Business Daily #1346 July 25, 2017 by Business Daily

Chinese debt determining U.S. Fed policy Monetary drive Page 10

Tuesday, July 25 2017 Year VI Nr. 1346 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Crackdown

DSEC data shows impact of 2014 crackdown on tourism-related sectors in 2015 Page 5

Transportation

Current number of special taxis not enough to meet demand, says Radio Taxi Macau GM Page 2

www.macaubusiness.com

Employment

Labour market

Job fair provides exposure for companies, but job seekers want more diversity in placement options Page 3

China joins global divergence between unemployment and wages evolution Page 8

Filling up the city Tourism

A 5.4 pct y-o-y uptick in the first six months of the year saw 15.56 million tourists visiting the MSAR. Overnight visitors continue to increase, up by 13 pct y-o-y to 8.09 mln, while same-day visitor numbers fell 1.8 pct y-o-y to 7.46 mln. Visitor numbers in June increased 1 pct y-o-y, to 2.37 mln, but fell 7.5 pct m-o-m. Page 2

Continual upside

Questions about the rail

The decision by the gov’t to create a private company with public funds to manage the Light Rail Transit system was questioned by residents, as well as whether the gov’t will have to subsidise its operations if revenues aren’t sufficient, according to results of a public consultation. Proposed fines for those using priority seats reserved for passengers with difficulties, the elderly and pregnant women were rejected.

Gaming Gaming revenues could rise as much as 29 pct y-o-y in July, hitting MOP22.9 bln, according to analyst firm. The average daily rate until July 23 hit MOP750 mln, a 34 pct increase y-o-y, driven by higher VIP hold and volume and strong visitation to the city during the summer holidays. Page 7

Reverse forecast

Transportation Page 4

HK Hang Seng Index July 24, 2017

26,846.83 +140.74 (+0.53%) Worst Performers

Geely Automobile Holdings

+5.92%

Tencent Holdings Ltd

+1.75%

AAC Technologies Holdings

-3.85%

China Merchants Port Hold-

-0.80%

CK Infrastructure Holdings

+3.66%

BOC Hong Kong Holdings

+1.21%

China Resources Power

-2.95%

China Mengniu Dairy Co Ltd

-0.61%

Galaxy Entertainment Group

+3.58%

Want Want China Holdings

+1.14%

Cathay Pacific Airways Ltd

-1.46%

Hong Kong Exchanges &

-0.46%

Power Assets Holdings Ltd

+2.59%

Link REIT

+1.06%

China Overseas Land &

-0.96%

China Petroleum & Chemical

-0.33%

China Unicom Hong Kong

+2.28%

Ping An Insurance Group Co

+1.05%

CNOOC Ltd

-0.92%

Bank of East Asia Ltd/The

-0.30%

27° 31° 27° 31° 27° 32° 28° 32° 28° 33° Today

Source: Bloomberg

Best Performers

WED

THU

I SSN 2226-8294

FRI

SAT

Source: AccuWeather

IMF report A report by the International Monetary Fund improved growth forecasts for China, Europe and Japan, while lowering its revisions for the United States and Britain. Page 16

2 Business Daily Tuesday, July 25 2017

Macau Tourism

Crowded streets The number of visitors to the MSAR went up by 5.4 per cent yearly in the first six months of 2017 to reach 15.56 million, as overnight visitation numbers continue to increase Nelson Moura nelson.moura@macaubusinessdaily.com

uring the first six months of this year, the number of visitors to the MSAR reached 15.56 million, going up 5.4 per cent yearon-year, the latest data released by the Statistics and Census Service (DSEC) reveals. In the first half of 2017, the number of overnight visitors went up by 13 per cent yearly to 8.09 million, while same-day visitors decreased by 1.8 per cent year-on-year down to 7.46 million. Of the total visitation from January to June, around 10.33 million were from mainland China, a number that went up 6.1 per cent yearly, with the number of visitors from Hong Kong growing by almost 2 per cent

year-on-year to 3.11 million.

Summer months

MSAR in June continued to be mainland China, with numbers going up 1.8 per cent year-on-year to 1.54 million, almost 65 per cent of total visitation, with the number of Chinese tourists travelling via the Individual Visit Scheme in June going up by 5.8 per cent yearly to 704,720. Most of the Chinese tourists to the

city during the month were primarily from Guangdong province, amounting to 625,932. The number of visitors from South Korea increased considerably by 42.2 per cent yearly to reach 66,758 in June. However the number of visitors from the second and third largest sources of visitation, Hong Kong and Taiwan, both decreased year-onyear, going down by 3.9 per cent to 491,687 and by 9.9 per cent to 86,180, respectively.

The city’s visitor arrivals in June increased by a slight 0.9 per cent year-on-year, reaching a total of 2.37 million, but with visitation numbers going down 7.5 per cent month-to-month. The number of visitors staying overnight in June rose by 10.1 per cent yearly to 1.35 million, while same-day visitors went down by 9.1 per cent year-on-year to 1.03 million. The average length of stay in June grew by only 0.1 percentage point year-on-year, to 1.3 days, with the average overnight stay lasting 2.1 days, a 0.1 percentage point drop yearly.

Friendly neighbours

The largest source of visitors to the

Taxi

M&A

Radio Taxi: not enough taxis to cope with demand

Shun Tak sells units to Pansy, Daisy and Maisy Ho

The current number of special taxis is not enough to meet the current demand, the general manager of Radio Taxi Macau Taxi Service Ltd., Kelvin U, told Business Daily. U revealed that some 4,000 calls were received per day, but the taxi company could only respond to some 1,600 orders with its currently operating first batch of 50 taxis, fulfilling only 30 per cent of orders made. Despite the business suspension of Uber in the city last week, U also remarked on Sunday on the Macao Forum talk show that the shortage of vehicles would still pose difficulties for the company in terms of making a profit. “Even though Uber has left, we will still be unable to serve their

customers so the impact will not be big,” said U. The general manager reiterated that 100 more radio taxis will be on the road by the end of this month, revealing that some vehicles are currently undergoing inspection. With more taxis to be operated on the road, U said they are continuously seeking drivers to work for Radio Taxi. “The turnover rate of drivers is high,” said U. “Many drivers who had taxi licenses would either drive for the black taxis or Uber.” According to U, there are currently 120 drivers for Radio Taxi, and he indicated that the company is striving to hire another 60, in order to have a total of 180 drivers.

Photo by: Cheong Kam Ka

A total of seven property units in the latest development in the centre of Taipa – Nova Grand – developed by Shun Tak Holdings Limited, are set to be sold by a subsidiary of the company and purchased by members of the Ho family and one of the director’s of Shun Tak, according to a company filing with the Hong Kong Stock Exchange. Ms. Pansy Ho, a director of the company, will be purchasing a total of two units located in tower 6 of the new development, with a total gross floor area of 3,339 square feet, purchasing both unit A and unit B on the 39th floor of the tower. The total price for the units amounts to MOP36.06 million. Ms. Daisy Ho will be purchasing MOP26.07 million worth, divided between two apartments, one located in tower 6 and the other in tower 7, for a total floor area of 2,714 square metres.

Both units will be located on the 28th floor of their respective towers. Ms. Maisy Ho will purchase 2,819 square feet worth of space, divided between one apartment in tower 6 and one in tower 7, in units B and A, respectively. The total price for the purchase is MOP28.73 million. Another director of the company, Mr. David Shum, will purchase one unit in tower 6, located on the 38th floor, unit B, with a total floor area of 1,690 square feet at a cost of MOP18.25 million. ‘Subject to audit, the Group is expected to record a total gain of approximately HK$57.4 million from the Transactions,’ notes the filing. The residential project, defined as ‘Phase 5 of Nova City’ has eight residential towers with a total gross floor area of ‘approximately 214,915 square metres providing 1,775 residential units’, notes the filing. K.W.

Pansy Ho

Court

Officer that accepted HK$10,000 casino chip as mediation fee denied appeal The Court of Final Instance has denied an appeal made by a former agent of the Public Security Police Force regarding the agent’s dismissal, according to a court filing. The agent was dismissed due to having accepted a HK$10,000 casino chip, which was later traded in by the agent for money and subsequently gambled away at a black jack table. The agent received the chip after attempting to intervene in a

discussion between two individuals arguing over a loan, in which one of the individuals was demanding its repayment. The chip was intended as a type of mediation fee for the ‘peaceful resolution’ of the problem, according to the court briefing. The agent, after his dismissal, took the case to the Court of Second Instance, which ruled against him and subsequently the Court of Final Appeal, who also ruled against him last Friday.

Business Daily Tuesday, July 25 2017 3

Macau Employment

Firm: more exposure from taking part in Career Expo Exhibitors are seeking exposure and participants are seeking more diverse offerings for employment placements Cecilia U cecilia.u@macaubusinessdaily.com

aking p a r t i n the Youth Career Expo 2017 for the first time, a human resource (HR) department representative of Hilti (Hong Kong) Limited, named L.K., told Business Daily that they had received over 30 resumes after participating in the Expo. Held at Macau Fisherman’s Wharf (MFW) from July 22 to 23, nearly 70 local companies and institutions participated in the expo as exhibitors, providing a total of some 4,700 employment placements, covering roughly 30 different types of work. “We found one third of the received resumes, around 10 of them, have potential [for

our company],” said L.K. The HR representative revealed that the main purpose of participating in the Expo was to get more exposure, allowing more people to know about the company. Specialising in the provision of construction tools and equipment, the company, according to L.K., had difficulties in hiring salespeople and engineers in the city. “We had a hard time finding potential candidates,” said the HR staff. “We had posted advertisements in the newspaper and had approached recruitment agencies but so far there were no applicants [for the job].” L.K. also disclosed that they are still currently arranging staff from Hong Kong to work in Macau, or staff who hold both identity

cards of the SARs to work at the branch in Macau.

Small firms can also be included

A resident surnamed Chan who attended the Expo opined that “the fair is a good starting point for young people in general”. However, Chan also expressed the hope that the Expo could include some startup firms who wanted

to recruit, or a more diverse array of businesses. Another resident surnamed Kuan also expressed a similar opinion: that companies which had participated in the Expo were mostly large corporations, opining that the job placement offerings were not diversified enough. Meanwhile, a resident surnamed Lam told Business Daily that the Expo had introduced some companies

that are not well-known in the city, which allowed her to be more aware of what is on the market. Nevertheless, Lam remarked that the Expo would be better if more companies were included. Business Daily sought to obtain the number of visitors who attended the Expo from the Labour Affairs Bureau (DSAL) but had not received a reply when this story went to print.

