobile application portfolio comprises three apps. In addition to MGIA, it has developed ‘Baccarat Track,’ a rough English translation from the Chinese name, and DB Duobao apps. The company headquarters’ address is in Hong Kong, according to its website. It is unclear if it has a branch registered in Macau.
Design
Macau Design Centre invites studio applications Macau Design Centre - a rent-controlled space established to help cultivate the city’s creative and cultural industries - has invited a new wave of applications for the use of 10 studios and one design store in its five-story building, according to a press release. Applicants can apply until August 4 for the studios which will run at MOP11.59 per square foot monthly while that of the Design Store will
cost MOP3,120 monthly including ‘water and electricity, security and cashier services’. The design store, located on the building’s ground floor, occupies 105 square feet ‘and is surrounded by an art and design book store, stage, coffee shop and exhibition,’ notes the release. Currently, the group is offering 12 design studios over two floors, occupying between 240 square feet
and 1,150 square feet. Applicants arte required to submit an application form, business proposal and Sales Tax Form M/1 by email to www.dcmacau.com. The Macau Design Centre ‘will select potential applicants’ based upon their business plan and development direction’ - maximum lease lengths are three years ‘during which extension will be reviewed on tenants’ annual performance’.
Business Daily Friday, July 14 2017 5
Macau Opinion
José I. Duarte* On rankings
Listing
Former junket operator LiNiu Technology could face Nasdaq delisting
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iNiu Technology Group, formerly known as junket operator Iao Kun Group Holdings Company, has 180 days in which to ‘regain compliance’ in order to maintain its listing on the Nasdaq Stock Market, according to a company release. The company notes that on July 7 it received notice from the stock market stating ‘that LiNiu is not in compliance with the audit committee requirements set forth’ in its listing rules due to the ‘resignation
of So Hin Lung from the board’ in mid-June leaving the company’s audit committee with ‘only two members’. The company has been granted ‘a 180 day period in which to regain compliance’ and currently ‘intends to appoint a third independent director with accounting or related financial management expertise to the Board and Audit Committee as soon as practicable,’ notes the release. A company that ‘does not meet the
listing standards . . . [is] . . . subject to delisting from, or denial of initial listing on the Nasdaq Stock Market’, according to the listing rules of the American Stock Exchange. The group rebranded from Iao Kun Group Holding Company on April 26, changing its ticker on the stock exchange to ‘LINU’ after purchasing and launching an electronic B2C (business to client), C2C (client to client) and O2O (online to offline) ‘trading platform focused on the Chinese agricultural industry’.
Luxury
Chow Tai Fook sales up in financial Q1 Luxury jewellery company Chow Tai Fook Jewellery Group Limited has seen an across-the-board uptick in its results for its first financial quarter in the MSAR and in Hong Kong, as well as flat growth or upticks in China, according to the group’s filing with the Hong Kong Stock Exchange. Retail sales value growth and same store volume growth in the SARs both went up 7 per cent year-on-year in the quarter ended June 30, while same store sales growth saw a 5 per cent uptick year-on-year. Growth in China was highest in retail sales value, which rose 17 per cent year-on-year, while that of same store sales increased 11 per cent yearon-year. Same stores sales volume growth was flat, at no increase. By product, gold saw the most growth in same store sales, both in the Mainland and the SARs, with a 16 per cent uptick in China and a 9 per cent rise in Macau and Hong
Kong, year-on-year. Gem-set jewellery saw negative growth in the SARs, down 4 per cent year-onyear, while on the Mainland same store sales growth was 3 per cent, year-on-year. advertisement
The average selling price for gold products in the Mainland during the period was HK$3,600 during the quarter, while that in the SARs was HK$7,100. ‘The increase in average sales price was primarily attributable to the gain in the average weight per gold product sold,’ notes the filing. For gem-set jewellery the Mainland increase in same store sales was ‘driven by an increase in both volume and average sales price’ with the average sales price in the Mainland at HK$6,100 and in the SARs at HK$10,800 during the quarter. The percentage of total retail sales value paid out via UnionPay cards or through Chinese yuan in the SARs fell by 5 per cent year-on-year, to 40 per cent, according to the filing. The most recent data from the Statistics and Census Service (DSEC) shows that in May of this year imports of gold jewellery went up by 73.4 per cent year-on-year, while an April retail survey found that 68 per cent of watches, clocks and jewellery retail respondents had seen a year-on-year increase in sales during the month. For the group’s last financial year, ended March 31, it recorded profits of HK$3.06 billion, a 3.9 per cent uptick year-on-year, while revenues fell 9.4 per cent year-on-year to HK$51.25 billion, according to its filing. K.W.
A couple of weeks ago, there were several references to the position of Macau in some rankings concerning competitiveness and living conditions. It is not my objective to delve into the specifics of that news but to ponder a bit on the uses and abuses of rankings. Given their wide availability and quantitative representation, we can be forgiven for thinking that rankings can be applied to almost anything and are faithful descriptors of some objective reality. Maybe we should think twice. First, rankings are ‘built’ figures, which are deemed to reflect some objective reality. Secondly, not all are equally good at that; possibly, most are not even very good at all. All rankings are based upon some understanding of what the ranking producers think is good or desirable and, therefore, worth observing and measuring. Those choices are not always explicit and can and should in many instances be challenged. Very seldom are they identified in the reports or the news concerning the results obtained. The fact that we are dealing with figures may provide the illusion they are based upon objective facts and measurements. That is often not the case. Rankings will inevitably result from the aggregation of many disparate figures and data from various sources, and are, in that sense wholly ‘artificially constructed’ data. Then, ponder the intrinsic difficulties that exist to measure many of the observed phenomena, a problem most people dealing with statistics are familiar with. Factor in the different nature of many of the socially and economically relevant phenomena. That feature alone raises the issue of how to add ‘apples and oranges.’ Even so, revered and used indicators such as Gross Domestic Product are not perfect. They are, at best, educated guesses about the level of economic activity. There is no such thing as an objective measurement of complex social or economic phenomena. We don’t measure society’s features the way we measure body temperature. Then, consider the fact that often these rankings also rely upon surveys, on what people declare that they like, think or wish. Another layer of uncertainty about the outcomes opens there. The quality of the surveys, their suitability to the task and the reliability of the answers must be assessed. Summing up: rankings make easy and good (or bad, or useful, depending on the purposes) news - but possibly most of them tell us much less than they purport to do. *Economist and permanent contributor to this newspaper.
6 Business Daily Friday, July 14 2017
Macau
CEO David Chow Kam Fai - photo by Cheong Kamka
Expansion
Perpetuating the Legend Having announced the intent to sell The Landmark Macau property last week, Macau Legend Development is linking itself to regional and national initiatives via its acquisitions, while not being overly reliant upon Chinese clientele Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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ith HK$300 million in hand as a deposit for the sale of The Landmark Hotel, and a further HK$160 million on its way in about three weeks time, Macau Legend Development [MLD] is confident in the sale of its asset, with a company representative telling Business Daily that the buyer is “very serious about closing” and that they will “try and close it in the next several months”. The sale, the second time the group has publicly sought a buyer for the property – including hotel, dining and conference facilities, casino and car parks – was announced on July 5, without the full sale price disclosed. A filing for the previous sale noted that the property was worth HK$5.47 billion as at end-2015. Regarding strategy, after the sale the group plans to ‘consolidate resources in Macau, continue the
successful redevelopment of Macau Fisherman’s Wharf and have capital ready to deploy outside of Macau without taking on too much leverage’.
Cape Verde
This includes its project in Praia, the capital of Cape Verde, where the group is developing a HK$2.15 billion integrated resort and marina. “We believe that through the internally generated cash from our business and the sale of the Landmark we’ll have more than ample proceeds to execute on what we’re building in Cape Verde,” noted the company representative. This will allow the group to connect better “into the West coast of Africa, where there’s a huge number of people,” as well as a further link to Portuguese-speaking countries and also China. This would be done leveraging its links in Portugal via a Memorandum of Understanding and a joint venture signed in July of last year. The JV puts 55 per cent of the Troia Casino - located on a promontory
of Portugal’s Setubal region – in the company’s hands, as well as plans for a ‘riverfront area’ project, expected to include a marina but still under negotiation. Despite media reports that environmental protection issues could stymie the project, the MLD representative assured that “the port […] has nothing to do with that”. “It’s some very technical things we need the government to be able to satisfy for us, and then we can move forward with the project,” said the company proxy. Since the “investment is quite modest in the first phase . . . [MLD] . . . can manage that through internal resources”. Linking the group’s worldwide operations together is part of “how we get customers moving around,” said the rep, noting “we look at Portugal to Cape Verde as we look at Macau to Laos. There’s a lot of connectivity”.
