Queen's Birthday Celebration Poolside BBQ Lunch Sat, 10 June 2017 │ 11:00am - 2:00pm │ The St. Regis Macao Join us in this relaxing and lighthearted get-together at a poolside BBQ lunch. Bring your swimmers, and slip, slop & slap!
Local sector maintains a happy face Tourism Page 6
Thursday, June 1 2017 Year VI Nr. 1308 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Markets
Hong Kong stocks cap a fifth month of gains Page 16
Merchandise
Diamonds business flourishing in the MSAR Page 6
World Heritage
UNESCO meeting likely to put pressure on monuments status Page 7
www.macaubusinessdaily.com Gaming industry
Lobby
Elections could impact timing of junket audit Page 3
EU group chivvy Beijing to open market Page 8
Giving wings to lusophone world Trade
Macau’s first Summit on the Construction of the Platform of Services for Commercial Co-operation between China and the Portuguese-speaking Countries of Macau. Generating encouraging messages for the future. The role of the city as a platform to link lusophone countries and Mainland China seems closer than ever. With a little help from our friends. Page 4
Saving for a rainy day
Class action complaint The head of the Macau Lawyers Association is unhappy. Saying the membership is working on a complaint regarding abuse of power by police authorities. Jorge Neto Valente implored “all citizens, not just lawyers” to report the abuse of power whenever encountered.
Pensions A heated debate on the pension scheme bill unfolded in the Legislative Assembly yesterday. The legislation was approved but several lawmakers dissected the details at length. Anticipating the body of the text to be preparation for a mandatory central pension scheme. Page 3
Development Fund sets up shop in MSAR Biz environment The Fund for Development Co-operation between China and the Portuguese-speaking Countries officially moves to the MSAR today. Its Managing Director wants to get to know local firms’ necessities and help them. While various parties – political and commercial - sense a world of trading opportunities. Page 5
Mainland factories hold up
Law Page 2
HK Hang Seng Index May 31, 2017
25,660.65 -40.98 (-0.16%) Worst Performers
Geely Automobile Holdings
+7.50%
CLP Holdings Ltd
+1.61%
Tencent Holdings Ltd
-2.62%
China Unicom Hong Kong
-1.41%
Lenovo Group Ltd
+5.15%
Cheung Kong Property
+1.21%
Cathay Pacific Airways Ltd
-2.56%
PetroChina Co Ltd
-1.33%
Galaxy Entertainment Group
+3.09%
Hang Lung Properties Ltd
+1.05%
Swire Pacific Ltd
-1.67%
CNOOC Ltd
-1.33%
Hong Kong & China Gas Co
+2.59%
Sino Land Co Ltd
+1.04%
Want Want China Holdings
-1.44%
China Shenhua Energy Co
-1.25%
Sands China Ltd
+2.13%
AIA Group Ltd
+0.91%
Kunlun Energy Co Ltd
-1.41%
China Resources Power
-1.11%
27° 30° 26° 30° 26° 30° 27° 30° 26° 30° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
PMI Activity in the Mainland’s key factory sector gathered momentum in May. The latest Purchasing Managers’ Index came in at 51.2, the National Bureau of Statistics reported. Expanding market supply and demand - plus acceleration in consumer goods manufacturing – was the driving force behind the result. Page 8
2 Business Daily Thursday, June 1 2017
Macau Politics
New Deputy-director for DSAL appointed
The Secretary for Economy and Finance, Lionel Leong Vai Tac, has appointed Ng Wai Han as Deputy-director of the city’s Labour Affairs Bureau (DSAL), effective today, lasting for a year. According to a dispatch posted yesterday in the Official Gazette, Ng has been acting as temporary DSAL Deputy
director since November. Ng was also head of the Labour Inspection Department of DSAL last year. The new Deputy-director has been working for DSAL since 1999 as a senior legal technician. The positions of the current DSAL Director, Wong Chi Hong, and Chan Un Tong, the second Deputy director, remain unchanged. C.U.