Greater Bay Area

Framework agreement to encourage youth businesses signed In order to encourage local youth to start up businesses in mainland China and diversify the local economy, the

Guangdong Youth Federation, Hong Kong United Youth Association and the Macao Youth Federation have signed

a framework agreement on cooperation, according to the Macao Youth Federation vice-president Ng Pek San, as

quoted by China News Service. The framework aims to connect the youth of the Greater Bay Area region and encourage

cooperation, building the Greater Bay Area into an internationally recognized city cluster. advertisement

4 Business Daily Tuesday, July 25 2017

Macau Opinion

Albano Martins*

Everything as expected 1. On June27, when it was learned that last May’s inflation was 1.37 per cent, I forecast in this column that inflation for June would be between 1.27 and 1.29 per cent. On July 21, DSEC reported that Macau’s inflation was indeed 1.27 per cent in June! In the last seven months I have been able to make these monthly mathematical predictions with some accuracy, using an interval of variation of only three centesimal points. The only major difficulty in this exercise is to advance a number for the year-end rate of inflation! However, in May, I predicted that inflation in Macau at the end of the year may reach between 0.9 and 1.73 percentage points. In June, I tightened this interval a little bit more, arguing that it could fall between 1.24 and 1.67 percentage points. Now, I am again tightening this interval, forecasting that the inflation rate in December will be in the range of 1.27 to 1.59 per cent, against 2 per cent by the IMF and 2.1 per cent by our University of Macau. Last but not least, I also guessed that inflation in 2017 was likely to reach its lowest value in July, and in August it would begin to enter an upward phase. Of course, if nothing unusual happens. I am still sticking to my forecasts! 2. Much more easy to forecast than the inflation rate, is the so-called accumulated billions of losses and debts of the Macau Jockey Club! Why is it taking the Macau Government so long to give these generous people a medal of dedication or altruism for the services they have rendered for so long (if I am not wrong, from 1978) and for their willingness to continue to do such business mainly to the benefit of the diversification of our economy, spending rivers of money so easy to forecast will be lost? Wow! We are talking about accumulated losses of more than MOP4 billion and MOP73 million, so big that nowadays the share capital of the company is negative to the tune of MOP1,182,981.582, when it should be MOP3 billion positive. The assets have shrunk to only MOP240,632,788 as compared with liabilities of MOP1,314,244,540! Why don’t these people deserve a medal? If the government is not able to give to them a medal, why not the remaining land? If not the remaining land, give them a new concession to replace the one that will expire in August! And don’t worry about the commercial code and how and who will pay their bills! Who cares about this? They deserve it! * an economist and contributor to this newspaper

LRT

Residents request that LRT ticket prices be similar to bus fares

Questions and answers The decision to create a private company with public funds to manage the future Light Rail Transit system was questioned by local residents Nelson Moura nelson.moura@macaubusinessdaily.com

ocal residents questioned the government on why it chose to create a private company with public funds to manage the future Light Rail Transit (LRT) system, instead of sub-contracting an experienced private company, according to the results of a public consultation on the LRT law proposal, co-released by the Transport Bureau (DSAT) and the Infrastructure Development Office (GDI). Several residents also questioned if the main focus of the company created will be providing a public service or commercial operations, asking if the government will have to subsidise its operations in case revenues are not sufficient. In its response, the government stated that in most countries, rail systems don’t have government support at their initial stages, since their purpose is to attract people to use public transport through accessible prices. With private companies having to assume responsibility for expenses and risks of the operations, and with profit predictions being difficult to calculate, the government considered it would be difficult to attract investment from private companies

that could allow the efficient performance of the LRT system. Therefore, creating a company where the Macau Government is the main shareholder is more suitable for the ‘current Macau situation’, it stated.

Acceptable prices

The public consultation on the LRT system - of which the Taipa line section is expected to be concluded in 2019 - was conducted between February 13 and April 13 of this year, with 379 opinions received. The consultation focused on the major aspects of the future LRT system, namely its operations, safety, duties, transport tickets, tariffs, accountability responsibilities, and investigation of accidents and incidents. In the consultation, residents stated that since the purpose is to improve traffic in the MSAR in the future, ticket prices should be similar to bus fare prices. The tariffs should also be set by the government and not the LRT operator, taking into consideration the distance travelled and the cost per user. Residents also considered that payments should be able to be conducted through Macau Pass so as to better interconnect the system with other public transport, while also accepting

other mobile payment systems used in the region, such as Alipay or WeChat Pay. According to the government, efforts will be made to adapt the current electronic payment method used on public transport, so that only one card can be used for different modes of transport.

Priority seats

The government also accepted the idea of removing the necessity of fining LRT users for the unauthorised use of priority seats from the future legislation regulating the rail system, due to opposing stances by respondents. The law proposal recommended fines of between MOP400 (US$50) and MOP5,000, for actions impacting other passengers, such as smoking, transporting animals or creating noise disturbances. One of the infractions that could have resulted in a fine was occupying priority seats reserved for passengers with reduced mobility, elderly people or pregnant women. ‘Opinions considered that it is difficult to define the criteria for the occupation of priority seats, such as identifying what people don’t have the physical attributes granting them the right to occupy these seats,’ the consultation document states. The government ultimately considered that since the illegal occupation of priority seats doesn’t affect the security of the rail system, no penalties should be enforced in regards to this action.

Trade

Extending vegetable suppliers from Gansu The cross department task force set up to monitor local food prices, along with a number of local vegetable retailers, visited the province of Gansu to seek new vegetable suppliers for the MSAR, according to a press release posted by the Macao Economic Services (DSE). The president of the Macau Vegetable Wholesalers Chamber of Commerce (ACLGM), Lei Iong Fai said the visit to Gansu was intended to build a direct link between retailers in Macau and suppliers in Gansu to reduce costs and simplify procedures. During the visit to the Chinese city, representatives of ACLGM and the vegetable production and marketing association of Zhangye City signed a framework agreement for the production and marketing of organic vegetables.

Business Daily Tuesday, July 25 2017 5

Macau Tourism

A difficult year for Macau’s tourism in 2015 The latest official data shows that Macau’s tourism industry performance was less satisfactory in 2015 Cecilia U cecilia.u@macaubusinessdaily.com

he direct tourism consumption of visitors in 2015 amounted to MOP217.6 billion (US$27.06 billion), down 28.7 per cent year-on-year, according the latest Tourism Satellite Account composed by the Statistics and Census Service (DSEC). The account shows that the proportion of spending on gambling in 2015, a total of MOP181.9 billion, decreased by 3.6 percentage points, to 83.6 per cent of total tourism consumption. However, the shares of other tourism goods and services - such as shopping, food and beverages, accommodation and passenger transport - all grew during the year in question, despite the amounts generated from the aforementioned sectors all dropping year-on-year. Meanwhile, the total value of supply of tourism goods and services generated MOP254.7 billion, plummeting 25.7 per cent when

compared to 2014. In terms of the types of services supplied, services related to gambling decreased 31.5 per cent in 2015, amounting to MOP185.4 billion in value. Given that many new hotel establishments, such as JW Marriott Macau Hotel were launched in 2015, the gross fixed capital formation (GFCF) of the hotels and similar

establishments sector leaped by 944.1 per cent year-onyear, reaching MOP28.9 billion in 2015. Other industries that experienced significant growth of GFCF in 2015 included the retail trade and passenger transport activities, up 192 per cent and 116.9 per cent year-on-year, respectively. The account focuses on six main tourism related industries: hotels and similar establishments, the retail trade, the gaming sector, passenger transport activities, restaurants and similar establishments, and travel agencies.

Growth also appeared in the number of enterprises and establishments operating in tourism related industries, from 10,027 in 2014 to 10,371 in 2015. Given the increase in the number of establishments in tourism related industries, the city also experienced a higher demand for manpower, with the total number of people engaged in the six tourism related industries reaching 184,000, up 5 per cent year-on-year. In particular, a total of 56,000 individuals were engaged in the gaming sector,

a decrease of 2.7 per cent year-on-year. For hotel establishments, the sector attracted 45,000 workers, up 14.7 per cent. On the other hand, the tourism ratio for all goods and services in the year was 85.5 per cent in 2015, decreasing by 3.5 percentage points from the year before. This indicates that over 85 per cent of tourism goods and services were still consumed by tourists, despite the ratio dropping year-on-year. In particular, the ratio for gaming services was 98.1 per cent, down 0.3 percentage points, year-on-year. The DSEC data also shows that the tourism value added (TVA) in 2015 dropped by 30.4 per cent year-on-year, to MOP164.4 billion, compared to the MOP239 billion recorded in 2014. TVA is the value added created in an economy by tourism related industries in providing goods and services directly to tourists, and is used to measure the sector’s direct contribution to the city’s economy. The gaming sector contributed over 90 per cent of the city’s TVA, generating MOP150.4 billion of TVA in 2015, down 31.7 per cent year-on-year.

Construction

A complex development The second phase of the construction of the Manduco Social Services Complex is set to be completed in almost two years for a cost of MOP193.9 million, while the first phase of the project is still considered to be on-going by the DSSOPT after a two-year delay Nelson Moura nelson.moura@macaubusinessdaily.com

The government announced yesterday that the second development phase of the Manduco Social Services Complex building near Rua de João Lecaros has been officially granted to a consortium comprised of local real estate investment and development company San You Development and Companhia de Fomento Predial e Construção New Tech, Limitada for a cost of MOP193.95 million (US$24.12 million). The dispatch in the Official Gazette also stated that the payment would be completed by 2020, with the consortium vowing to finish the project in 630 days. The public tender was announced in March of this year, with 25 companies

applying for the project contract of the Manduco Social Services Complex. Of the 25 applicants, three proposed a shorter completion period and lower budget from the one accepted by the government. The government had previously stated that price and time of completion would be the most relevant factors for choosing the successful tender bid.

space for 80 light vehicles and 60 motorbikes. The first phase of the project related to the development of the building’s foundations and underground levels. The project was awarded to a consortium comprised of Companhia de Construcao Urbana. J&T Lda. and Soc. Construtora Sonnic, Lda. for MOP120.5 million in November 2013, with the group vowing to finish the project within 480 days. However the project suffered a twoyear delay due to problems relating to the underground grid for energy and pipes, and due to changes made to the foundation’s infrastructure,

with the overall budget having to be increased, Portuguese newspaper Hoje Macau reported at the time. Currently, the Land, Public Works and Transport Bureau (DSSOPT) states on its website that the new completion deadline was to have been February of this year, however the project is still described as being ‘in progress’. The second phase will now focus on the construction of the ground floor and the remaining three aboveground floors, with the government predicting the construction will create 200 new job openings, with priority to be given to local workers.