Laos
About one month before the signing of the Setubal agreements, MLD entered into the Initial Project Development Agreement with the Laos Government, in order to purchase and operate the now-named Savan Resorts (formerly Savan Vegas Hotel and Entertainment Complex) property in the Savannakhet Province of Laos. “A project mired in controversy,” given that the previous owner of the resort was, and continues to be, in litigation with the Laos Government regarding its seizure and sale, the MLD spokesperson said that “that controversy is what created the opportunity for us . . . It was a competitive bid [process], completely transparent, and we were able to do full due diligence, get a set of documents that we were very comfortable with, and obviously the Laos Government was happy to get someone of our quality – in terms of an operator, track record, connections into China – to come in and take over that asset”. In fact, MLD delayed the purchase of the property numerous times as it conducted due diligence on it.
OBOR Opening of Legend Palace Hotel - David Chow -R Chief Executive Fernando Chui Sai On - L
“We look at countries like Laos that are really going to benefit from more Chinese investment, more emergence of their own middle class and really
much better connectivity – not only to China, but in the whole region,” said the MLD rep, noting that with regard to the project “the first thing is to get the Laos property renovated and expanded and then we’ll have to bring people in”. “The nice thing about Laos is you’re not really just relying on the Chinese market,” he continued, noting that projects such as those on Jeju Island in South Korea encountered issues due to this. “When you’re building up these projects, you want to have a diversified customer base,” said the MLD rep, pointing out that the growing middle class in the region will soon be able to travel more easily due to infrastructure development projects through ‘One Belt, One Road’.
“There’s been a resurgence of VIP recently, but the reality is: Macau is in the future going to be more and more mass gaming and mass tourism” This Chinese national project has prompted “a lot of countries [to] approach us […] saying ‘would you be interested in investing, developing a new integrated resort?’” as part of One Belt, One Road, said the company rep, noting that “obviously we’ll be very cautious in where we do that, but I think that overall policy [is] certainly helping us out”. MLD “like[s] protected markets in those kind of areas and you can make sure your investment is going to get a proper return . . . a 99-year monopoly on the three provinces” with the improved infrastructure creating “a real resurgence in the middle classes of those countries [and] higher disposable incomes”. The group’s presence in Beijing, through its first Legendale Hotel (the second of its name is set to be built on Macau Fisherman’s Wharf and is
Business Daily Friday, July 14 2017 7
Macau currently under discussion with the Macau Government), as well as its Macau properties allow it access to both the Greater Bay Area and ‘One Belt, One Road’ initiatives, as well as the central government-led plan for the MSAR to act as a platform for Portuguese-speaking countries. But it hasn’t only focused outwards, opening its Legend Palace property in late February of this year on the Peninsula, next to the ferry terminal. For its Legendale property in Macau the company is “still in negotiations with the government on the height of the fourth hotel [and] at the right time adding that hotel will be very important to finishing off Fisherman’s Wharf “. The project for the hotel was initially set to be 90 metres in height but concerns about it blocking the sightlines of the cultural heritage classified Guia Lighthouse caused the Cultural Affairs Bureau to suggest a 60-metre height limit.
Peninsula focus
“I think what we’re building in Macau is very diversified,” said the company rep, noting that “as more
middle-class type tourists come to Macau, the chance of them coming down to Fisherman’s Wharf and enjoying the amenities we provide there […] it’s probably a more natural fit than a high-end VIP gamer.” And while “there’s been a resurgence of VIP recently […] the reality is Macau is in the future going to be more and more mass gaming and mass tourism,” he opined.
“We’ll have more than ample proceeds to execute on what we’re building in Cape Verde” “One of the things we’re going to have to do is make sure that we’ve got attractions – and not just MICE (meetings, incentives, conferences and exhibitions) business - but attractions that get people down there during the week,” he said, noting Macau Fisherman’s Wharf “is a lot of non-gaming,
Gaming floor of Savan Resorts in Laos, Photo courtesy of Macau Legend Development
Construction works on Praia integrated resort. Courtesy of Macau Legend Development
anyway; it was the first attempt at non-gaming in a serious way”. Next steps are to “get the marina in” but not focus on any type of amusement park, given that “if someone wants to build an amusement park in Macau they’re going to have to build something of the quality of a Universal Studios or a Disneyland” due to nearby competition from Mainland theme park offerings. Despite the opening of the new Pac On Ferry Terminal in Taipa, MLD professes no concern that the current ferries operating out of the Outer Harbour Ferry Terminal will stop any time soon. “I think there was a rumour many years ago of the desire to shut down the Macau Ferry Terminal, I think that would be met with a huge backlash from the Peninsula people who would want to use that ferry terminal,” said the representative, adding, “When the sky bridge finally connects us to the Ferry Terminal and the Jai Alai and Oceanus [SJM’s nearby properties]” as well as the “ferry terminal […] getting a facelift” customers will have access to a “hub around the five or six casinos and hotels” in the area, straight off the ferry. In addition, the Hong Kong-Zhuhai-Macau Bridge “that’s sitting right off of our property . . . [provides[ . . . increased connectivity to Zhuhai,”
while the development of the new reclaimed land areas adding more residential nearby will continue to boost the group’s appeal on the Peninsula to both a locals market as well as visitors coming through the Gongbei border crossing.
Happy as we are
“I think there’s a good role for us as that mid-tier,” said the representative of the group’s overall operations. “David Chow [Kam Fai, MLD’s Co-chairman, Executive Director and CEO] is not going to build multi-billon dollar assets. We’re not competing with the big international operators. And in fact our space at the mid-level, there’s not a lot of guys like us – that build US$200-400 million assets. And I think we’re pretty good at that, we don’t take a lot of risks,” he said. And while many other operators in the MSAR such as Melco Resorts & Entertainment are focused primarily on the opening up of the gaming market in Japan, MLD is content to wait and see if its shareholders have any interest. “One of our largest shareholders is Dynam, which is the second largest pachinko company in Japan. So I think to the extent that Dynam is successful in doing something in Japan and they invite us in, of course we’d have a look.” advertisement
8 Business Daily Friday, July 14 2017
Consigliere
The top 10 museum exhibitions you need to see this summer When everyone’s on vacation, museums still step it up James Tarmy
M
useums have a reputation for saving their “serious” exhibitions for the winter, spring, and fall—the Whitney Biennial, the Shchukin Collection at the Fondation Louis Vuitton, the David Hockney retrospective at the Tate, for instance. Summer, when patrons and donors and critics are on vacation, is supposedly the time for lowbudget follies. But spared the spotlight of international scrutiny or the pressure of serving as a ticket-office bonanza, many museums make use of their excellent, often unseen permanent collections to create quiet, highly creative shows that are well worth a visit. The following 10 exhibitions are all cases in point: They range in scope and scale and content, but each, in its own way, is proof that summer is still a season for art.
Eduardo Arroyo: Dans le Respect des Traditions at the Fondation Maeght, Saint-Paul de Vence, France
Arroyo’s view on Velazquez classic character from Las Meninas
The Fondation Maeght, a private exhibition space perched on a mountainside in the south of France, has been a destination since it was founded in 1964 by the art dealers Marguerite and Aimé Maeght. Its permanent collection, which includes a terrace full of sculptures by Giacometti and a “labyrinth” designed by Joan Miro, is always a draw, but its temporary shows are equally good. This collection of work by the Spanish painter Eduardo Arroyo (b. 1937 in Madrid) showcases one of the giants of postwar painting who, for whatever reason (geography, and the fact that they can’t be easily categorized, most probably), has been undervalued by the art world for decades. That probably won’t last long. Eduardo Arroyo up now through November 19.
The Henkin Brothers: A Discovery at the Hermitage, St. Petersburg
polychrome Egyptian Stella from about 1350 B.C.E., and a gorgeously filigreed 13th century B.C.E. Chinese wine vessel in the shape of an ox, on loan from the Shanghai Museum. A bonus: the Neues Museum’s beautifully designed interiors by starchitect David Chipperfield. China and Egypt on view now through December 3.
Female Images from Biedermeier to Early Modernism at the Leopold Museum, Vienna
Cristóbal de Villalpando: Mexican Painter of the Baroque at the Metropolitan Museum of Art, New York In a prime example of a museum making excellent use of its extensive permanent collection, the Leopold Museum (pictured), Vienna’s pantheon of Germanic modernism, has dug into its own holdings and organized a thematic show around “female images.” While any mandate that sweeping runs the risk of falling flat, reassessing the evolution (or lack thereof) of depictions of gender feels timely. The first part of the show is organized around themes (mother and child, young/old, formal portraits, etc.), while the latter part includes works created by female artists. Female Images from Biedermeier to Early Modernism on view now through September 18.
Soul of a Nation: Art in the Age of Black Power at the Tate Modern, London
Sam Gilliam — The Generation Below Them — 1989
Perhaps it requires a British arts organization to truly interrogate what it meant to be a black American artist. This sweeping show—which includes work by Romare Bearden, Norman Lewis, Sam Gilliam, and more than 50 others—seeks to articulate a relatively fresh narrative from the race riots of the 1960s through the early 1980s and the establishment of the Black Power movement. Equally refreshing, the show includes work from the birth of Black Feminism, along with less overtly political pieces, like the aesthetic photography of Roy DeCarava, the first black photographer to win a Guggenheim Fellowship. Soul of a Nation: Art in the Age of Black Power opens July 12 and runs through October 22.