Law
Together we stand The President of the Macau Lawyers Association says local lawyers don’t believe security authorities will address their complaints of abuse of power and that a joint complaint to the government is being prepared Nelson Moura nelson.moura@macaubusinessdaily.com
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he President of the Macau Lawyers Association (AAM), Jorge Neto Valente, told Business Daily that a joint complaint by the Association regarding abuse of power by police authorities is being “worked on” and will be sent to the government at the “appropriate time”. Legal sources told Business Daily previously that there has been a recent increase in cases of Public Security Police Force (PSP) and Judiciary Police (PJ) officers denying lawyers access to or talk to their clients, or of blocking them from filing legal requests. This increase in complaints led the AAM to send a release on May 4 requesting lawyers to send information of any witnessed cases of abuse of power or infringement of residents’ and non-residents’ rights to the AAM by May 16. The AAM President told Business Daily some complaints were received after the release was sent, although not many “detailed complaints” had been received. “This doesn’t mean they don’t exist. Lawyers are extremely busy and some of them are demoralised since they believe it doesn’t matter about filing a complaint since nothing will be done and that the security authorities don’t care,” Mr. Valente told Business Daily. When questioned about the lawyers’ complaints the PSP told Business Daily that all its investigations
are conducted according to the law. “Every individual (including witnesses and suspects) has the right to get assistance from his/her lawyer in any process as well as any phase of the process. We will provide them with a space of privacy and ensure that they have reasonable time,” the PSP response informed.
“Lawyers are extremely busy and some of them are demoralised since they believe it doesn’t matter about filing a complaint since nothing will be done and that the security authorities don’t care” Jorge Neto Valente, President of the Macau Lawyers Association
Calling all people
The AAM President also said the Association advised “all citizens and not just lawyers” to complain in case of
The President of the Macau Lawyers Association, Jorge Neto Valente
abuse of power by authorities, citing the recent increase in complaints received by the Security Forces Disciplinary Committee (CFD). “Last year, there were almost 70 complaints against police authorities by residents and there will be more. The commission that did the report can only give recommendations and doesn’t have disciplinary powers; however, we do advise everyone to send complaints there, not just lawyers,” he said.
According to the CFD, of the 70 complaints of abuse of power and misconduct of the city’s security departments, 64 were against PSP officers, a 63 per cent year-on-year increase from the previous year. The complaints received refer to ‘improper execution procedures, poor attitude, slowness in law enforcement procedures, denial of justice, misconduct, abuse of police power and misuse of force’ the CFD annual report indicated.
Infrastructure
DSAMA: Annual Taipa Ferry operating expenses estimated at over MOP100 mln Speaking during the TDM Radio Programme Macao Forum, Tong Iok Peng, head of the Port Control Department of the Marine and Water Bureau (DSAMA), said the estimated annual expense of the new Taipa Ferry Terminal (pictured) could be over MOP100 million (US$12.46 million). Tong explained that the amount factors in security, cleaning, maintenance, insurance, water and electricity bills for the new ferry terminal. Meanwhile, the department head said the management and operational company for the commercial area in the ferry terminal - CSI Group Ltd. - will pay MOP1.1 million monthly as well as 8 per cent of the water and electricity bills. Ferry companies will also pay for the leasing of the berths, noted Tong. The new Taipa Ferry Terminal is officially operational today but
without any shops or restaurants. Tong explained that the concession of the commercial area is currently
undergoing administrative procedures, while affirming that the fitting-out of shops and restaurants
will be arranged during closing hours. DSAMA Director Susana Wong stated on Monday that the normal procedures for restaurant licence applications would be followed by the CSI Group Ltd., admitting that some restaurant licences could take one year to be granted. C.U.