Setting the ground

The Manduco Social Services Complex involves the development of a 2,500-square metre centre for providing health care, social and sport services provided by the Social Welfare Bureau (IAS), the Sports Bureau and the Health Bureau. The complex is planned to be a four-storey building with three underground levels, including parking

Corporate

Exhibitor and visitor registrations up for AGE 2017 With less than a month to go before the Australasian Gaming Expo, there has been a 20 per cent increase in online visitor registrations and a 30 per cent increase in confirmed exhibitors for the event. Taking place at ICC Sydney in Darling Harbour, the event will run between August 15 and 17, with a focus on new machines and

games. In addition, the latest in Audio Visual equipment, ATM Equipment, Building Services, Cash Handling & Equipment, C o n s u l t a n c y S e r v i c e s, Entertainment, Financial Services, Food and Beverage, Furniture, I.T., Interior Design & Fitout, Marketing Services, Membership Management, Paging & Communication, Point of

Sale Systems, Retail, Security, Signage & Displays and Staff Uniforms, will also be displayed. Sessions on venues, research, casinos, technology, cash and investors will take place during the three-day period, with a keynote by financial commentator Michael Pascoe - set to moderate a panel on global gaming supply companies’ CEOs.

6 Business Daily Tuesday, July 25 2017

Macau

Business Daily Tuesday, July 25 2017 7

Macau Results

Bullish July Gross gaming revenues could grow as much as 29 per cent yearly in July to MOP22.9 billion, brokerage firm Bernstein predicts Nelson Moura nelson.moura@macaubusinessdaily.com

he MSAR gaming average daily rate between July 1 and July 23 reached MOP750 million (US$93.2 million), a 34 per cent increase from the same period in July last year, a gaming report by brokerage Sanford C. Bernstein Co. stated. According to the firm, the week between July 17 and July 23 saw an average daily rate of around MOP807 million, driven by a ‘combination of higher VIP hold and volume’ together with strong visitation numbers in the city due to the summer holidays. The firm estimates that if the average daily rate remains between MO670 million and MOP710 million until the end of the month, gross gaming revenues for July could reach

as much as MOP22.9 billion, a possible 29 per cent yearon-year increase. ‘The month of July is coming in stronger than we, and the market, had been expecting,’ the report states.

The dangling sword

Despite expected continued growth in the next few months, the VIP gaming market in the MSAR will continue to face challenges due to the possibility of tighter regulations by the local government and increased control on capital outflows by the Chinese central government, the report indicates. ‘We continue to view the industry as a secular growth story driven by the paradigm shift from VIP to Mass (…) Due to improvements in transportation infrastructure and the continued opening and ramping up of new integrated casino resorts in Macau, the

mass market will be the key driver of sustainable growth in 2017 and through the rest of the decade,’ the report reiterated.

Gaming operator expectations

In terms of future performances by gaming operators, the report states that Wynn Macau has continued to ‘gain traction’ due to its new Wynn

Palace property inaugurated last year, with the gaming operator considered to be ‘strongly positioned’ in the gaming mass market ‘over the longer run’. In regards to Melco Resorts & Entertainment, the sale of Australian group Crown Resorts’ stake in the company removed a ‘major overhang’ with Melco’s performance, with predictions it will be

able to improve in the ‘medium term’ with the expected opening of its Morpheus property in 2018, ‘continued organic growth in the Philippines’ and providing the group improves the performance of its Studio City property. However the ‘complexity of its corporate structure’ was considered as a possible setback.

Opinion

The 13 should begin to cut losses and sell: columnist There’s ‘little chance’ that The 13 will be open ‘by next week’, according to a column published by Bloomberg/Gadfly. Suggestions are for the joint-chairman of The 13 Holdings – Stephen Hung, a former investment banker helping to run Merrill Lynch’s Asian investment banking operations – to ‘reach into that Rolodex and start wheeling and dealing,’ according to the column’s author, Shelley Banjo. ‘Selling the company

may be his best way out,’ points out the author, noting that the group’s liabilities exceeded its assets by HK$300 million as of March 31 and the company announced its ‘fourth straight year of losses in June’. Potential purchasers for the project could include the usual suspects: MGM China, SJM Holdings, Wynn Macau, Galaxy Entertainment Group or Melco Resorts & Entertainment – five of the six MSAR operators.

However, ‘junket operators or players like Macau Legend Development Ltd or Emperor Entertainment Hotel Ltd’ could also be looking to purchase the property and could use it ‘as a way of getting their hands on Macau’s seventh gaming license,’ the author states – referencing a Union Gaming report by analyst Grant Govertsen from March and inferring that another license could be on the table. This possibility was also acknowledged

by experts who spoke with Business Daily, although it is not the only option for the upcoming revision of concessions, whose first batch comes up in 2020. ‘The longer that delays extend past the project’s initial 2016 slated opening date, the further 13 Holdings sinks into debt, lowering Hung’s chance to make a graceful exit. In gambling, as in business, knowing when to fold ‘em is key,’ states Banjo.

Luxury charter aircraft Crystal Skye, operated by gaming and hospitality group Genting, will depart on its inaugural trip from Hong Kong, instead of a previously announced possibility of departing from the MSAR, according to regional media reports. The trip, set for China’s Golden Week holiday, will include an eight-night safari in Nairobi and a trip to the Tahiti islands, and will cost each passenger US$45,000. “This is part of Genting Hong Kong’s strategic plan to drive the luxury travel market through the Crystal brand,” the president of

Genting Cruise Lines, Kent Zhu Fuming, told the South China Morning Post, noting that “we are anticipating an overwhelming response from the region […] for this extraordinary new travel option”. The customer target is “a niche luxury clientele who are less impacted by the economy than most consumers,” Zhu told the publication, having large companies and investable assets of HK$1 million or more. Earlier this month, Genting announced the disposal of all of its shares in Star Entertainment for A$271.36 million.

Luxury

Crystal Skye skips MSAR

Image courtesy of Crystal Cruises

Crown resorts

Wynn Macau vice-chairman says Crown-style debt collection in China not common for MSAR operators Nelson Moura nelson.moura@macaubusinessdaily.com

The debt collecting activities that led to several Crown Resorts employees being arrested in mainland China are not used by Macau companies, the Vice-Chairman of gaming operator Wynn Macau Ltd, Allan Zeman, stated to The Australian newspaper. In June this year, 19 current and former Crown Resorts staff members, including

a Senior Executive, were charged for gambling-related crimes in Shanghai. “Maybe for some, you work through junket operators, who collect their own debts. China is not a place that you go to collect debts. There was a big group in there - something like 12 or 14 people - so it wasn’t just sending one guy in to collect money or do a sales job. You’re in a country that doesn’t allow gaming and you’re promoting it,” Mr.

Zeman told the newspaper. According to the Wynn Macau manager, several companies operate in the “grey area” of the Chinese gambling market, with Crown Resorts being “unfortunate” to have been caught. Mr. Zeman also commented that the Chinese luxury and VIP gaming markets had recovered from the impact of the central government crackdown on corruption. “Everyone was talking

Crown Resorts’ James Packer

about switching from VIP to mass market because they thought the VIP market was disappearing and they had disappeared for many years

(…) Then suddenly, as things started to quiet down, VIP again this past year has been very, very strong,” he told the publication.

8 Business Daily Tuesday, July 25 2017

Greater China Labour market

Mainland joins global puzzle of elusive raises amid ample openings Beijing was the most competitive big city for high-end jobs, according to the number of resumes received for each job via Zhaopin

hina’s labour market remains tight and unemployment low. And yet -- just like in the U.S., Europe and elsewhere -- wages growth isn’t reflecting that strength. Official and private gauges show demand for hiring remained healthy in the second quarter, with even the weakest regions and sectors recovering. Yet white-collar pay edged down from the first quarter and pay raises for the nation’s 281 million migrant workers also narrowed. While conditions like those may be good for companies’ payroll costs, they also give less spending power to consumers who play an increasingly crucial role in generating economic growth. Technology is seeing the most demand for talent and professional services pay the best -- positive signs for industries that the government is relying on to rebalance the economy away from smokestack sectors. The unlikely combination of low unemployment and stagnating pay isn’t unique to China. Wage gains in the U.S. were below forecasts in June, even with the jobless rate close to the lowest since 2001. Unions in the euro-area’s largest nations blame lacklustre pay gains on dampened expectations among workers since the region’s financial crises.

There were 1.11 vacancies per applicant at job centres in 95 cities across the nation last quarter, Ministry of Human Resources and Social Securities data show, down slightly from 1.13 in the prior quarter. Labour demand in the commercial and leasing sector, which includes a wide range of industries, soared while financial sector demand declined. The ratio edged down in the wealthier eastern region, while demand intensified in western regions. A similar gauge by Beijing-based recruitment site Zhaopin.com and Renmin University’s China Institute for Employment Research rose to 2.26 in the second quarter from 1.91.

Energy, mining

Demand for the so-called old economy may have recovered in the past quarter. Zhaopin data show labour demand in energy, mining and excavation -- some of the weakest sectors for hiring -almost doubled from the first quarter while still remaining below 1. The rustbelt northeast also saw some recovery as the ratio edged up to 1.33. Internet and e-commerce talent remains the most sought after, with 9.06 positions chasing each applicant, followed by transportation and insurance. That’s consistent with the economy depending more on technology

and logistics, which drove second-quarter economic growth. Beijing was the most competitive big city for high-end jobs, according to the number of resumes received for each job via Zhaopin. Shenzhen, Shanghai and Chengdu followed.