Fred Forest at the Centre Pompidou, Paris
Rarely has an exhibition made more sense, or seemed more clever, than the juxtaposition of photographs by the brothers Evgeny and Yakov Henkin. Born in Rostov-on-Don, a port city in southern Russia on the border of Ukraine, in 1900 and 1903, respectively, the brothers split up after the October Revolution, one moving to Berlin, the other Moscow. The Hermitage (pictured), a museum known for its unparalleled collection of old master paintings, has organized an exhibition that contrasts the trajectory (and parallels) of the two brothers’ lives as their respective cities transitioned from the comparatively ebullient 1920s to the increasingly despotic and bellicose 1930s. The Henkin Brothers on view now through September 24.
China and Egypt: Cradles of the World at the Neues Museum, Berlin
Centre Pompidou, Paris
Fred Forest, a French artist born in 1933, became famous (or at least art world famous) in the 1970s for his conceptual, performative, and largely incomprehensible practice. Forty years later, the theory behind much of his art remains muddled, but his embrace of new technology—he was a leading practitioner of video art—has begun to appear dramatically ahead of its time. Given that Forest has largely disappeared from recent contemporary discourse, the Pompidou’s show is part retrospective and part introduction to a younger audience that wasn’t alive when he was first scandalizing (or sending up) the art world. Fred Forest opens July 12 and runs through August 28.
Sarah Lucas: Good Muse at the Legion of Honor, San Francisco
In a very different example of contrasting timelines, this show comprises 250 objects spanning nearly 4,000 years and charts the development of the two earliest and most sophisticated societies on the planet. The exhibition’s objects include a full Chinese burial suit made out of jade blocks from about 200 B.C.E., a perfectly preserved
on the scene with her peers Damien Hirst and Tracey Emin in the early 1990s under the umbrella of the much-maligned moniker Young British Artists. Unlike her peers, though, Lucas has managed to evolve, persistently creating art that feels fresh, challenging, and fun. This show at the Legion of Honor is the result of the museum’s invitation to Lucas to create new works that “dialogue” with works from its exhibition Auguste Rodin: The Centenary Installation, which closed in April. Many of those works will remain on view alongside Lucas’s sculpture. Sarah Lucas: Good Muse opens July 15 and runs through September 17.
Perceval by Sarah Lucas
Sarah Lucas has been an art market juggernaut for the better part of 25 years, having first appeared
A detail of La Dolorosa by Cristóbal de Villalpando
The Met might be in the throes of a much-publicized budget crisis and management shakeup, but you wouldn’t know it from the quality of its 2017 exhibitions. One of the most exciting displays is a colossal painting by Cristóbal de Villalpando (c. 1649–1714), a Mexican Baroque painter. The painting is more than 28 feet tall and depicts two biblical scenes (Moses and the brazen serpent, and the Transfiguration of Jesus). Ten additional works round out the show, but the massive painting is the star: This is the first time in more than 300 years that it’s left Mexico. Cristóbal de Villalpando opens July 25 and runs through October 15.
Playing with Fire: Paintings by Carlos Almaraz at LACMA, Los Angeles
LACMA, Los Angeles
It’s entirely reasonable that Carlos Almaraz’s reputation is intertwined with Los Angeles: He founded a Chicano artist collective in the city in the 1970s and subsequently created a series of prominent murals in East L.A. depicting the struggle for Chicano civil rights. But his paintings, which are bright, vivid, and often verge on the surreal, practically beg for an international audience. This show—the first major retrospective of his work—includes more than 60 pieces from 1967 until his death from AIDS-related complications in 1989. Playing with Fire: Paintings by Carlos Almaraz opens August 6 and runs through December 3.
The Sculpture Park at the Louisiana Museum of Modern Art, Humlebaek, Denmark
No roundup is worth its salt without a glaring exception, and there’s no better exception than the Louisiana Museum’s (pictured) outdoor sculpture park. Truly, it’s one of the most beautiful summertime destinations for art viewership on the planet. Set on a rolling lawn overlooking the Öresund Sound, the park contains more than 60 sculptures dotted amid trees, flowers, and meandering paths. The park is about a half- hour drive from downtown Copenhagen and well worth the trip. The sculpture park is open year round. Bloomberg
Business Daily Friday, July 14 2017 9
Consigliere
Express yourself!
P
eople nowadays love to express their unique personality, stepping, at long last, out of the shadow of others. Brands know this well, which is why they launch personalised services to enhance their exclusive experiences to customers. Now you can make your own fashion product statements that completely declare your individuality.
Longchamp
The Le Pliage bag is the iconic bag of French brand Longchamp. Born in 1993, the bag is still as popular today as it’s always been. Nicknamed the ‘dumpling bag’ in China because of its shape, its beautiful design and strong practicality enabled the bag to conquer the world. It is also the first designer bag for many girls. Considered the different preference of different women, Longchamp launched its personalised online service in 2014, enabling customers to make their own Le Pliage with vibrant colours. This service is only applied to Le Pliage Cuir, the lambskin and goatskin version. It has wonderful texture as well as perfect gloss; moreover, it can also be folded. You can design all details of the bag from the colour to the handle, flap and inner liner to the letter carved on the bag. This month, Le Pliage Cuir got even more appealing with limited edition badges available at Longchamp stores. Eye, heart, cloud, kitten . . . each badge is a piece of jewellery to accessorise and make your bag even more distinctive. There are 14 original badges to choose from with themes like Longchamp Trends; Love; Space and Happy. This limited edition is a chance to treat yourself to something unique that’s all you!
Tod’s
London sculptor Conrad Shawcross
The art world star breaking the gallery model London sculptor Conrad Shawcross is finding new ways to support his work. James Tarmy
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onrad Shawcross’s rise in the British art world was unprecedented, beginning with his 2003 debut, a wooden machine that slowly wound threads into yarn. It was quickly acquired by the mega- collector Charles Saatchi. A year later, at the age of 25, Shawcross coldcalled Victoria Miro, arguably one of London’s most important dealers. “I got a meeting, and two weeks later she took me on,” he says. In 2013 he was inducted into London’s Royal Academy of Art, the youngest person ever to achieve the honour. Now that he’s 40, Shawcross, the child of historians William Shawcross (the official biographer of Queen Elizabeth the Queen Mother) and Marina Warner, is aging out of his status as a wunderkind. In his own telling, the ambition and scope of his practice reflect his growing maturity. His latest work, a 52-foot-wide set of sails currently suspended from the ceiling of St. Pancras train station, is deliberately less w himsical. He’s also come to rely less on g alleries to fund his projects and instead is focused on cultivating corporate and public patronage. With the art world wringing its hands over the rapid commercialization of young talent, Shawcross’s model could point to
a viable alternative to the current collector-dealer-artist model. “It really became about how to get things made,” he says. “It’s about how to get people to be enthused about helping.” Take his 160-foot-tall tower on the Greenwich Peninsula, an urban regeneration project across the river from Canary Wharf. It was commissioned by Knight Dragon, the area’s Hong Kong-based developer. And his 46-foot-tall sculpture Paradigm, the tallest public sculpture in central London, was commissioned by the Francis Crick Institute and funded by the Wellcome Trust, a biomedical charity. “Today, the scale of his practice is monumental,” Miro says. “He takes on architectural and public spaces with work that combines epic scope but remains poetic and graceful.” Even with major commissions, Shawcross hasn’t shied away from divisive subjects. The sculpture at St. Pancras spans the station’s border-free zone where European Union nationals can disembark from the Eurostar platform without a passport. “It’s in a very poignant position, because it hangs above the only part of the EU in England—on one side of a wall it’s France, and the other is England,” Shawcross says. “I can’t help but see it as a lament about the end of an era or the beginning of another.” Bloomberg
Italian luxury brand Tod’s is famous for its best quality leather and crafting of unique products with continuous attention to the smallest detail. Among so many fantastic products of the brand, its Gommino shoes are no doubt the most famed. Each pair of Gomminos is cut and stitched by hand in order to offer optimum comfort. The signature rubber pebble sole creates an incomparable wearing experience-feel like walking on a waterbed. Tod’s ‘My Gommino’ service allows customers to personalise their iconic shoes. After choosing the shoe model, in just five steps your unique Gommino is born. First, you can choose the leather and colour; next, confirm the style of stitching and insole. Then, you can also design your own rubber pebble sole - which is the soul of Gommino. The last step is to choose the place to put your initials on your shoes. This service is available on Tod’s website and from appointed stores in Macau.