Business Daily Thursday, June 1 2017 3
Macau AL
Non-mandatory central pension scheme bill passed However, legislators representing different parties voiced their concerns and debated the pension scheme Cecilia U cecilia.u@macaubusinessdaily.com
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he plenary session at the Legislative Assembly (AL) yesterday passed the final readings of three bills fiscal exchange, control of the cross-border transport of cash and bearer negotiable instruments, and non-mandatory central pension scheme. Of the three bills, the bill for non-mandatory central pension scheme raised most issues leading to voting being prolonged after the regulated time. In particular, Kou Hoi In, who had voted against all Articles of the bill, expressed strong objections to the absence of an offset mechanism within the bill, pointing out that local SMEs (Small and medium size enterprises) would as such not be encouraged to participate. The bill proposed by the MSAR Government instead suggested the attribution of rights and interests. The offset mechanism enables employers to use the deposit for the central pension to offset the amount paid for the dismissal of an employee. Meanwhile, the representatives of the labour group including legislators Ella Lei Cheng I and Lam Heong Sang were not satisfied with the pension to be deposited based upon basic wages not remuneration. However, legislators such as Fong Chi Keong and Zheng Anting pointed
The Legislative Assembly holds a plenary session for the second reading of three bills. GCS
out the instability when the deposit of pension is based upon remuneration, given that remuneration includes commission, subsidies and other kinds of benefit offered by the employer. In addition, the unionists were worried about the termination of the deposit by employers at will. Secretary for Social Affairs and Culture Alexis Tam Chon Weng, together with the president of the administrative committee of the Social Security Fund, Iong Kong Io, expressed that the passing of the bill would be the first step to making the introduction of a mandatory central pension scheme possible. Tam added that the previous two public consultations had shown that the majority of society is in favour of the scheme, pledging that reviewing
will be performed after the law is implemented and will further upgrade details in accordance with future conditions. Yong also responded to the matter of the scheme’s termination at will by employers, saying that the government had considered the conditions when companies face serious financial crisis, noting that evaluation over whether to approve termination would definitely be performed by the government. In order to attract companies to participate in the central pension scheme, Yong assured that the government is ready to preserve MOP383 million (US$47.73 million) for taxation rebate for companies. Another hotly debated area was the ratio of attribution of rights and interests, with workers only able to
claim 30 per cent of the amount after working for the same employer for three years. Legislator Ella Lei pointed out that workers who engaged in flexible industries such as construction usually work less than three years in the same company. As such, the Articles relating to the aforementioned issues were being requested to be voted upon individually and were accepted by AL president Ho Iat Seng despite legal consultants from both the government and AL explaining the consequences if related Articles were not passed. The individual final reading was passed despite a few legislators voting against. The law for the non-mandatory central pension scheme will become effective on the first day of 2018.
Elections
DICJ junket review could slow due to election oversight The upcoming elections could delay the Gaming Co-ordination and Inspection Bureau’s (DICJ) efforts to finalise its junket audit by the end of the year, diverting manpower from the DICJ’s already insufficient forces to oversee not only resting rooms and common areas of integrated resorts but also junket rooms. In a prior response to Business Daily enquiries, the DICJ noted on May 24 that: “Even with the addition of the new hires [the process of which is not yet finalised], we think the staffing level has still not yet reached the ideal level in respect to the rapid growth of our workload”. Yesterday, the Electoral Affairs Commission met with representatives from the six gaming operators, as well as four junket operators, the DICJ and the local anti-graft body, the Commission Against Corruption (CCAC) to reiterate that influencing employees or visitors to vote for certain candidates is illegal, with a penalty of up to three years in jail. When asked whether any other departments would provide manpower to the DICJ to aid in its oversight efforts, Electoral Affairs Commission Chairman Tong Hio Fong noted that: “The government is a team and we, each service, is following the law, according to the responsibilities given it. […] For example illegal subversion is under the CCAC to investigate. And to follow this law we count on the
help of various departments/services; namely, the Electoral Commission, the DICJ and the police.” The Chairman also addressed the complaints filed by some gaming employees that they’d been coerced
to support a certain candidate list, noting that the CCAC in yesterday’s meeting had “given instructions to the operators that the candidate lists, when acquiring signatures on their candidate list, cannot use any
influence or threat” to sway their vote, or acquire their support. Business Daily contacted the DICJ after the press conference for comment but had not received a reply by the time this went to press. K.W.