‘There were 1.11 vacancies per applicant at job centres in 95 cities across the nation last quarter’ Factories have resumed shedding workers after a pause in March, a sub-index

of the official manufacturing purchasing managers index shows. Both the official index and a sub-gauge of a private PMI stayed below 50, the line separating improving and deteriorating conditions. While the official non-manufacturing PMI indicates contraction in services and construction jobs, a private indicator from Caixin Media and Markit Economics signals an expansion. In the so-called new economy -- from law to software and pharmaceutical labs -hiring continued to expand in June, according to a labor input sub-gauge of the New Economy Index produced by Big Data Business Co. in Chengdu. While it’s easier to find jobs, some pay gains are levelling off. White-collar workers saw wages shrink compared with the first quarter, according to Zhaopin, while the pace of gains for

new economy professionals stalled, according to Big Data’s indicator. Zhaopin data also show white-collar pay checks in 37 major cities dropped to a monthly average of RMB7,376 (US$1,100), the first quarter-over-quarter decline on record. Wages at the smallest companies fell 31 per cent, which means “start-ups using high salaries to lure talent is a memory,” Zhaopin said in a recent report. Professional services such as finance, accounting, law and consulting were the highest-paying sector, with an average monthly salary of RMB10,165, followed by firms in funds, securities, and investment at RMB9,475. Such stagnation isn’t limited to professionals. Wage growth for migrant workers from rural areas slowed to 6.3 per cent, according to the NBS, versus more than 20 per cent in 2011. Bloomberg News

Markets

Domestic Nasdaq about to be cheaper than Nasdaq for first time ChiNext has fallen out of favour in the past year as China intensified efforts to reduce leverage in the financial system Emma Dai

China’s small-caps share gauge, cowed by the nation’s battle against speculators, is on the verge of becoming cheaper than the Nasdaq Composite Index for the first time on record. The ChiNext Price Index’s valuation based on reported earnings is now at 36.2, compared with 34.3 for the Nasdaq, leaving the narrowest gap since the Chinese board started in 2010. The ChiNext, which is made up of mostly technology companies, has plummeted 25 per cent in the past year, while the U.S. gauge has climbed more than 25 per cent as of Friday. Once a darling of local investors, the ChiNext has fallen out of favour in the past year as China intensified efforts to reduce leverage in the financial system. Concerns were heightened this month, with the Xinhua News Agency citing President Xi Jinping as saying at a five-yearly policy conference that authorities will actively prevent financial risks. While valuations on the small-cap gauge have crumbled from the giddy peaks of the

2015 stock market bubble, they’re still elevated relative to the rest of China’s stock market, or most global indexes.

“Investors have lost risk appetite in the face of tighter liquidity conditions and increased supply of new stocks” Qiu Zhicheng, Hong Kong-based strategist at ICBC International Research Ltd. “Investors have lost risk appetite in the face of tighter liquidity conditions and increased supply of new stocks,” said Qiu Zhicheng, Hong Kong-based strategist at ICBC International Research Ltd. “Given the conference

has just signalled policy preference to enhance regulation and reduce risk, the ChiNext will probably continue to fall.” Earnings have played a part as well. Profit warnings by companies including Enjoyor Co. to Hithink Royal Flush Information Network Co., and reports regulators are probing the finances of index heavyweight Leshi Internet Information & Technology Corp., have added to investor bearishness.

After raising US$21 billion from share sales in the three years through 2016, the 100 ChiNext members posted a combined profit of just US$17 billion and negative combined free cash flow for the period, according to data compiled by Bloomberg. In comparison, the 107 components of the Nasdaq 100 Stock Index reported profit of US$905 billion and free cash flow of US$996 billion after selling shares for US$24 billion in three years. Bloomberg News

Business Daily Tuesday, July 25 2017 9

Greater China Joint venture

CIMB to partner Alipay for mobile payment platform Digital payments firms are looking to tap the more than 370 million people without bank accounts that use cash on a day-to-day basis in Southeast Asia CIMB Group Holdings Bhd, Malaysia’s second-biggest bank, yesterday said its subsidiary will form an equity joint venture with Ant Financial Services Group, the parent of Alipay, to provide mobile wallet and related financial services. The CIMB unit, Touch ‘n Go Sdn Bhd, will be majority shareholder and Ant Financial a minority shareholder, the bank said in a statement filed at the Kuala Lumpur stock exchange. “The capital injected by both parties will go towards the creation of a world-class online and offline payments provider, delivering superior mobile wallet solutions and other related financial services,” CIMB said

in the statement. Millions of Malaysians use ‘Touch ‘n Go’ cards daily to pay for road tolls, bus fares, parking and shopping. The envisaged mobile wallet will allow these users access more services on mobile phones, said the statement. Alipay users currently use e-wallet services on mobile phones to hail taxis, book hotels, buy movie tickets, pay utility bills, make doctors appointments and manage their finances. For Ant Financial, an affiliate of Alibaba Group Holding Ltd, the investment would be its first in Malaysia. Its association with CIMB is

likely to advance the bank’s plans to build an early lead in the country in so-called fintech.

Chinese expansion

After growing into multi-billion dollar companies, Chinese financial technology (fintech) and internet firms including Ant Financial, Lufax and Tencent Holdings Ltd are moving into Southeast Asia and beyond in search of more customers. Ant Financial last year bought a minority stake in Ascend Money looking to benefit from the Thai company’s presence in six countries, including Indonesia, Southeast Asia’s most populous. “To bring digital financial inclusion to more people across the world, Ant Financial takes an approach of collaborating with strategic partners overseas and enabling them with its innovative solutions,” Ant Financial Chief Executive Officer Eric Jing said

in the statement. Digital payments firms are looking to tap the more than 370 million people without bank accounts that use cash on a day-to-day basis in Southeast Asia to offer lending and other financial services.

Key Points CIMB, Ant Financial to set up equity joint venture CIMB unit Touch ‘n Go to be majority shareholder Comes as Chinese fintech firms expand abroad Tencent has applied for a licence in Malaysia to offer local payment services via its popular WeChat Pay, while Lufax announced plans to launch its wealth management platform in Singapore. Reuters

Commodities

Coal imports from Mongolia, Russia rise Supplies from Australia, China’s largest coal supplier, rose 6.8 per cent from a year ago China’s coal imports from Mongolia and Russia rose in June as utilities and steel mills sought out less expensive raw materials even as the government tried to curb purchases of foreign fuel. Coal-fired power demand rose last month during a prolonged heat wave in northern China at the start of the peak consumption period. Since mid-February the two nations have helped fill a supply gap caused by China’s ban on coal from North Korea. In the first half of the year, imports from Mongolia were up 79.5 per cent from last year’s 10.4 million tonnes, data from the General

Administration of Customs showed yesterday. The data came after figures earlier this month showed total imports of coal fell year-on-year for the first time since August 2016. Beijing asked utilities in May to reduce their purchases of overseas coal by between 5 per cent to 10 per cent this year in an effort to restrict low-quality imports. Consumption has remained firm though, as hot temperatures stifled the north and low rainfall last month reduced hydropower output, increasing the reliance on coal to generate power.

Torrential rains earlier this month have helped to replenish river and reservoir levels, which is likely to help boost hydropower this month. Mongolian coal exports to China last month rose 58.9 per cent from a year ago to 3.71 million tonnes, the customs data showed. Russian exports increased 41.7 per cent to 2.57 million tonnes. Supplies from Australia, China’s

largest coal supplier, rose 6.8 per cent from a year ago to 6.35 million tonnes in June, the data showed. Coal shipments from Indonesia in June fell 19.4 per cent from a year ago to 2.33 million tonnes, according to the data. Anthracite supplies from Russia in June more than tripled to 738,324 tonnes, the data showed. Anthracite is a hard coal that can be used as coking coal to fire furnaces for the steel industry. China did not import coal from North Korea in May or June. Reuters advertisement

10 Business Daily Tuesday, July 25 2017

Greater China

Monetary policy

Mainland’s debt spectre could haunt Fed’s policy meetings A fifth of China’s dollar bonds mature within a year, according to BIS data Marius Zaharia

n September 2015, the U.S. Federal Reserve cited risks from China as a key reason for delaying its first interest rate hike in a decade. A wall of Chinese debt maturing in the next few years could jolt the country back into the U.S. central bank’s policy deliberations. Two years ago, it was a collapse in Chinese stocks, a surprise yuan devaluation and shrinking foreign exchange reserves that roiled financial markets that delayed the Fed, but it did raise rates three months later and has tightened further since. Now, some see risks emerging in China’s dollar-denominated bonds that could give the Fed greater pause for thought as it raises rates, even as other central banks signal a shift from ultra-easy policy. To be sure, Fed officials have not publicly flagged China’s debt as a major risk in their policy discussions. However, debt analysts point to the possibility of another September 2015 moment in which the Fed takes its cues from concerns about China. “Back then, I said that U.S. monetary policy is not made in Washington, it’s made in Beijing,” said Joachim Fels, global economic advisor at bond giant PIMCO. “China does have a major impact on monetary policies elsewhere ... This year has been smooth sailing for global central banks because there

were no shockwaves from China but I expect that to change if we think beyond the next few months.” The outstanding amount of dollar bonds issued by Chinese entities has grown almost 20 times since the 2008-09 global financial crisis to just over half a trillion dollars, according to data from the Bank for International Settlements. Since September 2015, it has grown almost 50 per cent.

Key Points China’s outstanding dollar bonds now 1/3 of EM dollar debt China made major contribution to global post-crisis leveraging U.S. Federal Reserve tightening a risk to China Any Chinese economic, financial troubles risk for global growth Fed must take China into account in policy decisions

China’s dollar bonds are now almost a third of the emerging market total dollar issuance, up from a quarter in September 2015 and less than 5 per cent before the Fed first began printing money in December 2008. A fifth of China’s dollar bonds mature within a year, according to

BIS data. More than half are due in the next five, Thomson Reuters data show. If U.S. borrowing costs start rising as a result of the Fed’s exit from its unconventional monetary policy, that debt would have to be rolled over at higher costs, chipping away at the real economy in China. Alternatively, Chinese companies might decide to refinance their debt in local currency, creating weakening pressure on the yuan. Either development would reverberate globally and create a major external challenge for Fed policy.