Bulgari
Dubbed the master of coloured gemstones, Italian brand Bulgari not only focuses on creating beautiful luxury jewellery accessories but high quality timepieces. In fact, it is one of the few brands to meet the standards of a Swiss watchmaker. Serpenti Watch collection are iconic Bulgari products that showcase the strong Italian design style - bold and avantg arde. This collection is inspired by the flexible, graceful and mysterious serpent, with the shape of the serpent giving designers much freedom to design the products. Following the Tubogas and Creamic, the Seroenti Watch collection features a leather strap for the first time. Meanwhile, the brand has launched its ‘Twist Your Serpenti’ service to allow customers to personalise their own Serpenti watch by choosing their own combination of dial, case and leather bracelet. You can choose the dial from pink gold and steel curved cased, with both materials providing a brilliant-cut diamonds version. There are six colours of dials plus a variety of colours and materials straps for you to mix and match. Finally, you can also have your name emblazoned on the back of the case. This service is available on the official website and from appointed stores. Customers who buy the New Serpenti watch will receive one more complimentary strap. Edwina Liu, Essential Macau Editor
10 Business Daily Friday, July 14 2017
Greater China Commerce
Trade beats expectations on robust demand China’s trade surplus with the United States was the widest since October 2015 Yawen Chen and Ryan Woo
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h ina p o st e d st r o n ger-than-expected June trade figures yesterday, bolstered by firm global demand for Chinese goods and robust appetite for construction materials at home, but local curbs on lending could weigh on imports later this year. Exports from the world’s second largest economy rose 11.3 per cent from a year earlier, while imports expanded 17.2 per cent, both beating analysts’ expectations, official data showed. While exports benefited from solid demand for electronics and industrial goods, a growing trade surplus, particularly with the United States, may add to trade tensions as U.S. President Donald Trump seeks to boost activity in his country’s manufacturing sector. An increase in trade between China and nuclear-armed North Korea in the first half of the year could also add to diplomatic pressures between Beijing and Washington. Analysts say economic and political risks could undermine much of the strong trade momentum seen in the first half of this year. “Looking ahead, we expect export growth to slow on uncertainties in external demand due to rising geopolitical risks and the stronger yuan-U.S. dollar exchange rate in the first half of 2017,” Nomura researchers said in a note after the data release. China posted a trade surplus of US$42.77 billion in June, slightly above analyst forecasts for a surplus of US$42.44 billion and wider than
May’s US$40.81 billion. Analysts polled by Reuters had expected June shipments from the world’s largest exporter to have risen 8.7 per cent, in line with May’s growth. Imports were forecast to have climbed 13.1 per cent, easing from the unexpectedly strong 14.8 per cent jump in May. The country’s demand for imports, particularly for industrial commodities such as iron ore and coal used to feed a construction boom, has remained robust in recent months. This is thanks mostly to resilient real estate demand in smaller Chinese cities with lax property rules as authorities are keen to clear a housing glut. However, analysts say a slowdown in demand for materials from abroad may already be taking place. “Looking ahead, exports should continue to do well given the relatively positive outlook for China’s main trading partners,” Julian Evans-Pritchard, China Economist at Capital Economics, said in a note. “But we are sceptical that the current pace of imports can be sustained for much longer given the increasing headwinds to China’s economy from
policy tightening.” China’s exports denominated in yuan rose 15 per cent in January-June from the same period a year earlier, while imports jumped 25.7 per cent during the period. Many economists still expect Beijing’s intensifying crackdown on unscrupulous lending and a cooling property market to translate to slower growth after a surprisingly solid first quarter. China publishes its second quarter economic growth numbers on Monday. Economics polled by Reuters expect gross domestic product growth to have cooled to 6.8 per cent from 6.9 per cent in the first quarter as Beijing tightens the screws on financial risks. Authorities have continued their campaign to reduce financial leverage in the economy while also maintaining stability in markets.
Heightened trade tensions?
China’s trade surplus with the United States was US$25.4 billion in June, up from US$22.0 billion in May, official data showed, and its widest since October 2015, according to a Reuters
calculation. While U.S. demand remains robust, concerns of possible trade frictions between the United States and China appear to be back on the radar. Trump has described the trade imbalances between the two countries as a “very, very big issue” that he would address. Washington is also investigating aluminium imports from China under the rarely used section 232 of the Trade Expansion Act of 1962 that allows restrictions on imports for reasons of national security. The administration is conducting a separate investigation into steel. The world’s two biggest economies started their 100 days of trade talks in April and agreed in May to take action by mid-July to increase access for U.S. financial firms and expanding trade in beef and chicken among other steps. Senior U.S. and Chinese officials will hold a U.S.-China Comprehensive Economic Dialogue in Washington on July 19, which will be the first covering economic and trade issues in a new format for U.S.-China dialogue. Reuters
H1 outlook
Outbound investment plummets as capital outflow controls bite Investment in overseas real estate fell 82.1 per cent from a year earlier in the first six months of the year China’s non-financial outbound direct investment (ODI) nearly halved in the first half of 2017 as curbs over capital outflows took effect, the commerce ministry said yesterday. Outbound direct investment in the January to June period plummeted 45.8 per cent from a year earlier to US$48.19 billion. Rapid falls in the yuan currency prompted Beijing to tighten control over funds moving out of China since late last year, as it moved swiftly to quash expectations of a further steep depreciation and safeguard its reserves. Capital outflows have eased in recent months in the face of tighter regulations and the dollar’s rally paused. The yuan has gained more than 2 per cent this year. “Unreasonable outbound investment have been effectively curbed,” the ministry
said during a regular briefing in Beijing, noting that overseas investment in real estate, hotels, cinemas and entertainment have all dropped significantly.
Key Points Jan-June non-financial ODI dives 45.8 pct y/yto US$48.19 bln H1 foreign direct investment slips 0.1 pct y/y “Unreasonable” overseas investment effectively curbed-ministry Overseas investment in real estate, hotels, cinemas down sharply For example, investment into overseas real estate fell 82.1 per cent from a year earlier in the first six months of the year, accounting for just 2 per cent of the total outbound
investment during the period, data from the ministry showed. In June alone, China’s total outbound investment dropped 11.3 per cent from a year earlier to US$13.6 billion. China burned through nearly US$320 billion of reserves last year but the yuan still fell about 6.5 per cent
against the dollar, its biggest annual drop since 1994. The ministry also cited a recovery in the domestic economy and rising instability in the global trade environment as reasons for the sharp decline of China’s investment abroad. “Some countries have tightened market access for foreign capital,” it said,
without naming the specific controls. Foreign direct investment (FDI) into China fell 0.1 per cent to RMB441.54 billion (US$65.1 billion) during the Jan-June period from the same period a year earlier, the Commerce Ministry said. In June alone, FDI rose 2.3 per cent from a year earlier to RMB100.45 billion. Reuters
Business Daily Friday, July 14 2017 11
Greater China Monetary policy
Central bank makes ‘neutral’ mid-term loan injection Traders and analysts said yesterday’s cash injection through MLF loans was well within market expectations China’s central bank injected RMB360 billion (US$53.06 billion) in medium-term loans into the financial system yesterday, a fresh sign authorities aim to maintain financial stability while continuing a deleveraging campaign. The injection was made through the People’s Bank of China’s (PBOC) medium-term lending facility (MLF) loans. A similar amount of such loans matures this month.
Key Points Injection size similar to mid-term loans maturing in July C.bank skips reverse repo open market operations Interest rates on RMB360 bln in MLF loans unchanged The MLF loans injected yesterday have a one-year tenure, with interest rates unchanged at 3.20 per cent, the PBOC said in a statement on its website. MLF loans totalling RMB357.5
billion mature in July. Two batches that together are worth RMB179.5 billion are due to mature yesterday. Another batch of one-year loans worth RMB39.5 billion will mature on July 18 and RMB138.5 billion of sixmonth MLF loans will be maturing on July 24. Nie Wen, economist at Hwabao Trust in Shanghai, called yesterday’s MLF operation “neutral”. “Starting late June, liquidity in the financial system has improved while the pace of reducing leverage has become slower,” he said. Nie added that authorities have set
financial stability as a key task for the second half after a deleveraging drive between April and early June impacted financial markets. However, a fixed-income trader at an asset-management firm in Shanghai said yesterday’s injection of one-year MLF loans may have the effect of extending maturities, as some of the loans due in July had tenors of a few months. While banks are unlikely to be affected, entities more sensitive to short-term funding costs may have a more bearish outlook as a result, the trader said.