The Electoral Affairs Commission for the Legislative Assembly Election, the Commission Against Corruption and the Gaming Inspection and Co-ordination Bureau jointly hold a meeting with representatives of local gaming concessionaires and sub-concessionaires and of the Association of Gaming and Entertainment Promoters of Macau. GCS
4 Business Daily Thursday, June 1 2017
Macau Opinion
Ashley Sutherland-Winch* Are we ready? The economy is improving, unemployment is low, casinos are reporting increased patronage, but are we ready for Summer? The business of tourism becomes incredibly intense in the Summer across the globe but are we ready to receive increased tourism here in Macau, especially on our beaches? Public transportation is becoming more complicated by the day. As the weather improves and the temperature climbs, more people are travelling to the beaches of Coloane. Since the recent removal of Bus 25 to both Cheoc Van and Hac Sa Beach, the remaining bus routes are becoming very unpleasant for passengers. Often, passengers are packed to capacity or potentially over in some cases, when you can visibly see people pushing onto the bus and the driver is unable to even close the door. Transportation that runs to the beaches, at this time, are 15, 21A and 26A. On weekends and holidays, it is common that these buses are full long before they reach the end of the line destinations during peak daytime hours. The Dragon Boat Race holiday weekend was almost unbearable for tourists and residents alike. I continue to find it odd that the DSAT removed Bus 25 from circulation just before the Summer holidays. People often flock to Macau’s beautiful beaches but I grow concerned that lack of transportation options may soon tarnish the appeal for residents and tourists to visit. In such a high season, I would have guessed that transport methods would be increased to accommodate the volume. Many international cities have additional bus or train transportation during peak hours or days; alas, this is not something that Macau is offering at this time. Parking is also a major woe for visitors to Coloane. There is limited parking at the beaches and surrounding parks. Often, all metered parking is completely full by mid-day on both weekends and holidays leaving visitors to park at their own risk in residential areas that are frequently patrolled by police issuing tickets. We must think of the best transportation options for our city. We want to be held in high regard by Summer tourists. As an international city targeting revenue beyond gaming, highlighting our incredible natural resources during the Summer should be a high priority. We should be accommodating and make transportation easy. Will the DSAT reconsider the Bus 25 route so soon after removing it? The answer remains to be seen - meanwhile, I ask you to ponder: are we logistically ready for the Summer? *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
One Belt, One Road
Conquering the world through the MSAR In the new phase of the One Belt, One Road policy, large Chinese state-owned enterprises will attempt to establish operations with MSAR companies to develop investment and business projects in Portuguese-speaking countries Nelson Moura nelson.moura@macaubusinessdaily.com
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he special characteristics of Macau, coupled with the strong capacities of Chinese state-owned companies will enable co-operation with local companies to “jointly conquer the international market” through bilateral co-operation in business and investments, Chief Executive Fernando Chui Sai On said yesterday. According to the CE, the new development phase of the One Belt, One Road policy and the positioning of Macau as a platform between China and Portuguese-speaking countries will generate more opportunities for co-operation between Chinese state-owned enterprises, the MSAR Government and local companies. “Macau will actively support lusophone countries’ industrial and commerce sectors to collaborate with SOE’s and China’s internal market,” he added. The statements were made yesterday at Macau’s first Summit on the Construction of the Platform of Services for Commercial Co-operation between China and the Portuguese-speaking Countries of Macau supported by Chinese State-owned Enterprises, organised in co-operation with the Chinese State-owned Assets Supervision and Administration Commission of the State Council (SASAC). According to the SASAC Party Committee Secretary, Hao Peng, the summit brought to the city 25 large scale SOE’s, with 20 having branches in Macau and a total value of business in the MSAR of RMB50 billion (MOP58.53 billion/US$7.33 billion) with profits of RMB5 billion. “The One Road, One Belt initiative will be used to support the development of infrastructure in Portuguese-speaking countries . . . We’ll also speed up Greater Bay Area projects such as the Hong Kong-Zhuhai-Macau Bridge and look to develop Macau as a sustainable intelligent city,” he added. During the event, six co-operation agreements were signed between lusophone and Chinese companies, with local businessman David Chow’s investment company Legend
Connection to the Atlantic
The summit was also attended by an infrastructure and construction delegation led by Portugal’s Secretary of State for Internationalisation, Jorge Costa Oliveira, who highlighted that with Portugal China’s third largest trading partner the country wanted to contribute to
Globe Investment Co. Ltd. signing an agreement with the Cape Verde Government to develop a bank in the African country.