Feedback loop

For its part, the Fed doesn’t see any immediate dangers with China’s dollar debt. “You’ll find if you look at China they certainly have dollar-denominated debt but ... you’ll see that they are not as reliant on external debt as people might have thought,” Dallas Fed chief Robert Kaplan said in Mexico City on Friday. Also, a significant portion of Chinese dollar borrowing makes economic sense -- such as companies funding overseas investment projects. And if those dollars are converted into yuan, they could help ease any weakening pressure on the Chinese currency. For now, dollar borrowing conditions remain stable with 10-year benchmark U.S. yields still low by historical standards, despite four Fed rate hikes since September 2015. Broadly, the dollar is as strong now as it was back then.

Indeed, the bigger risk focus for many analysts currently is not China’s dollar bonds, but its local currency debt, which ratings agencies estimate to be almost three times the size of the economy. But analysts say that the longer China’s rapid accumulation of dollar debt continues, the harsher the future adjustment for the economy will be, especially if lenders start repricing Chinese credit risk. “Regardless of how you cut your pie, you’ll discover debt is a big problem. China has made a major contribution to global leverage since 2008,” said Aidan Yao, senior emerging Asia economist at Axa Investment Managers. “When markets start to wobble, there’s a feedback loop that has an impact on the Fed’s trajectory. Policy normalisation is not going to be in a straight line.” A forced deleveraging could renew weakening pressure on the yuan as dollars find their way out of the country, although capital controls help mitigate that risk. “While the market generally believes that money flows have stabilised and the worst of the yuan’s slide is over, the reality may well be the opposite,” said Kevin Lai, chief economist for Asia ex-Japan at Daiwa Capital Markets. “As more dollar debt has been taken up, the pressure on outflows is merely being delayed. Such pressure is also getting bigger, not smaller. This would eventually feed into even bigger downward pressure for the yuan.” Reuters

Business Daily Tuesday, July 25 2017 11

Asia Markets

Nomura India fund reaches US$3.6 billion as Japan bets on Modi reforms done, and when you want to do things on a national scale you need the country behind you.” Modi has burnished India’s appeal through policy changes aimed at boosting growth, curbing corruption and improving public finances. The country’s 10-year bond yields 6.43 per cent, the highest level among major Asian economies, versus just 0.07 per cent in Japan.

India is what money managers have begun to call a “consensus trade,” meaning almost every fund is bullish Santanu Chakraborty, Min Jeong Lee and Nao Sano

he land of Abenomics is betting on Modinomics. The demand is so strong that assets of Nomura Holdings Inc.’s India equity fund quadrupled to almost 400 billion yen (US$3.6 billion) in just the past year. Japanese investors owned US$13 billion of Indian stocks and bonds at the end of June, the most in data going back to 2012, according to India’s regulator. “It’s not like we put in any special marketing effort for this fund,” said Kazuto Wada, an executive director at Nomura, Japan’s largest brokerage. “Investors are looking at where the growth will be in the medium to long term, without having to worry about short-term swings in the market.” India’s economy is expanding at about seven times the pace of Japan’s, buoyed by a burgeoning middle class and more than one million young people joining the labour force every month. Indian shares have hit multiple records this year amid optimism about Prime Minister Narendra Modi’s policies.

High yield

“You have an economy that’s growing at 7 per cent annually with reforms showing tangible progress,” Wada said in an interview. “Growth in advanced economies is slowing.” India is what money managers have begun to call a “consensus trade,” meaning almost every fund is bullish. Global and local funds have pumped about US$16 billion into its stock market this year alone, making the S&P BSE Sensex one of the world’s top performers in 2017 and sending the rupee up 5.6 per cent against the dollar. The combined assets of three India funds run by Nissay Asset Management Corp. have topped 100 billion yen since their launch 2015, said Sundeep Sikka, chief executive officer of Mumbai-based Reliance Nippon Life Asset Management Ltd. Nissay

is a unit of Nippon Life. And it’s not just Japanese individuals who have the India bug. For Franklin Templeton’s Michael Hasenstab, “unprecedented” structural reforms by Modi and relatively high yields make India a “sweet spot” among emerging markets. On July 1, India introduced a goods and services levy designed to unify the nation into a common market and widen the tax net. Bryan Goh, Singapore-based chief investment officer for Bordier & Cie, said India today reminds him of Japan in 2013, after Prime Minister Shinzo Abe swept to power with widespread support for his plans to spur growth. “India, from a political standpoint, looks very much like when Abe was elected,” Goh said. “You have a popular prime minister who is able to get

“India is the only country among major emerging markets that satisfies all the conditions -- a sizable economy, high growth rate and yield, and political stability,” said Go Ikeda, a senior fund manager at Mitsubishi UFJ Kokusai Asset Management Co. And while the Topix index of Japanese shares has surged 23 per cent in the past year, the Sensex has gained 27 per cent in yen terms. Sumitomo Mitsui Asset Management Co. is picking smaller stocks to tap India’s growth. Its fund, co-managed with Kotak Mahindra Asset Management Co., boasts a three-year cumulative return of more than 70 per cent, said Taiki Matsuno, a senior fund manager for global investment. Matsuno says the market could drop if Federal Reserve rate increases spur capital outflows, but he expects any pullback to be temporary, and no reason for the growing legion of Japanese India bulls to get cold feet. “As long as people don’t think the economy will collapse, stocks will bounce back,” he said. Bloomberg News

Forecast

Australia inflation bogeyman still fast asleep in Q2 Steep increases in electricity and gas prices are expected to add to CPI this quarter Wayne Cole

Australia’s core inflation rate is expected to have stayed below target for a sixth straight quarter through April-June, a reminder of just why interest rates in the country are at record lows and set to remain there for months to come. Analysts polled by Reuters forecast consumer prices (CPI) rose around 0.4 per cent in the second quarter, from the first, which would nudge the annual pace up a tick to 2.2 per cent. The Australian Bureau of Statistics releases the report for the three months to June on July 26. Housing and health likely saw costs rise, while petrol and car prices fell in the quarter. The biggest single increase was caused by damage done to fruit and vegetable crops by Cyclone Debbie, which analysts at ANZ estimate would add 0.2 percentage points to CPI in the quarter. They also note, however, that the government statistician (ABS) is making greater use of scanner data at supermarkets to measure the volume of goods sold and not just the price. If consumers substituted

cheaper goods for those that jumped in price, it could limit the upward impact on the CPI. To strip out such one-off influences, the Reserve Bank of Australia (RBA) looks at various measures of underlying prices. Analysts estimate underlying inflation rose around 0.5 per cent in the quarter, which would keep the annual pace stuck around 1.75 per cent.

Key Points Q2 CPI seen rising 0.4 pct q/q, 2.2 pct y/y Underlying inflation seen up 0.5 pct q/q, 1.75 pct y/y Inflation has not been in RBA’s 2-3 pct band since end 2015 Data due 0130 GMT on Wednesday, July 26 Such an outcome would mean underlying inflation had been under the RBA’s 2-3 per cent target band since early 2016, and has not been above

the band in seven years. “We expect the Q2 CPI to confirm that inflationary pressures have stabilised, although we continue to see only a very gradual lift from here,” said ANZ senior economist Jo Masters. “Indeed, on our forecasts, core inflation is set to remain below 2 per cent until late 2018.” Steep increases in electricity and gas prices are expected to add to CPI this quarter, yet those will also act as a tax on household incomes and spending power. Plenty of headwinds to inflation remain including record-low wage growth and the recent climb in the Australian dollar.

The RBA itself doubts inflation will get back to 2 per cent for another year or more, but has ruled out cutting interest rates again for fear of stoking a debt-driven bubble in the Sydney and Melbourne housing markets. Neither are policy makers in any rush to start lifting the 1.5 per cent cash rate. Speaking last week, RBA Deputy Governor Guy Debelle argued there was no automatic reason for Australia to follow some of its peers in tightening. The global forces keeping rates low would “continue to do so for the foreseeable future,” said Debelle, quashing market talk of a hike before year-end. Reuters

12 Business Daily Tuesday, July 25 2017

Asia Cryptocurrencies

Singapore start-up takes bitcoin into real world with Visa A card now supports eight digital currencies, including the lesser-known dash and augur, and aims to offer about 11 of them by the end of the year Krystal Chia and Sterling Wong

recurringchallenge for bitcoin and other cryptocurrencies is how to make them work in the real world. A Singapore-based start-up says the answer is its Visa card. TenX is pitching its debit card as an instant converter of multiple digital currencies into fiat money: the dollars, yen and euros that power most everyday commerce. The company said it takes a 2 per cent cut from each transaction and has received orders for more than 10,000 cards. While transactions are capped at US$2,000 a year, users can apply to increase the limit if they undergo identify verification procedures. Tenx’s bid to make digital currencies easier to spend comes amid massive volatility and infighting within the cryptocurrency community. Bitcoin, the most popular, slumped after reaching a record in June amid concerns

about a split in two, only to recover as fears faded. The company has built an app that serves as a digital wallet connected to the Visa card so that when it’s swiped at a cafe or restaurant, the merchant is paid in local currency and the users’ crypto account is debited. “You’re mixing two worlds that are night and day,” co-founder Julian Hosp said in an interview. “When the user spends the cryptocurrency, we have to instantly switch these currencies to fiat and pay to Visa straight away. It’s a lot of pathways.” Hosp said transactions are processed immediately and it doesn’t impose any charges on top of the conversion fee that is set by cryptocurrency exchanges, which typically is 0.15 to 0.2 per cent. The card now supports eight digital currencies, including the lesser-known dash and augur, and aims to offer about 11 of them by the end of the year. TenX currently processes about US$100,000 of

transactions a month. By the end of 2018, it’s targeting US$100 million in monthly transactions and a million users. TenX has an advantage in moving early, but the start-up can expect competition in the future from major financial institutions and venture capitalists with deeper pockets and direct access to clients and databases, said Mati Greenspan, a Tel Aviv, Israel-based analyst at social trading platform eToro. “It’s an incredible concept,” said Greenspan. “At the end of the day, it’s going to depend a lot on customer

relations. Are they meeting the customers’ expectations? Can somebody else do it better?” TenX’s efforts to make digital currencies spendable come as it joined the many blockchain-based start-ups taking advantage of initial coin offerings. ICOs are a cross between crowdfunding and an initial public offering that firms use to raise funds by issuing digital tokens rather than stock. In its token sale last month, TenX raised US$80 million with about half to be used to expand operations while the rest will provide liquidity for a cryptocurrency exchange

in the works, said Hosp. The company had previously raised US$120,000 from angel investors and US$1 million in a seed round led by venture capital firm Fenbushi Capital, which lists Ethereum’s co-founder, Vitalik Buterin, as a general partner. TenX isn’t expecting to become profitable in the next two years as it focuses on expanding services. “One thing we want to offer in the end, is that you can switch cryptocurrencies within the app,” said Hosp. “If we do this, we can become the market maker, which can bring in a lot of revenue.” Bloomberg News