In a report in early July, the PBOC said it would steadily push forward financial regulatory reform and improve the stability of financial institutions, as well as appropriately deal with some high-risk institutions this year. In yesterday’s statement, the PBOC said it was skipping reverse repos in open market operations. Until Tuesday, when it had open market operations, the PBOC had abstained from them for 12 straight sessions, citing either “relatively high” or “appropriate” liquidity levels in the banking system. Reuters
Banking
CITIC International looks to offload US$2.8 bln loan portfolio The largest loan up for sale is a US$600 million chunk of a US$12.7 billion syndicated financing facility backing ChemChina Carol Zhong
China CITIC Bank International, the offshore banking arm of conglomerate CITIC Group, is selling US$2.8 billion of its Asian loan portfolio including financing it extended to ChemChina, Fosun International and China Evergrande Group, Thomson Reuters Basis Point reported on Wednesday. The loan sale - representing about 7 per cent of the bank’s US$39 billion offshore assets - comes as Chinese regulators move to reduce leverage and control potential systemic risk, including problems posed by domestic companies acquiring overseas assets. Hong Kong based CITIC Bank International has put 51 Asia offshore loans up for sale, most of which were made to companies based in mainland China, Basis Point reported, citing people with direct knowledge of the matter and a sale document. The loans are largely denominated in U.S. and Hong Kong
dollars, maturing between 2017 to 2021. The largest loan up for sale is a US$600 million chunk of a US$12.7 billion syndicated financing facility backing China National Chemical Corp’s (ChemChina) US$44 billion acquisition of pesticides and seeds group Syngenta AG, according the document and the sources, Basis Point said. CITIC Bank International, together with its parent China CITIC Bank, was the global coordinator and largest lender of the facility. The bank is also selling a HK$4 billion (US$512 million) portion of a loan used to finance Hong Kong-listed Goldin Properties Holdings Ltd’s take-private, HK$2 billion of lending to debt-laden property developer China Evergrande Group and US$30 million to acquisitive Chinese conglomerate Fosun, according to the document and sources. Banks typically offload portfolios in the secondary market to reduce credit
and liquidity risk. Bankers in receipt of the sale document said the US$2.8 billion portfolio was unusually large for the Asian secondary loan market. A H o n g K o n g-b a s e d spokesman for CITIC Bank International said in an email statement that the sale of the loans was part of the bank’s ongoing portfolio management. “The bank’s liquidity maintenance ratio is well above regulatory requirements and is above peer average,” he added.
Scaling back
The Chinese banking regulator is cracking down following years of aggressive lending by Chinese banks, particularly to finance overseas acquisitions. Chinese firms spent a record $221 billion on assets overseas in 2016, ranging from movie studios to football clubs. Chinese banks’ share of the Asia ex-Japan market in syndicated loans, usually used to fund acquisitions, was more than a third last year compared to about 14 per cent in 2013, according to Thomson Reuters LPC data. Last month, China’s banking regulator ordered a group
of lenders to assess their exposure to offshore acquisitions by HNA Group, Dalian Wanda Group Co, Anbang Insurance Group, and Fosun, Reuters reported, without naming the banks. Several Chinese loan bankers said they were also looking to deleverage their
portfolio and would be selective in lending in the second half of 2017. “We have been asked to tighten our lending in the second half after making so many loans in the past few years,” one Hong Kongbased senior loan banker told Basis Point. Reuters
12 Business Daily Friday, July 14 2017
Greater China Private poll
Economy to top gov’t target in 2017 It grew a surprisingly solid 6.9 per cent in the first quarter
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hina’s economic growth is expected to top the government target to reach 6.6 per cent in 2017, tempering initial worries of a sharper slowdown as Beijing walks a policy tightrope with its quest to crackdown on financial risks and limit damage to the economy. An upturn in global demand for Chinese goods could cushion the impact on growth from curbs on property and debt risks, which have seen a modest tightening in monetary conditions, economists said. The government has targeted annual growth of around 6.5 per cent this year, down from the 6.7 per cent pace clocked in 2016 - the slowest in 26
years - as authorities stepped up their campaign to wean the economy off its reliance on years of cheap credit. Growth in the world’s second-biggest economy is projected to continue cooling to 6.3 per cent in 2018, the Reuters poll of 65 economists showed. The forecasts for this year and in 2018 were both more optimistic than the polling results three months prior, as a slew of official data in recent months eased worries about a sharper downturn in China’s economy. “We raised our forecast because the economy has fared much better than expected in the first half of the year,” said Betty Wang, a Hong-Kong based senior economist with ANZ Research.
China’s economy grew a surprisingly solid 6.9 per cent in the first quarter, buoyed by a gravity-defying property boom and higher government infrastructure spending which helped boost industrial output by the most in over two years. However, the impact of a cooling property sector on economic growth is starting to show up, as fixed asset investment growth in May slowed more than expected. While growth in the second quarter is expected to have eased slightly according to the poll, solid exports in recent months have helped the economy weather tighter financial conditions. On a quarterly basis, China’s economy is expected to slow to 6.8 per cent growth in the second quarter, 6.6 per cent in the third and 6.5 per cent in fourth quarter, the poll showed.
Still, analysts remain cautious about the longer-term economic prospects of the Asian giant. Property curbs and higher borrowing costs could gain more traction over the coming quarters. “You don’t feel the pain initially,” said Julian Evans-Pritchard, China economist at Capital Economics.
Key Points China 2017 GDP growth seen at 6.6 pct, 6.3 pct in 2018 Third-quarter growth seen slowing to 6.6 pct from 6.9 pct in Q1 Inflation to slip to 1.8 pct in 2017 C.bank seen keeping rates steady, cutting RRR in Q1 2018 “Companies can make do with less credit for now, but then lending starts to slow, as monetary conditions are still tighter, and that will eventually start to hurt,” he said, adding that the transmission time could take up to nine months. Analysts believe the PBOC will keep benchmark lending rates unchanged at 4.35 per cent through at least the fourth quarter of 2018, the Reuters poll showed. They have pushed back their expectations on a cut in the amount of cash that banks are required hold as reserves, or the reserve requirement ratio (RRR). The central bank is expected to cut the RRR by 50 basis points (bps) in the first quarter of 2018 to 16.5 per cent, versus the April poll’s prediction for the 50 bps cut to be made in the fourth quarter of this year. Analysts also expect annual inflation to be more muted at 1.8 per cent in 2017, down from the actual 2 per cent rate in 2016, probably reflecting a drag from low food inflation. Reuters
Results
TSMC guides Q3 revenue up Apple is gearing up to launch its latest iPhone version, and analysts expect TSMC and some other suppliers to benefit from it Jess Macy Yu
Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker and a key Apple supplier, forecast third-quarter revenue to rise at least 15 per cent from the last quarter due to new mobile devices-related product launches.
and US$8.22 billion, compared to the US$7.06 billion posted for the April-June quarter. TSMC and its rivals are riding a boom in demand for chips that power smartphones and computer servers, driving sharp gains in
their shares. South Korea’s Samsung Electronics Co last week estimated a record quarterly operating profit for April-June. Apple is gearing up to launch its latest iPhone version, and analysts expect TSMC and some other suppliers to benefit from it. TSMC’s brighter outlook came after its second-quarter net profit fell 8.6 per cent from the same period a year ago due to a seasonally weaker quarter and an “unfavourable foreign exchange rate”, the company said. Net profit for April-June was T$66.27 billion (US$2.19 billion), down from T$72.51 billion in the
year-ago quarter. That compared to the T$68.44 billion average forecast of 22 analysts, according to Thomson Reuters. TSMC also said it will from this quarter offer revenue guidance in U.S. dollar terms, a departure from denoting it in Taiwan dollars, because of the unfavourable on-year appreciation of the local currency, which it said has been making its revenue appear less than it was. Revenue in U.S. dollar terms fell 5.9 per cent in the second quarter from the previous quarter, but was up 3.2 per cent from a year ago, the company said. Reuters
Key Points Q3 revenue seen at US$8.12US$8.22 bln range vs US$7.06 bln in Q2 Says to offer guidance in US$ to smoothen currency effect Q2 net profit T$66.27 bln vs T$68.44 bln forecast of analysts Taiwan’s most valuable company, which has a market capitalisation that exceeds Intel Corp’s, said yesterday revenue for the July-Sept quarter will be between US$8.12 billion
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Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; 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 Friday, July 14 2017 13
Asia Policy
Bank of Korea raises growth forecast Governor of the central bank said inflation will fluctuate around 2 per cent for some time Jiyeun Lee and Hooyeon Kim
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outh Korea’s central bank held its benchmark interest rate unchanged yesterday while raising its growth forecast as exports and plans for fiscal stimulus add to optimism for the economy. The Bank of Korea’s (BOK) policy board voted unanimously to keep the seven-day repurchase rate at a record-low 1.25 per cent, as forecast by all economists surveyed by Bloomberg. Governor Lee Ju-yeol said gross domestic product will expand 2.8 per cent this year, exceeding the previous forecast of 2.6 per cent, and close to the country’s potential growth rate. He added that fiscal stimulus from the government could further boost the economy and wasn’t included in the GDP estimate. President Moon Jae-in is pursuing an 11.2 trillion won (US$9.8 billion) package as a key to generating more jobs, but the bill has made little progress in parliament. The BOK needs to be sure the economy has clearly recovered before there can be any change in monetary policy, though the board agrees that the future bias is for its stance to become less accommodative, according to the governor. He also said that while changes made
by key central banks overseas are an important consideration, the board needn’t respond directly to moves by its foreign counterparts. “The change in growth forecast was in line with expectations, and shows that the BOK has a positive view on the economy,” said Stephen Lee, an economist at Meritz Securities in Seoul. “By saying that the BOK needn’t respond directly to policy changes by other central banks, the governor signalled a rate increase need not come soon.” Meritz sees a 25 basis-point increase coming in the first quarter of 2018.