Elephants and ants
During a talk conducted afterwards on how to strengthen co-operation between SOEs and lusophone countries several business representatives believed one of the challenges would be the imbalance in scale between “enormous” Chinese state companies and smaller lusophone companies. According to the Chairman of China National Building Material Group Co., Lda., Song Zhiping, of every three tones of cement used in the world one was supplied by the state-owned company, with the group supplying 65 per cent of the international market. Meanwhile, Zhu Guanghcai, the Director of the International Co-operation Department for what is the world’s largest utility company State Grid Corporation of China said the enterprise had more than US$400 billion in total assets, registered almost US$13 billion in profits last year and supplied electricity to 1 billion people in Mainland China. “Yesterday, I met a company with more than a million workers. That dimension has to be articulated with the companies of Portuguese-speaking countries,” said Rodrigo Brum, a consultant in Portuguese investment agency aicep Global Parques.
According to Mr. Brum - who will become a Forum Macao Deputy Secretary-general this year - “common ground” needs to be created to make these businesses possible, and work needs to be done to inform countries where SOE’s want to invest that these investments are not “conquering deals”. “If taking into account the country dimension for calculations, Portugal has received the largest amount of Chinese investment in Europe per capita. This investment is not ownership investment but collaboration investment,” he said.
New eyes
The present SOE representatives also consider that although their companies have been present in the MSAR for many years they only recently started looking at the city as a way of connecting with business opportunities in Portuguese-speaking countries. “We went to Macau many times but didn’t give the city much importance. However, after exchanges with lusophone countries representatives we think the platform role is more and more important. There are more fiscal benefits for us and the new bridge will also improve the economic environment,” Mr. Guangchao said. According to the SOE representative, Portuguese-speaking countries characteristics such as stable politics, rapid economic development, large markets and proximity to the sea made them profitable investment markets. “We did this investment before but we never thought we could make connections through Macau. In the future, if we will deal with the eight lusophone countries in one place here there’ll be plenty of advantages,” he concluded.
The Chief Executive, Mr Chui Sai On, speaks at the Summit on the Chinese Central SOEs’ Support of Macao in the Building of China and Portuguesespeaking Countries Co-operation Platform. GCS
the development of Macau as an efficient business platform. “We’re a strategic partner for the One Belt, One Road policy as we believe Sines Harbour is of great importance for opening a route to the Atlantic. The high-speed train connection between the harbour and Madrid will also contribute to the Euro-Asian
connection,” the Secretary of State said. Connecting the Sines Harbour with international infrastructure planned by the One Belt policy, is one of the projects currently being evaluated for financing by the Fund for Development Co-operation between China and Portuguese-speaking Countries.
Politics
MSAR Government appoints co-ordinator for GASPF The Macau Government has appointed Mok Iun Lei as co-ordinator for the Permanent Secretariat of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries
(Macau) (GASPF), according to a dispatch released yesterday in the Official Gazette. Mok will take up the position starting on June 5 for a period of one year. Mok is currently the vice-chairman
of Macau Productivity and Technology Transfer Centre, the chairman of GS1 Macau, vice-chairman of the board of the Macao Science Centre and advisory committee member of the GASPF training centre. C.U.