Ride-hailing competition

Southeast Asia’s Grab to get US$2.5 bln extra firepower against Uber Uber has been expected to increase its focus on India and Southeast Asia after retreating from China last year Aradhana Aravindan

Southeast Asian ride-hailing service Grab expects to raise US$2.5 billion in a record round of fundraising to cement its lead over Uber Technolgies Inc in the region and grow its payments platform. Southeast Asia has become a key battleground for technology start-ups vying for a market of over 600 million people, with a burgeoning middle class as well as a youthful, internet-savvy demographic. Grab’s Chinese peer Didi Chuxing and Japan’s SoftBank Group Corp, both of which are existing investors, will contribute up to US$2 billion to lead the current financing round, it said in its statement yesterday. The firm expects to raise an additional US$500 million, bringing the total to US$2.5 billion in this round, which it said would be the largest-ever single financing in Southeast Asia. Grab will be valued at more than US$6 billion at the close of this round, according to

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a source close to company. The Singapore-headquartered company said it has a Southeast Asia market share of 95 per cent in third-party taxi-hailing and 71 per cent in private vehicle hailing. It operates private car, motorcycle, taxi and carpooling services across seven countries in the region, with 1.1 million drivers. “With their (Didi and SoftBank’s) support, Grab will achieve an unassailable market lead in ridesharing, and build on this to make

GrabPay the payment solution of choice for Southeast Asia,” Anthony Tan, group chief executive officer and co-founder of Grab, said in the statement. Building on soaring user numbers of its Grab ride-hailing app and GrabPay function, the five-year-old start-up aims to transform into a consumer technology firm that also offers loans, electronic money transfer and money-market funds. Grab bought Indonesian payment service Kudo earlier this year, and has said it is seeking more acquisitions to support rapid growth. “The heterogeneity of the banking system, multiple competitors in each country,

and multiple regulations to meet are barriers to success,” said analyst Rushabh Doshi at researcher Canalys. “However, given no single payment solution has been able to work across all S.E. Asian markets, Grab stands a good chance of building market share via its ride-sharing business model, and then extend the payments to other adjunct businesses,” he said. Grab competes with the likes of Uber, the world’s largest ride-hailing service, and Indonesia’s Go-Jek. Tencent Holdings Ltd invested around US$100 million to US$150 million in Go-Jek, sources told Reuters earlier this month. Grab’s fundraising comes

at a time when San Francisco-based Uber has been beset by complaints about its workplace culture, a federal inquiry into software to help drivers avoid police, and an intellectual property lawsuit

Key Points Says Didi, SoftBank to lead round with $2 bln investment Grab will be valued at more than $6 bln -source Grab competes with Uber, Go-Jek in Southeast Asia Grab keen to grow its payments platform GrabPay by Waymo, the self-driving car unit of Google parent Alphabet Inc. Uber has been expected to increase its focus on India and Southeast Asia after retreating from China last year. Grab’s previous investors include sovereign wealth fund China Investment Corp, hedge fund Coatue Management LLC, venture capital firm GGV Capital, and Vertex Ventures Holdings - a subsidiary of Singapore state investor Temasek Holdings (Pte) Ltd. Reuters

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Business Daily Tuesday, July 25 2017 13

Asia Tag

In Brief

Abe denies cronyism allegations as support continues to fall While support for the main opposition Democratic Party has faded into the low single figures, Abe faces potential rivals within his own LDP Isabel Reynolds and Takashi Hirokawa

Japanese Prime Minister Shinzo Abe sought to stem a slide in his popularity in a special parliamentary hearing yesterday, reiterating his denials of cronyism, apologizing for disparaging remarks about opponents and vowing to focus on the economy. Approval for Abe’s cabinet slumped again in three media polls conducted over the weekend. His support was at 26 per cent, the lowest since he took office in 2012, in a poll conducted by the Mainichi newspaper, while disapproval was more than twice as high at 56 per cent. Separate surveys by the Nikkei newspaper and FNN put support at 39 per cent and 35 per cent respectively. Abe and his aides are facing two days of questioning over why one of his close friends received government backing to open the country’s first veterinary college in decades. He is set to reshuffle his cabinet early next month in a bid to claw back enough support to stay in his job at least until a party leadership election due in September 2018. “There is a saying that one should never allow room for doubts,” Abe told parliament. “Since this is a matter involving a friend of mine, it is understandable that the people would look at it with suspicion.” But he added he had no intention of cancelling the project.

meals, but he denied that Kake had ever asked him for favours based on his political position and said he had never personally issued instructions on the project. While support for the main opposition Democratic Party has faded into the low single figures, Abe faces potential rivals within his own LDP, raising questions over how long the government will continue with its economic program of unprecedented monetary easing, deregulation and limited attempts to restore fiscal health. “To restore the trust of the people, I think I must press ahead with my work with care and sincerity and achieve results,” Abe said. “The economy has been the administration’s top priority and it’s our job to create employment and raise wages,” he added.

More than 60 per cent of respondents to the Mainichi poll said Abe shouldn’t serve a third term as party leader. Only months ago, Abe appeared to be within reach of becoming the country’s longest-ever serving prime minister. The long-dominant party changed its rules in March to allow him to serve a third consecutive term as party president, which could have taken him through to 2021.

Abe apology

The fact that no general election needs to be held until the end of 2018 will probably help Abe keep his job for the time being, according to Tomoaki Iwai, a politics professor at Nihon University in Tokyo. “His support rate is low, but he will stay on,” said Iwai. “If there was an election scheduled in the near future, they would try to replace him before that, but they don’t need to hold one for quite a while.” Abe apologized yesterday for lashing out at jeering opponents during a stump speech ahead of the July 2 Tokyo assembly election, in which his ruling party went on to suffer an historic defeat. In a fresh blow, an LDP-supported candidate lost to a rival backed by opposition parties in Sunday’s election for mayor of the northern city of Sendai. Bloomberg News

Wine glasses

One opposition lawmaker produced a large print of a photograph showing Abe and Kotaro Kake, whose foundation is set to open the veterinary college, holding up wine glasses to the camera. Abe said the two had been friends since they were students and sometimes treated one another to

Indonesia’s environment minister said yesterday she wants to make permanent a moratorium on issuing new licences to use land designated as primary forest and peatland. The moratorium, part of an effort to reduce emissions from fires caused by deforestation, was extended by President Joko Widodo for a third time in May. “So far its only been extended, and extended again. I want a permanent (moratorium),” said Environment and Forestry Minister Siti Nurbaya Bakar. “Our primary forest cannot be cleared out.” Indonesia is prone to outbreaks of forest fires during dry seasons. Nuclear

S.Korea’s new energy minister supports reactor exports South Korea’s new energy minister on Monday said he plans to support the country’s push to sell nuclear reactors overseas, even as the nation curbs nuclear power at home. State-run Korea Electric Power Corp (KEPCO) is building the first of four nuclear plants in the United Arab Emirates in an US$18.6 billion deal, and is scouting for more business in Britain and other countries. But that comes as South Korea, Asia’ fourth-largest economy, has been looking to steer its domestic energy policy away from its current heavy dependence on coal and nuclear, with large chunks of the public sceptical about the safety of atomic power.

IMF upgrades forecast for Malaysia

Australian regulator investigating Takata airbag recall after death Choice estimates that more than two-thirds of the cars recalled in Australia still have not had their faulty airbags replaced

Indonesia minister wants permanent ban on forest land use

GDP

Safety

ustralia’s consumer watchdog said yesterday it was investigating the recall of Takata Corp vehicle airbags, a day after police said a man’s death in a Sydney car crash could be linked to the faulty safety equipment. The Australian Competition and Consumer Commission (ACCC) said it was seeking information from both the government department responsible for vehicle safety and car manufacturers on what information was being given to consumers about the recall. Police said over the weekend that the death of the man in Sydney earlier this month may be the 18th death related to faulty airbags by the Japanese auto parts maker. The ACCC referred to another incident in April in which a woman in the Northern Territory suffered severe injuries from her airbag after a crash. ACCC Chairman Rod Sims noted that the Takata airbags degrade over time and can become lethal by misdeploying and firing metal shards at a car’s occupants.

Environment

Citing a report by Australian consumer group Choice, Sims said some vehicles’ airbags were being replaced with ones that may in turn need to be replaced again in six years’ time because they were treated with a water-absorbing chemical designed to address the original problem that can also degrade over time. Choice estimates that more than two-thirds of the cars recalled in Australia still have not had their faulty airbags replaced. Manufacturers including BMW, Toyota, Mazda, Lexus

and Subaru have replaced some airbags with a temporary fix, it said. More than 2.3 million vehicles in Australia have been targeted in a recall since 2009, the ACCC said. The airbags are in 60 makes of cars sold in Australia, including Honda and Toyota. “We would have very serious concerns if manufacturers were found to be misleading consumers about their car’s safety in breach of their obligations under consumer law,” Sims said in a statement.

‘Manufacturers including BMW, Toyota, Mazda, Lexus and Subaru have replaced some airbags with a temporary fix’ “Our advice to consumers is not to panic, but to visit the Product Safety Australia website to see if their car is affected by the recall and if it is, to contact their car’s manufacturer immediately.” Takata has filed for bankruptcy protection in the United States and Japan, and said last month it had agreed to be largely acquired for US$1.6 billion by the Chinese-owned U.S.-based Key Safety Systems. Reuters

The International Monetary Fund has upgraded its 2017 growth forecast for Malaysia to 4.8 per cent from 4.5 per cent. The upgrade was announced at a news conference in Kuala Lumpur yesterday for the release of the Fund’s updated World Economic Outlook. Maurice Obstfeld, economic counsellor and director of the IMF Research Department, said there is “a very steady hand in monetary policy for Malaysia... we are optimistic here in Malaysia”. Southeast Asia’s third-largest economy is seeing a gradual economic recovery, after tepid demand for Malaysia’s oil and other commodity exports slowed growth over the two previous ears. M&A

Australia’s Westpac in talks for fund unit sale Westpac Banking Corp said yesterday it is in exclusive talks with Charter Hall Group for the sale of its Hastings Funds Management unit, in the latest move by a big Australian bank to offload a capital intensive division. It is the second time Westpac has put Hastings up for sale in as many years and three analysts contacted by Reuters put the potential price between A$250 million (US$200 million) and A$600 million. Westpac, Charter Hall and Hastings declined to comment on the potential sale price.