Inflation outlook
Governor Lee said inflation will fluctuate around 2 per cent for some time and that the BOK hadn’t changed its 1.9 per cent projection for price changes. “His comments can be seen as hawkish, and he again signalled that the direction is for a rate increase,” said Park Jong-youn, an analyst at NH Investment and Securities. “The key would be when it decides to raise.” The governor noted in his press briefing that the board has no specific timing in mind. Most analysts see the BOK staying the course through the end of this year, though, out of concern that higher rates would pose a risk to the
The central bank said Malaysia continues to face risks from political and policy uncertainties in the major economies Joseph Sipalan
Malaysia’s central bank kept its benchmark interest rate unchanged yesterday, saying it expects improved global growth prospects to sustain solid exports and generate “positive spillovers” to the domestic economy. As expected, Bank Negara Malaysia (BNM) maintained the overnight policy rate at 3.00 per cent, where it has been since a 25 basis point cut one year ago. All 12 economists polled by Reuters had forecast no rate change yesterday. Earlier this year, when annual inflation topped 5 per cent, some analysts
Central bank headquarters
predicted at least one rate hike in the second half. But now, with inflation moderating, the chance of a rate hike soon has diminished, though that could change if the Federal Reserve hikes U.S. rates a third time this year. “BNM didn’t give any hint of possibly raising rates. They continued to signal a neutral stance for now,” said Julia Goh, a Kuala Lumpur-based economist for UOB Bank. “But we don’t rule out the possibility of a hike next year.” For there to be a hike, economic growth has to be at least 5 per cent and there needs to be wage pressure raising inflation, she said.
Key indicator
Indonesia’s motorbike sales down Motorcycle sales in Indonesia fell 26.9 per cent in June from a year earlier, data from an industry association showed yesterday. These sales are also the biggest drop since July 2016, according to Thomson Reuters data. Sales stood at 379,467 motorbikes in June, down from 518,878 sold in the year-ago period. It was also lower than the 531,496 bikes sold in May. Motorbikes are hugely popular in Southeast Asia’s biggest economy and their sales are a key indicator of consumption. Sales in June were led by Honda Motor Co Ltd, Yamaha Motor Co Ltd and Suzuki, data showed. 1MDB linked case
Bank of Korea Gov. Lee Ju-yeol holds a news conference at the central bank in Seoul yesterday. Lusa
recovery and add to consumers’ repayment burdens at a time of record household debt. Lee said the government’s policies should be the key tool to curb debt growth, rather than higher rates. The central bank said last month in a semi-annual financial stability report that while an incremental rise in the lending rate would not hurt consumers’ ability to meet payments much, a rapid rise in a short time would lead to relatively large increase in the number of households at risk. Bloomberg News
Monetary meeting
Malaysia holds key rate, upbeat on path ahead for economy
In Brief
The central bank, which earlier forecast expansion of 4.3-4.8 per cent this year, said the economy is expected to register “higher growth” in 2017. It did not specify if that meant stronger growth than its 2017 forecast, or than last year’s rate of 4.2 per cent. BNM said growth will be driven by sustained export performance, given a more favourable global outlook. Private consumption will be underpinned by higher wages and employment, and new and on-going infrastructure projects have driven an improved investment outlook, the central bank said. Malaysia’s economy grew at a better-than-expected 5.6 per cent annual rate in the first quarter - the quickest pace in two years - on robust exports and strong domestic demand. Second-quarter growth data will be released on Aug. 18.
Stronger currency
In May, exports surged 32.5 per cent from a year earlier, well above economists’ forecasts. The ringgit has recovered from being among the weakest emerging Asian currencies in 2016, following measures by the central bank to reduce volatility in the ringgit and domestic forex market. It has strengthened more than 4 per cent against the dollar this year. Headline inflation eased to 3.9 per cent in May after hitting an eight-year high of 5.1 per cent in March. BNM said the pace is expected to moderate in the second half, “mainly reflecting the waning effect of global cost factors”. “Underlying inflation, as measured by core inflation, will be sustained by the more robust domestic demand but is expected to remain contained,” it said. The central bank said Malaysia continues to face risks from political and policy uncertainties in the major economies and volatility of commodity prices. Reuters
Singapore sentences ex-BSI banker to more jail time A Singapore court jailed a former wealth manager of Swiss bank BSI for 4-1/2 years on Wednesday for money laundering and cheating in a case linked to investigations into the siphoning off of billions of dollars from Malaysian sovereign fund 1MDB. A political storm has raged for two years in Malaysia over the scandal at 1MDB, which is the focus of money laundering investigations in at least six countries. Singapore public prosecutor Nathaniel Khng described the citystate’s investigation as “the most complex, sophisticated and largest money laundering case” ever carried out by its white-collar police. Agreement amendment
U.S. informs SK plans to start trade talks The United States notified South Korea on Wednesday it plans to start negotiating amendments to a five-year-old free trade agreement with Seoul and called a meeting to kick off the talks for next month. The announcement came months after U.S. President Donald Trump said he would either renegotiate or terminate what he called a “horrible” trade deal. U.S. Trade Representative Robert Lighthizer, acting on Trump’s instructions, said the joint committee under the U.S.-Korea Trade Agreement (KORUS) would meet in Washington next month. No date has been set. Real estate
Auckland house prices slow in June House price growth in New Zealand’s largest city of Auckland slowed in June, a development only likely to reinforce the central bank’s determination to keep interest rates steady at record lows. House prices in Auckland grew 2.1 per cent on the year, in a seasonally adjusted basis -- half the 4.4 per cent annual pace seen in May. On the month, house prices in Auckland, grew 1.0 per cent. The central bank is closely watching house price inflation amid concerns that a sharp downturn in the housing market could pose a financial stability risk.
14 Business Daily Friday, July 14 2017
International In Brief Public finances
UK budget watchdog warns of long-term Brexit risks Britain will need to curb public spending further or raise taxes if leaving the European Union does longterm damage to economic growth, underscoring the importance of the country striking new trade deals, the government’s budget watchdog said yesterday. The Office for Budget Responsibility said ensuring robust trade agreements was more significant for the long-run health of Britain’s public finances than the size of any ‘divorce bill’ to settle one-off liabilities with the EU. A continuation of Britain’s recent weak productivity would also make tax rises or spending cuts more likely, the OBR said. Strategy
BlackRock cuts fees, builds bond indexes The world’s largest asset manager BlackRock Inc yesterday launched four bond exchange-traded funds and cut fees on another in an effort to lure more investors to its products from traditional debt markets. The moves come as BlackRock estimates bond ETFs attracted US$84 billion so far in 2017, a record for the first-half of the year, and the company establishes a new business line building its own indexes. “We have aspirations to be ubiquitous in every securities market,” said Martin Small, U.S. Head of iShares at BlackRock, in an interview with Reuters.
Legislation
EU watchdog says regulators should ban “letter-box” investment firms European Securities and Markets Authority said decision-making for designing, controlling and monitoring trading systems’ operations should not be outsourced outside the EU
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egulators should prevent investment firms from setting up shop in one jurisdiction to avoid stricter controls in their home state, the European Union’s markets watchdog said yesterday. EU supervisory authorities are concerned about a “race to the bottom” as financial services firms shift operations after Britain leaves the bloc in 2019. National securities regulators should “mitigate the risk of letter-box entities and ensure that any relocation is effective”, the European Securities and Markets Authority (ESMA) said in an ‘opinion’, or formal guidance. Regulators should ensure senior management are based in the home jurisdiction of the firm and that “board members and senior managers in the EU27 have effective decision-making powers, even where the investment
firm is part of a group”, ESMA said. If regulators believe that investment firms, including the trading arms of investment banks, are not genuinely operating in their home jurisdiction, “this may provide grounds for not granting or withdrawing authorisation”, ESMA said. In a separate opinion on secondary trading, ESMA said decision-making for designing, controlling and monitoring trading systems’ operations should not be outsourced outside the EU. The broker-dealer trading arms of banks in Britain have previously asked EU regulators whether their entities in the other 27 EU states will still be allowed to outsource operations to London once Britain leaves the bloc. “ESMA considers it necessary that conditions for outsourcing activities to UK-based entities do not generate regulatory and supervisory arbitrage
risks,” the watchdog said. In a third opinion, ESMA said regulators should also prevent asset managers from setting up letter-box operations, bringing them into line with rules applying to hedge funds.