Business Daily Thursday, June 1 2017 5
Macau Portuguese-speaking Countries investment
Matchmaker, matchmaker, make me a match As the US$1billion Fund for Development Co-operation between China and the Portuguese-speaking Countries officially moves to the MSAR today, its Managing Director considers that it will provide an opportunity for partnerships, connecting the investment power of Chinese state-owned enterprises and the expertise of local companies in business with lusophone countries Nelson Moura nelson.moura@macaubusinessdaily.com
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oving t h e Fund for Development Co-operation between China and the Portuguese-speaking Countries to the MSAR will allow Chinese state-owned enterprises (SOE’s) to establish partnerships with local companies and use their experience to prepare investments in lusophone countries, a representative from the Fund said yesterday. “Macau companies have great potential, and the Fund is here get to know their necessities and help them by fostering co-operation with SOE’s through initiatives such as networking sessions,” the Fund’s Managing Director, Jin Guangze, said yesterday. The statements were made at yesterday’s Summit on the Construction of the Platform of Services for Commercial Co-operation between China and the Portuguese-speaking Countries of Macau
The Chief Executive, Mr Chui Sai On, attends the Summit on the Chinese Central SOEs’ Support of Macao in the Building of China and Portuguese-speaking Countries Co-operation Platform. GCS
supported by Chinese Stateowned Enterprises. According to Ms. Jin, stateowned enterprises have to have “more flexibility and change with the situations” while investing in lusophone countries and that the Fund’s experience in developing projects can help SOE’s “collect information and find solutions for any obstacles found”. With the Fund now based in Macau, she considers that the Forum for Economic and Trade Co-operation between China and
Portuguese-speaking Countries (Forum Macao) “could help us find the perfect notion of the obstacles” in the way of business opportunities in Portuguese-speaking countries. Although the Fund has “only” US$1 billion (MOP8 billion), its financial support could complement a US$5 billion joint investment between SOE’s, local companies and Portuguese-speaking companies, noted the CEO of CESL Asia, Antonio Trindade. “I think SOE’s can make a
lot of win-win partnerships through the Fund in Macau,” he added. However Mr. Trindade considered that Macau’s financial services could still be further developed, especially in the investment banking sector or in the organisation of infrastructure investments.
Moving down south
The Fund headquarters will officially be moved from Beijing to Macau today, operating initially from the Macau Trade and Investment
Promotion Institute (IPIM) Business Support Centre, and afterwards from the future Complex of the Trade Co-operation Services Platform between China the Portuguese-speaking Countries. Created in 2013, a total of 60 per cent of the Fund’s initial US$125 million capital was provided by the China Development Bank (CDB), with 40 per cent granted by the Macau Industrial and Commercial Development Fund, with further fundraising increasing the capital to US$1 billion. The Fund is managed by the China-Africa Development Fund, a part of CBD, and focuses on supporting business and investment opportunities between China and Portuguese-speaking countries. Financial support granted by the Fund can range between US$5 million to US$20 million, and since it was set up it has granted financial support to an agricultural project in Mozambique and an electricity supply project in Angola. This year the Fund announced it will grant US$20 million in support for a solar project in Brazil, and that it would invest the same amount in local businessman David Chow’s US$280 million integrated resort project in the African country of Cape Verde.
6 Business Daily Thursday, June 1 2017
Macau Public tender
Rebuilding the built
The University of Macau (pictured) has opened yet another public tender for the renovation of stone finishing on the walls of the corridors located in some of the facilities situated in the east, south, and west wings of the university, an announcement in the Official Gazette made public yesterday.
Proposals will be accepted up to 90 days from the official publication, while repair works should not exceed 120 working days. The University of Macau has launched several public tenders in the recent past to renovate and rehabilitate structures on its premises, including schools within the campus, rooms, and labs. S.Z.