14 Business Daily Tuesday, July 25 2017

International In Brief Politics

Kushner says his Russian contacts were insignificant Jared Kushner confirmed four contacts with Russians during his father-in-law’s presidential campaign or after the election, he said, but he described the encounters as unmemorable and denied colluding with the Russian government to help Donald Trump win. In the most consequential meeting, Kushner said he agreed to meet with a Russian banker, Sergey Gorkov, on Dec. 13 at the request of the Russian ambassador to the U.S., Sergey Kislyak. “I did not collude, nor know of anyone else in the campaign who colluded, with any foreign government,” Kushner said in a statement prepared for an interview with the Senate Intelligence Committee yesterday. Politics

Polish President to veto part of judiciary legislation Polish President Andrzey Duda said he’d veto part of an overhaul of the judiciary that’s brought tens of thousands of protesters into the streets across the eastern European nation. Duda said yesterday in televised comments that he’d veto a bill on the Supreme Court and urged a calming of political tensions. Demonstrations have been held for eight days with participants complaining the reforms would curb the independence of the courts. The European Union has threatened sanctions if the changes take effect. The zloty rebound on Duda’s remarks.

Survey

Fed seen making September balance-sheet announcement Inflation’s tepid performance, despite a steady decline in the U.S. jobless rate to almost a 16-year low, strains the Fed’s outlook Christopher Condon and Catarina Saraiva

he U.S. Federal Reserve will unveil the timing of its balance sheet unwind in September and wait until December to raise interest rates again, according to a Bloomberg survey of 41 economists. Results of the survey, conducted July 18-20, showed economists are growing increasingly concerned over the recent slowing of inflation, compared with a similar questionnaire in June. Nonetheless, two-thirds of respondents said Fed officials wouldn’t change the language of their next policy statement to highlight their growing worries. The Federal Open Market Committee meets July 25-26 in Washington. “While the soft inflation data has raised some concerns on this front, this is largely temporary,” Parul Jain, chief investment strategist at Macrofin Analytics LLC in Wayne, New Jersey, said in comments attached to her survey response. Reflecting on sliding inflation figures, Fed Chair Janet Yellen told lawmakers on July 13 that inflation risks

were “two-sided,” dismissing some of the softness in recent reports to “transitory” moves in specific sectors of the economy. Still, she added, “there may be more going on, and we’re watching inflation very carefully in light of low readings.” That was before the consumer price index report showed another

‘Officials project another rate increase before the end of 2017, according to quarterly projections they updated in June’ month of soft price gains. CPI inflation, excluding food and energy components, dropped to 1.7 per cent in the 12 months through June from 2.3 per cent in January.

Inflation’s tepid performance, despite a steady decline in the U.S. jobless rate to almost a 16-year low, strains the Fed’s outlook. Policy makers have forecast inflation will head back to their 2 per cent target, a goal they’ve missed for most of the last five years. Bloomberg’s survey of economists reflected that nagging concern, showing that 36 per cent of respondents felt risks on growth and inflation were tilted to the downside, versus 30 per cent in June and 13 per cent in March. Risks were viewed as roughly balanced by 44 per cent of respondents. That caution may help explain why economists now expect the next rate hike in December, a move back from September compared with the June survey. For even that to happen, economists said the core version of the Fed’s preferred measure of inflation would have to average .1 per cent on a month-to-month basis over the near term. It averaged .02 per cent in the three months through May. Economists continued to expect that the federal funds rate would peak in this cycle at 3 per cent. It currently lies in a range of 1 per cent to 1.25 per cent after the FOMC hiked three times beginning in December. Officials project another rate increase before the end of 2017, according to quarterly projections they updated in June. Bloomberg News

Health system

Push to roll back Obamacare faces crucial test A seven-year Republican effort to repeal and replace Obamacare faces a major test this week in the U.S. Senate, where lawmakers will decide whether to move forward and vote on a bill whose details and prospects are uncertain. The Senate will decide as early as today whether to begin debating a healthcare bill. But it remained unclear over the weekend which version of the bill the senators would ultimately vote on. President Donald Trump, after initially suggesting last week that he was fine with letting Obamacare collapse, has urged Republican senators to hash out a deal. Cartel probe

BMW denies diesel cheating BMW AG sought to defuse concerns about possible collusion with other German automakers by rejecting allegations of cheating on diesel emissions and downplaying talks with rivals as being focused on promoting exhaust-treatment technology in Europe. With uncertainty clouding the German auto industry, BMW said it has gone farther than competitors to ensure its diesel cars meet regulatory guidelines while still performing well on the road. The company says it combines AdBlue fluid to neutralize pollutants as well as a system that stores nitrogen-oxide emissions, adding it sees no reason to recall or upgrade its latest diesel vehicles.

Fed Chair Janet Yellen told lawmakers on July 13 that inflation risks were “two-sided,” dismissing some of the softness in recent reports to “transitory” moves in specific sectors of the economy. Lusa

PMI poll

Eurozone economy hits ‘speed bump’ in July The manufacturing index fell to 56.8 points from 57.4 points in June Eurozone private sector business activity slowed in July for the second month running but was still running near six-year highs, a closely watched survey showed yesterday. Analysts said that while the slip in the headline readings of the survey by data monitoring company IHS Markit was disappointing, the economy remained on its best run since the eurozone debt crisis. IHS Markit said its July Composite Purchasing Managers Index (PMI) came in at 55.8 points, the lowest reading in six months and down from 56.3 in June. The PMI measures companies’ willingness to invest in their business and so gives a good idea of how well the underlying economy is performing. Any reading above the boom-bust

50 points line indicates the economy is expanding.

“It’s too early to know for sure whether the economy has merely hit a speed bump or whether the upturn is already starting to fade” Chris Williamson, IHS Markit chief business economist By sector, the all important services index was unchanged at 55.4 points in July, while manufacturing fell to 56.8 points from 57.4 points in June.

IHS Markit chief business economist Chris Williamson stressed that the state of economy in the 19-nation eurozone remained “impressive”. “It’s too early to know for sure whether the economy has merely hit a speed bump or whether the upturn is already starting to fade,” Williamson said. “The evidence so far points to the former, with the economy hitting bottlenecks due to the speed of the recent upturn,” he said. On that basis, IHS Markit expected the economy to grow 0.6 per cent in the three months to June, in line with the 0.6 per cent reached in the first quarter. Despite the slip, “the rate of job creation continued to run at one of the highest seen over the past decade,” it noted. “Sentiment about prospects for the year ahead remained buoyant by historical standards, albeit slipping to the lowest since January,” Markit added. AFP

Business Daily Tuesday, July 25 2017 15

Opinion

Now everybody’s running with the bulls in Indian stocks

Trump is barrelling down a road of no return

Shuli Ren a Bloomberg Gadfly columnist

n equity culture is growing in India, propelling benchmark indexes to a record bull run. Now beware a turning of the tide. For years, the market was a playground for foreign institutions. Since 2014, domestic investors bought US$28 billion net of stocks, matching overseas buyers’ US$30 billion inflow. Unlike China’s mom-and-pop day traders, Indian households tap into the market mainly through mutual funds. Retail investors now own 85 per cent of such funds invested in equities, compared with 38 per cent of bond mutual funds. So local money managers have become movers and shakers in Mumbai, owing 10 per cent of the entire stock market. Those households are by no means per cent passive investors, BSE Midcap Index however. They’re annualized return looking for doublein dollars since 2014 digit returns in an economy with falling interest rates. Government-backed small savings schemes, once popular with individuals, are less so now. Starting April 2016, the authorities reset rates on these plans every quarter, linking them to government bond yields, rather than subsidizing them indefinitely. The Public Provident Fund, for example, now offers a 7.8 per cent return, 30 basis points less than a year ago. So far, equities have rewarded retail enthusiasm. Since 2014, in dollar terms, the large-cap NSE Nifty 50 Index has gained an annualized 14 per cent, while the S&P BSE Midcap delivered a whopping 26.4 per cent per year. Domestic mutual funds have been favouring smaller growth stocks -- they have only 43 per cent of their portfolios in large-cap companies, versus a 56 per cent share for foreign institutional investors, Citi Research estimates. This flood of money is testing valuations. The S&P BSE 200 Index is trading at 24.6 times forward earnings, well above its 10-year average of 18.5 times. Meanwhile, India Inc. is expected to increase earnings by only 26 per cent in the coming year, according to the average of analyst estimates compiled by Bloomberg. Few are predicting a rapid bull run from this point. Will retail investors who came late to the party have the patience, or the nerve, to buy and hold? Should they, even? Indian households will gradually grasp the beauty of real interest rates, as the nation shakes off decades of rampant inflation. In June, CPI inflation was 1.5 per cent, down from 2.2 per cent in May, making those small savings plans the most attractive in five years. Each to their own, but I’d take a risk-free 6 per cent real return on savings over a ride on the Sensex roller coaster any day.