“It is a big development because the ‘letter-box’ concept is only a...hedge fund idea” Leonard Ng, co-head of the EU financial services regulatory group at law firm Sidley Austin “It is a big development because the ‘letter-box’ concept is only a... hedge fund idea,” said Leonard Ng, co-head of the EU financial services regulatory group at law firm Sidley Austin, adding that legislation for other asset managers “has not previously been as prescriptive”. Reuters
HR
Goldman Sachs relaxes dress code in fight for talent Traditionally buttoned-up Wall Street bank Goldman Sachs Group Inc has relaxed the dress code for its computer engineers in a bid to attract tech talent with a more casual environment. The fifth-largest U.S. bank by assets told employees in its technology division to “exercise judgment in determining when to adapt to business attire,” according to an internal memo from late June seen by Reuters yesterday. It did not specify whether hoodies or sneakers, the ad-hoc uniform of millennial tech workers, constitute acceptable dress. M&A
Uber cedes Russia to Yandex Uber Technologies Inc. is handing over the keys to its business in Russia. The San Francisco-based company and Yandex NV are merging their ride-hailing businesses in Russia. Uber will invest US$225 million and take a 36.6 per cent stake in a new, yet-to-be named venture that will be valued at US$3.73 billion, the companies said in a statement yesterday. Moscow-based Yandex will invest US$100 million and own 59.3 per cent of the new enterprise. The deal with Yandex is Uber’s second retreat from a major market. Last year, Uber left China in exchange for a 17.5 per cent stake in rival Didi Chuxing, after losing more than US$2 billion battling its competitor.
Oil industry
IEA says OPEC compliance with cuts at lowest in 6 months The cuts have stabilised oil at around US$45-50 per barrel, but prices have come under renewed pressure in recent weeks Dmitry Zhdannikov
OPEC’s compliance with production cuts fell in June to its lowest levels in six months as several members pumped much more oil than allowed by their supply deal, thus delaying market rebalancing, the International Energy Agency said yesterday. OPEC’s compliance with cuts slumped to 78 per cent last month from 95 per cent in May as higher-than-allowed output from Algeria, Ecuador, Gabon, Iraq, the UAE and Venezuela offset strong compliance from Saudi Arabia, Kuwait, Qatar and Angola. “Each month something seems to come along to raise doubts about the pace of the rebalancing process. This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement,” the Paris-based IEA said. The Organization of the Petroleum Exporting Countries (OPEC) and several non-OPEC producers including Russia have agreed to cut production by around 1.8 million barrels per day until March 2018 to ease a global crude glut spurred by booming U.S. output.
OPEC members Libya and Nigeria were exempted from the cuts due to years of unrest that have sapped their output. The two countries have managed to increase their combined production by more than 700,000 bpd in recent months, the IEA said.
Key Points Algeria, Iraq, UAE and Venezuela pump more than allowed Compliance with cuts slips to 78 per cent in June Demand growth should accelerate market rebalancing in H2 Price weakness may prompt U.S. shale firms to reassess prospects “For fellow OPEC members, who agreed to reduce production by 1.2 million bpd, to see their cut effectively diluted by nearly two-thirds must be very frustrating, especially as their pact has, hitherto, been well observed by historical standards,” the IEA said. The cuts have stabilised oil at around US$45-50 per barrel, but prices have come under renewed pressure in recent weeks due to growing U.S.
output and little evidence of global stocks falling from record highs above 3 billion barrels. The IEA, which advises industrialised nations on energy policy, said strong demand growth in the second half of 2017 and in 2018 should nevertheless speed up market rebalancing. It said demand for OPEC’s crude was forecast to rise steadily through 2017 and reach 33.6 million bpd in the fourth quarter - up 1 million bpd on OPEC’s June output. “Provided there is strong compliance with OPEC’s cuts, that would imply a hefty stock draw, even if Libya and Nigeria recover further,” it said. The IEA said stocks in industrialised nations in May were 266 million barrels above the five-year average, down from 300 million barrels in April. Preliminary data shows a further moderate reduction in stocks for June. The agency also said that while non-OPEC producers such as the United States, Canada and Brazil were firmly back in growth mode, the recent decline in oil prices could force some U.S. producers to reassess their prospects. “Financial data suggests that while output might be gushing, profits are not and recent press reports quoted leading company executives saying that oil prices need to be around US$50 per barrel to maintain production growth,” the IEA said. Reuters
Business Daily Friday, July 14 2017 15
Opinion Business Wires
Taipei Times Taiwan’s initial public offering activity might not pick up in the second half, following a poor showing in the first half, as the depressant effects of a lack of highprofile deals and growing competition from the Chinese market persist, accounting firm Deloitte & Touche said. The first half saw 21 local and foreignregistered firms list on the Taiwan Stock Exchange and the Taipei Exchange in deals which raised a total of NT$7.313 billion (US$239.85 million), representing a 22 per cent decline from the money raised by deals made in the same period last year, the international consultancy’s local branch said.
Global Times An increasing number of State-owned enterprises (SOEs) are optimizing their assets through mergers. It seems that the capital market has served as a platform for these enterprises to carry out reform. Mergers are considered a good choice, however, some experts say that SOEs still need to reform their internal system and mechanisms to stimulate enterprise vitality. They forecast that the implementation of reform plans will accelerate in the third quarter as a way to welcome the upcoming 19th Communist Party of China National Congress.
The Star The asking price for a new three-storey Singapore penthouse, complete with a private pool on the 64th floor, has reached a dizzying S$100 million (US$72.6 million). Due to be formally unveiled later this year, Wallich Residence’s penthouse is in the tallest building in Singapore, the island of well-heeled stability that attracts the super-rich from its less-developed Southeast Asian neighbours, as well as multi-millionaires from mainland China. The ‘bungalow in the sky’ penthouse in the GuocoLand -developed Tanjong Pagar Centre, is likely to become Singapore’s most expensive apartment.
The Inquirer Senator Juan Edgardo “Sonny” Angara reassured the business process outsourcing (BPO) sector that the tax incentives industry firms are receiving will not be taken out under the proposed comprehensive tax reform program “The BPO sector can finally heave a sigh of relief after it has been clarified to its members that their VAT exemption will be untouched. With the industry’s incentives intact, we can continue to attract more BPO investments that would spur economic growth and job creation in the country,” Angara said in a statement yesterday.
Size matters in fund management, and it doesn’t help
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ize does matter in fund management, and if you are an investor it is not helpful. While the idea that it is harder to perform well managing a larger fund than a smaller one makes intuitive sense, up until now the results from the academic literature have been inconclusive. Most industries experience so-called diseconomies of scale, the point at which producing a given unit of output for a given firm rises. In the case of funds, the issue isn’t so much of the price of managing the money but whether it can be done as successfully, with as much alpha, or market outperformance. After all, size is difficult for fund managers; not only does more money deployed tend to make the market move against you as you try to build a position in a stock, but there are theoretically only so many good investment opportunities and fewer and fewer as your requirements for the size of an investment rise. A new study of U.S. active equity fund managers, borrowing techniques from development economics, purports to show that economies of scale in fund management show diminishing returns. “We find strong evidence for decreasing returns to scale at the individual fund level,” Campbell Harvey of Duke University and Yan Liu of Texas A&M University write in a study released in late June. “We also present evidence for decreasing returns to scale at the industry level, although its economic significance is much smaller.” This is a finding with wide implications, not only for investors but for the fund management industry. For investors the implication is that they should be more careful, and perhaps parsimonious, in allocating to the largest funds. For fund companies, fighting a difficult battle as they see billions of outflows into passive instruments like ETFs, the realization that there are diseconomies of scale will be deeply unsettling to the largest funds, which benefit from brand recognition and marketing advantages. For an average fund in the study, which covered the years 1991 to 2011, a doubling in size relative to the size of the industry over one year would shave 20 basis points off of their annual alpha.