Foreign trade
Diamonds are Macau’s best friend The re-export of luxury goods skyrockets, while trade between Macau and Portuguesespeaking countries underperforms Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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e-exports of diamonds and diamond jewellery skyrocketed 303.8 per cent in April, amounting to MOP60 million-worth of trade, or nearly 10 per cent of the total merchandise that has been routed through Macau in re-exporting activity. According to the latest data released by the Statistics and Census Services (DSEC), re-exports amounted to MOP692 million over the same period, recording an increase of 15.2 per cent year-on-year. As for the value of goods leaving Macau’s borders during the month, it was up 11 per cent, reaching MOP839 million, while the amount of domestic exports fell 5.2 per cent to MOP147 million. Down 1.1 per cent from last year, imports totalled MOP5.42 billion, with the purchase of mobile phones from outside markets falling particularly, down 32.8 per cent to MOP1.45 billion. Overall, the merchandise trade deficit amounted to MOP4.58 billion.
Q1 outlook
On a quarterly basis, both exports and imports increased. Exports were up 9.3 per cent to MOP3.78 billion, with the value of re-exports (MOP3.19 billion) and
domestic exports (MOP592 million) up 9.2 per cent and 9.5 per cent, respectively. Exports of diamonds and diamond jewellery also performed positively, amounting to MOP373 million, posting an increase of 46 per cent, while the external sale of machines, apparatus and parts dropped 45.2 per cent to MOP193 million. As for imports, the total value of merchandise purchased abroad rose 4.4 per cent for the same period last year, reaching MOP23.36 billion. The amount of external merchandise trade totalled MOP27.14 billion in the first four months of 2017, up 5 per cent when compared to a year before (MOP25.84 billion). Merchandise trade deficit reached MOP19.57 billion over the period analysed by DESC.
Source: DSEC
Trading routes
Trade business between Macau and Portuguese-speaking countries recorded decreases in both directions during the first quarter 2017. While exports to the Portuguese-speaking countries plunged 85.4 per cent year-on-year, totalling just MOP300,000, imports from the latter dropped 6.1 per cent to MOP195 million. With regard to exports to Hong Kong (MOP2.43 billion), the European Union (MOP71 million) and the U.S. (MOP62 million) all posted increases: of 16.8 per cent, 22.2 per cent and 27.1 per cent, respectively.
Source: DSEC
Travel
Unpacking the packages 5-star hotel rooms are the least you can get in a gambling town Sheyla Zandonai sheyla.zandonai@macaubusiness.com
Similar to previous months, the overwhelming majority of visitors coming to Macau on package tours in April originated from Mainland China, amounting to 536,000 out of a total of 677,000 according to data released yesterday by the Census and Statistics Services (DSEC). The total number of visitors on package tours represented an increase of 14.5 per cent year-on-year and of 4.3 per cent month-to-month. Visitors from the Mainland rose 13.8 per cent year-on-year, while visitors from India posted the highest
Outbound visitors
Some 112,000 Macau residents reached out to travel agencies during the Easter month, representing an increase of 20.5 per cent year-on-year. During the first quarter, a total of 446,000 residents have used the
increase, up 68.5 per cent – although they were less representative in number, totalling 10,300. Visitors from the Republic of Korea continued to increase, up 41.3 per cent, totalling 40,700. On a quarterly basis, the number of visitors on package tours rose 5.1 per cent to nearly 2.41 million as at the end of April 2017.
5-star experience
Five-star hotel rooms accounted for 60.3 per cent of the total offer in the city in April 2017, amounting to 22,000 rooms. In total, the statistics services noted that there were 107 hotels and
services, up 9.8 per cent year-onyear. The number of Macau residents travelling on package tours in April surged 32.2 per cent to 46,000. Their favourite destination was the Mainland (34,000), up 44.6 per cent.
guesthouses operating in Macau during the period, comprising 37,000 hotel rooms – an increase of 13.4 per cent year-on-year. An increase in offering was followed by an increase in demand, with the number of guests in local hotel establishments rising 17.3 per cent during the month, to some 1.08 million people. Again, the majority of hotel guests - or 678,000 people - were from the
Mainland (up 10.4 per cent), followed by 168,000 guests from Hong Kong (up 44.6 per cent), and 41,000 guests from Taiwan (up 6.2 per cent). The highest increase in reservations and hotel usage came, however, from South Korean visitors, rising 94.1 per cent to 37,000. In the first quarter of 2017, guests staying in local hotels and guesthouses totalled 4.13 million, up 14.6 per cent year-on-year.