26.4

Bloomberg Gadfly

he Wall Street Journal editorial page, hardly a left-wing Donald Trump critic, called on the president to adopt a new strategy on the Russia probe: “Radical transparency.” Specifically, Trump, family members, campaign operatives and business associates should release anything pertinent to the investigation, any meeting with Russians or Americans with Russia ties and “every Trump business relationship with Russians going back years.” This information includes his tax returns. It’s sound advice. There’s no way Trump will take it. He has stuff he wants to hide. More likely, he’ll try to fire the special counsel investigating him and pardon his family and himself. The Washington scandal clichés -- it’s always better to get everything out or the cover-up is always worse than the crime -- are inoperative if you’re covering up bad deeds. There is probable cause to believe the Trump team colluded with Russian interference in the American election; whether that can be traced to Trump is supposed to be up to special counsel Robert Mueller. There is little doubt that the president had much deeper financial ties to Russians than he acknowledges. Determining whether that is illicit is also part of Mueller’s charge. Continuously, Trump’s desperation raises more questions about his culpability. The latest evidence is in the New York Times interview where he lashed out at his own attorney general, Jeff Sessions, for recusing himself from the Russia investigation due to a conflict of interest, and at Deputy Attorney General Rod Rosenstein, who appointed Mueller. He also took further shots at James Comey, the former FBI director. The president tried to intimidate Mueller, warning him to stay away from looking into his or his family’s business interests. Trump is obsessed with Sessions and Rosenstein, not because of any policy or practices but because of the Russia probe. The president fired Comey not based on his stewardship of the FBI, but because he was digging too deep into the Russian connections; and he’s obsessed with obstructing any serious Mueller investigation. This is why it’s not crazy conjecture that a president who doesn’t think the rules and laws apply to him would try to replace the attorney general with somebody not recused from the Russia probe. The chatter is that Texas Senator John Cornyn, a Trump champion, may be that somebody, with the calculation being that the Senate usually confirms one of its own. The ultimate goal would be to rein in Mueller. Or Trump himself might try to fire the special counsel. This would produce a firestorm the likes of which Washington hasn’t seen in decades. But Trump might well rationalize that such a risk isn’t nearly as troubling as what a thorough investigation might uncover. People in contact with the White House said one

“

Albert R. Hunt a Bloomberg View columnist

Mueller move that spooked them was hiring Andrew Weissmann, a tough financial-fraud expert who has prosecuted the mob and Enron. He and another expert on money laundering are looking into the Trump financial links with Russians and whether that gives Moscow any leverage over the president. The breadth of Mueller’s mandate is set by the president’s Justice Department. So it’s fraudulent to claim that the special counsel would be crossing a red line by investigating the family’s business practices. If a special prosecutor runs across a crime, he has a duty to act. During Watergate, President Richard Nixon unsuccessfully sought to limit the scope of the investigation. The initial inquiry was into a burglary at the office of the Democratic National Committee. From that, separate illegal acts were uncovered, such as a break-in of the office of a psychiatrist of Nixon adversary Daniel Ellsberg, and the abuse of power by government agencies such as the Internal Revenue Service. Of course, the special counsel will delve deeply into any financial links to Russia -- he has access to all Trump’s tax returns and bank records -- as well as into the possibility of collusion during the campaign. It was only several weeks ago, remember, that some Washington insiders dismissed the notion of any such coordination with the Russians. This changed when it was revealed that the president’s son, sonin-law and campaign manager secretly met with Russians who were promising dirt on Hillary Clinton. Intelligence experts say the emails that came out about the meeting strongly suggest that it wasn’t an initial contact, and that the Russian pattern would be to follow up. Trump critics are already preparing for any radical moves by the president, drawing up legal, political and national protest plans. Pressure would be intense on Congress to counter any move by Trump. How would Republicans react? Would there be Cabinet or White House resignations? Would the new FBI director, who has endorsed Mueller’s investigation, stay? Important congressional Republicans, including House conservatives such as Trey Gowdy and Speaker Paul Ryan and senators such as Charles Grassley, Rob Portman and Marco Rubio, have all expressed support for Mueller. It’s one of the many reasons to cheer for the return of John McCain, stricken with brain cancer. The fearless Arizona Republican is outraged at the Russians’ actions and determined to get to the bottom of it all. His toughness might strengthen the resolve of other Republicans in what may be a looming crisis. Bloomberg View

Trump critics are already preparing for any radical moves by the president, drawing up legal, political and national protest plans

”

16 Business Daily Tuesday, July 25 2017

Closing Work space

WeWork is said in talks to rent in heart of Hong Kong bar zone

converted into an office building by the middle of next year, the owner Peterson Group said in June. WeWork’s expansion in the world’s priciest property WeWork Cos., the co-working space company that’s market comes as soaring office rents have pushed among the world’s most valuable start-ups, is in some financial firms and hedge funds out of the advanced talks to rent a building in Hong Kong’s popular nightlife district near the city’s business centre, financial district. Demand for flexible and shared offices is surging in Asia, with the area taken up by according to people familiar with the matter. The New York-based firm is seeking to rent Hotel LKF such work spaces in Hong Kong’s central business by Rhombus on Wyndham Street, said the people, who district expected to double this year to 250,000 square feet, according to property broker Colliers asked not to be identified because the information International. Flexible work spaces accounted for hasn’t been publicly disclosed. The boutique hotel, located in the Lan Kwai Fong district that’s known for about 9 per cent of the office space in the city’s financial district as of 2016, Colliers said. Bloomberg News its bars and nightclubs, closed down on July 1 and be

World Economic Outlook

IMF maintains global growth forecasts China, eurozone revised higher

he International Monetary Fund kept its growth forecasts for the world economy unchanged for this year and next, although it revised up growth expectations for the eurozone and China. In an updated World Economic Outlook published yesterday, the IMF said global gross domestic product would grow 3.5 per cent in 2017 and 3.6 per cent in 2018, unchanged from estimates issued in April. “While risks around the global growth forecast appear broadly balanced in the near term, they remain skewed to the downside over the medium term,” the IMF said in updated forecasts released in the Malaysian capital, Kuala Lumpur. The IMF shaved its forecasts for U.S. growth to 2.1 per cent for 2017 and 2018, slightly down from projections of 2.3 per cent and 2.5 per cent, respectively, just three months ago. The Fund reversed previous assumptions that the Trump administration’s planned stimulus measures would boost U.S. growth, largely because no details of those plans have been made public. Maurice Obstfeld, the IMF’s economic counsellor and director of research, said the global economy has been the subject of considerable protectionist rhetoric, such as President Donald Trump’s proposed tariff on steel imported from China, but such talk had yet to translate into much action.

“What will happen in the future, we don’t know. These threats are in our downside thinking. They’re not built into our baseline (forecast) because hopefully they don’t happen, but there are risks,” Obstfeld told a news conference here. The IMF said growth in the euro zone was now expected to be slightly stronger in 2018 and pointed to “solid momentum”. It upgraded 2017 GDP growth projections for the eurozone to 1.9 per cent, up 0.2 percentage point from April. The IMF said eurozone growth would be slightly stronger at 1.7 per cent, a 0.1-percentage-point change from just three months ago. It said the expected higher growth in the eurozone indicated “stronger momentum in domestic demand than

Olympics

previously expected”. The IMF revised down its 2017 forecast for the United Kingdom by 0.3 percentage point to 1.7 per cent, citing weaker-than-expected activity in the first quarter. It left its 2018 forecast unchanged at 1.5 per cent. The IMF said it expected slightly higher growth in Japan this year of 1.3 per cent, revised from a forecast of 1.2 per cent in April. It cited stronger first-quarter growth buoyed by private consumption, investment and exports. Its forecast for Japan’s 2018 growth was unchanged at 0.6 per cent. For China, the IMF expected stronger growth of 6.7 per cent in 2017, up 0.1 percentage point from the April forecast. It said China’s growth would still

Trade

moderate in 2018 to 6.4 per cent, but noted that estimate was up 0.2 percentage point from the April forecast on expectations that Beijing would maintain high levels of public investment. But Obstfeld expected China’s economic expansion to slow down over the second half of 2017 as Chinese authorities looked to manage rapid credit growth and non-performing loans. “In the first two quarters of this year, growth has come in very high. Part of this is the general upsurge in world growth and the upsurge in trade in Asia. But there is also a component that has been fuelled by expanding domestic credit, and that’s the part that worries us,” Obstfeld said. Reuters

Protectionism

Japan marks three years China’s exports to Tokyo 2020 as issues linger to N.Korea fall

Trump curbs on steel risk trade war

Japan marked three years before the 2020 Tokyo Olympics yesterday with celebration and fanfare -- even as organisers struggle to contain soaring costs and restore credibility. Japanese celebrities and athletes dressed in bright kimonos gathered at the launch of a remake of a popular 1964 Tokyo Olympic song as organisers promised to turn the 2020 Games into the biggest “natsu matsuri” (summer festival) ever. Japanese organisers however have plenty of work to do. The International Olympic Committee (IOC) last month praised local organisers for slashing costs, fearful that ballooning budgets could see future bids dry up. Tokyo Governor Yuriko Koike last year ordered a review of the budget that recommended revised plans to reduce costs projected to rise to more than US$25 billion -- four times the initial estimates when Tokyo won the 2020 hosting rights. Local organisers have since slashed costs to around US$13 billion but have otherwise largely failed to inspire confidence since Tokyo beat Madrid and Istanbul in the race to host the Games for a second time. AFP

There’s a risk of a global trade war should President Donald Trump decide to restrict imports of steel, according to Japan’s leading mills group, which warns any new U.S. curbs on the metal may provoke a tit-for-tat response from others that could drag in other products. There’s concern about the potential for the spread of protectionism if Trump acts, Kosei Shindo, chairman of Japan Iron and Steel Federation, told reporters in Tokyo yesterday. A trade fight beyond steel could happen if countries retaliated in other areas, such as farm products, Shindo said. The U.S. administration has pledged stringent new measures to protect local steel producers against overseas rivals as Trump seeks to deliver on campaign-trail comments that the trade is unfair. The potential for restrictions comes even as figures from China -- which makes half of global supply -- show that overseas sales have dropped sharply in recent months. “If other countries respond with products other than steel, that would be opening a Pandora’s box,” Shindo said, noting that the European Union has already said it will consider retaliation if the U.S. takes action. “We are concerned about the possibility that a chain of protectionism would happen.” Bloomberg News

China’s gasoline exports to North Korea fell in June from a year ago, but still jumped nearly 60 per cent from the previous month, official data showed yesterday. Gasoline accounts for the bulk of China’s fuel exports to the isolated state. The refined oil shipments to North Korea are being closely watched amid pressure on Pyongyang to rein in its nuclear and missile programmes. Gasoline exports, which are often volatile, fell 30 per cent from June last year to 8,262 tonnes, but rose 58 per cent from May, according to the General Administration of Customs. China’s total fuel exports in June were worth US$5.5 million, up from US$3.4 million in May, but down from US$8.6 million in April, according to Reuters calculations based on customs data. The rise in gasoline exports in June over the previous month came after sources told Reuters that state-owned China National Petroleum Corp (CNPC) had suspended fuel sales to North Korea. In the weeks since the report on June 28, gasoline and diesel prices have surged in North Korea. Shipments of diesel to North Korea rose to 367 tonnes in June from just 10 tonnes in May, the data showed. Reuters