“
James Saft a Reuters columnist
level) implies a 5-basis-point drop in alpha (per annum) for the average fund,” the authors write. The impact of industry size, relative to the size of the market, first improves and then gets worse. This the authors attribute both to the impact of new capital flowing in and the “profitability of investment ideas deteriorating through time.” This, on its face, accords pretty well with Credit Suisse strategist Michael Mauboussin’s “Paradox of Skill”, which posits that the average skill level in the investment industry is rising over time, as poor managers get fired, but that this leaves a tougher set of opponents and less low-hanging investment fruit for those still in the game. Think of a poker game in which the lousy players bust out early in the night. By about midnight, if you are still playing, you are facing a tougher table. Such may be the position of the investment industry, and in some ways, of those most successful at it, whose funds have grown too large to be easy to wield. Mauboussin, building on work by Peter Bernstein from the 1990s, showed in earlier research that statistical measures of outperformance by large capitalization mutual funds in the United States have been declining steadily for almost five decades, with the standard deviation of excess return now less than half what it was in the late 1960s. During the 20 years of the Campbell and Liu study the number of funds increased from about 400 to nearly 1,500 and they moved from owning about 4 per cent of market capitalization to nearly 16 per cent. Unsurprisingly, the study finds that funds which show themselves less liable to perform more poorly tend to attract a disproportionately large amount of money, perhaps as investors seek to get in on what seems a good thing in a fund with which they are familiar. While these funds are relatively less vulnerable to diseconomies of scale and decreasing alpha, they still are vulnerable, meaning that the additional and large flow of funds only hurts future performance. To be sure, size is surely a good thing for operators of mutual funds. For the rest of us, there is more reason to be sceptical and wary. Reuters
For investors the implication is that they should be more careful, and perhaps parsimonious, in allocating to the largest funds
A business which gets harder and harder
What is true for funds is true for the active fund management industry as a whole, the study finds. “We also find a significant impact of industry size, consistent with earlier research. We estimate that a 1 per cent increase in industry size (at the monthly
”
16 Business Daily Friday, July 14 2017
Closing Gambling
World’s biggest gamblers cry foul as betting ads lure kids Crown Resorts sponsors a rugby club, while its betting unit is the official gambling partner of rival code the Australian Football League Angus Whitley and Jason Scott
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s Australians on Wednesday night watched one of the year’s biggest sporting events, the interstate rugby league finale, television ads repeatedly implored them to have a bet. F o r y e a r s, c o v e ra g e swamped by betting promotions has made match day in Australia almost synonymous with a wager. But now a sports-mad nation that racks up gambling losses of A$23 billion (US$17.7 billion) a year -- more per person than any country -- is growing a conscience. Aussies are seeking to weaken the combined force of sports, broadcasters and betting companies -- for their kids’ sake. With about a quarter of young Australians estimated to be gambling on sport, the government is pushing through a ban on betting ads during daytime live matches. Lawmakers are also debating a bill, expected to pass next month, that aims to crack down on offshore gambling websites that offer bets on games already in progress. “In people’s minds, and especially children, the concept of sports and gambling have become so intertwined that they can’t think about one without the other,” said David Rowe, a professor at Western Sydney University who specializes in sports, culture and media. “That’s what people regard as really dangerous.” As the U.K.’s top soccer body ends all betting sponsorship, Australia’s government faces a conundrum: how to nurture major sports while shielding children from gambling. Efforts to stem the flood of marketing threaten the value of
A$4.9 billion of media rights for rugby league, Australian rules football and cricket alone. The rights were sold to networks including Seven West Media Ltd., Nine Entertainment Co. and Rupert Murdoch-backed pay-TV service Foxtel. As many as 500,000 people in Australia either have a gambling problem or risk developing one, the government estimates. And in an era of smartphones and social media, adolescents are particularly at risk, according to the Victorian Responsible Gambling Foundation. Teenagers are four times more likely to develop gambling problems than adults, the foundation said in a March report citing a range of studies. It included a survey of 2012’s interstate rugby league contest -- known as State of Origin -- where types of gambling promotions, including on billboards and uniforms, appeared an average 111 times during its free-to-air coverage. “I hear parents’ concerns that their kids can name the odds on every game and talk about that rather than who’s playing well,” said Australian Human Services Minister Alan Tudge, whose department is overseeing the Interactive Gaming Amendment Bill. Online gambling “has all the growth and is where the problems of the future will arise unless we start to get control of it now.” Such problems have been more than 200 years in the making. Gambling was already entrenched in Australia before the colony’s first official horse-race in Sydney in 1810. One of the earliest forms saw convicts and military officers bet on a coin toss in a game now called “two-up” that’s
Gaming
still played today. Today’s gambling advertisements, such as those by Sportsbet, often attempt to capture the nation’s working-class and blokey past, showing cheeky young men trying to escape their female partners to drink beer or watch a match. Sportsbet also signed up Olympic drug cheat Ben Johnson to promote its mobile-phone service, before pulling the ad following criticism. Bet365 has appealed to more urbane, tech-savvy millennials, using Hollywood star Samuel L. Jackson to add glamor to its ads. On Australian broadcasts of games, local former sports stars cite the latest betting odds during pre-match discussions, always adding: “And please, gamble responsibly.” Restrictions likely to be implemented in March will ban gambling ads during matches before 8:30 p.m., as well as in the five minutes before and after them. That didn’t apply to Wednesday night’s third and deciding clash between New South Wales and Queensland states, which at least 16 per cent of Aussies were expected to watch. Even before the match started, six ads for Ladbrokes had appeared. One commercial break was book-ended with Sportsbet promotions, while appeals to gamble from CrownBet rounded out the game’s coverage.
Australia’s major sporting codes blame the television networks and betting operators for swamping the airwaves with gambling ads, which Victorian Responsible Gambling’s report said were valued at A$236 million in 2015. “They overcooked the pudding,” said Malcolm Speed, executive director of the Melbourne-based Coalition of Major Professional and Participation Sports. “While it’s a very clearly defined demographic they aim at, the general sporting public finds the advertising overbearing and annoying.’’ Nine didn’t reply to requests for comment, while Ten Network Holdings Ltd. and Seven referred questions to Free TV Australia, which represents free-to-air broadcasters. Free TV didn’t return a call and email seeking comment. The television networks and Foxtel have said they support the gambling ad restrictions as part of a package of broader reforms.
Still up
All the same, it’s not clear the ad restrictions will be effective because they don’t constitute a blanket ban, and many children are awake past 8:30 p.m. “At the end of the day, if the ads are shown, kids will see them,” said Andrew Hughes, a lecturer in marketing at the Australian National University in Canberra. “The advertising
Auto industry
is very clever and effective -it downplays the harm, and gives young people a sense of belonging to a club.” The public debate has laid bare a network connecting some of Australia’s richest men and major businesses to the sporting codes and their betting partners. Billionaire James Packer, the largest shareholder in casino operator Crown Resorts Ltd., part owns rugby league club South Sydney Rabbitohs with actor Russell Crowe. Crown Resorts also sponsors the club, while its betting unit is the official gambling partner of rival code the Australian Football League. Cricket’s national governing body, Cricket Australia, lists 20 approved sports-betting partners on its website.
Caring bookies
And the bookies show up on both sides of the debate. Even as they’re teaming up with the sporting codes, lobby groups such as Responsible Wagering Australia -- whose members include Sportsbet, Ladbrokes and Bet365 -- say they’re pushing for better ways to protect the public. “Our members acknowledge that there is concern in the community about the level of wagering advertising,” said Stephen Conroy, a former government minister who’s now executive director at Responsible Wagering Australia. “That’s why we have been at the forefront of calling for a reduction in the volume of wagering advertising.” Christopher Hunt, a clinical psychologist at the University of Sydney who specializes in treating gambling addictions, says he witnesses the fallout. He’s concerned about the number of young men he sees suffering from sports-betting problems. “They went from being rare to being one of our more common client groups,” said Hunt. “We’re at the vanguard of this problem.” Bloomberg News
Nobel laureate
Poker Pro Ivey at U.K. Supreme Carmakers demand changes Court over cheating to China’s electric car quota
Liu Xiaobo dies aged 61
All bets are off as professional poker player Phil Ivey seeks to prove to the U.K.’s top court that he didn’t cheat to win 7.7 million pounds (US$9.9 million) at a Genting Bhd. casino. The 10-time winner of World Series of Poker bracelets is taking the issue of whether dishonesty is a necessary element of cheating to the U.K.’s top court for the very first time. He originally sued for the winnings in 2014. Ivey won the money playing Punto Banco, a form of baccarat, at Crockfords casino in London in 2012. He admitted using a technique called edge sorting, which involves arranging cards to take advantage of slight design differences or flaws to give a player a better idea of high and low-value cards. Ivey didn’t touch any of the cards but persuaded the croupier to rotate the most valuable cards saying he was superstitious, according to a court summary of the case. He said it was a legitimate tactic to gain an advantage over Crockfords, which is owned by Southeast Asia’s biggest casino operator. Ivey has career earnings of more than US$23 million from gambling, according to the Card Player website. Bloomberg News
China’s Nobel laureate Liu Xiaobo died yesterday while still in custody following a battle with cancer, authorities said, after officials ignored international pleas to let him spend his final days free and abroad. The prominent democracy advocate died aged 61, more than a month after he was transferred from prison to a heavily-guarded hospital to be treated for late-stage liver cancer. The legal bureau in the north-eastern city of Shenyang said on its website that Liu died three days after going into intensive care at the First Hospital of China Medical University. Liu’s death puts China in dubious company as he became the first Nobel Peace Prize laureate to die in custody since German pacifist Carl von Ossietzky, who passed away in a hospital while held by the Nazis in 1938. International human rights groups, Western governments and local activists had urged authorities to free Liu and grant his final wish to be treated abroad. But officials insisted that Liu was receiving treatment from top Chinese doctors since being granted medical parole following his diagnosis in late May. AFP
The world’s four biggest automotive industry associations have written to China’s government to demand it change its plans for strict sales quotas for electrically powered vehicles, German weekly magazine WirtschaftsWoche reported, citing the letter. The associations, based in Europe, the United States, Japan and South Korea and representing around 70 per cent of global car production, also called for the quotas to be postponed by at least one to three years, the magazine said yesterday. China last month upheld the sales quotas for electric cars in draft regulation, ignoring concessions that had been agreed between Chinese Premier Li Keqiang and German Chancellor Angela Merkel. The draft says that automakers must sell enough electric or plug-in hybrid vehicles to generate “credits” equivalent to 8 per cent of sales by 2018, 10 per cent by 2019 and 12 per cent by 2020 -criteria many in the industry deem too ambitious. The number of credits per car is based on the level of electrification. According to WirtschaftsWoche, the industry associations are demanding that the Chinese government includes less harsh penalties for failing to reach the sales quota, and that it tailors the quota to each carmaker’s production volume. Reuters