Business Daily Thursday, June 1 2017 7
Macau
Heritage affairs
UNESCO slams Macau again As the World Heritage Committee prepares for its next meeting, the Macau Cultural Affairs Bureau has some serious work ahead Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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s the UNESCO World Heritage Committee (WHC) prepares to hold a meeting this Summer, the Macau SAR Government may have to face some extra work down the line before the 41st session of the Committee takes place this July (2-12) in Krakow, Poland. Several considerations about the current state of heritage conservation in Macau have been raised in a working document produced by the WHC available online, of which some elements were advanced yesterday by Jornal Tribuna de Macau (JTM). Entitled ‘State of conservation of properties inscribed on the World Heritage List,’ the document refers to various concerns and delays on the part of the local government to fulfill previous recommendations delivered by both the State Party, China, and the advisory body within UNESCO – reporting in conjunction with the International Council on Monuments and Sites (ICOMOS) and
Guia Lighthouse
In previous monitoring missions conducted in Macau in January 2009, the WHC Centre and ICOMOS Reactive Monitoring mission identified two main factors regarding the Historic Centre of Macau: 1. Possible negative impact of development projects in areas surrounding the buffer zones on the visual integrity of the property 2. Inadequacy of the current management system WHC’s report came after four construction projects announced in 2006 for high-rise buildings planned in the area surrounding Guia Hill would compromise the panoramic view from the lighthouse and obscure it from various points elsewhere in the city. The four projects were: The Chinese Communist Party (CCP) Liaison Office (99.91 metres), at Avenida Rodrigo Rodrigues A 50-storey mixed-use
International Centre for the Study of the Preservation and Restoration of Cultural Property (ICCROM). On the list of remarks, the main concerns are future constructions on the new landfills of Zone B and building height restrictions for the projects planned at Fisherman’s Wharf. In spite of the efforts led by the Macau Government to strengthen protection from ‘adverse development’ - following the adoption of the Urban Planning Law in 2013 and the Cultural Heritage Protection Law in 2014 - the Committee noted that ‘the current issue of height restrictions concerning the project at Macau Fisherman’s Warf, the proposals for land reclamation around the property, and possible developments involving high-rise buildings all raise serious concerns.’ Speaking to Business Daily, a spokesperson for Fisherman’s Wharf said there are no current updates on the issue, adding that they are “still awaiting the government’s decision, for which there is no fixed date yet.”
Zone B
In a report made available on March
3, 2017, the State Party, China argued that ‘the Master Plan for New Reclamation (MPLR) is being developed in consultation with the Cultural Affairs Bureau… [and that] it foresees that the area located southeast of the Historic Centre of Macau (Zone B) and its buffer zones will act as a green corridor that enhances the urban landscape.’ In addition, the State Party noted that ‘a holistic Urban Master Plan of Macao will be launched in the next three to five years, to be followed by a detailed plan that aims to control and regulate urban development in a scientific and transparent manner.’ While pitched as part of a comprehensive urban plan for Macau (Master Plan), the Committee stressed that the relationship between the latter and the MPLR is not clearly stated, requesting the State Party provide ‘the draft MPLR for review by the Advisory Bodies before it is approved, and meanwhile to submit details of all current proposals for land reclamation, e.g. for Zone B.’
Paperwork
On the paperwork front, the Committee urges local and national governments (the ‘State Party’) to get the work done. From UNESCO’s perspective, the most ‘urgent’ matter concerns the
Protection and Management Plan (PMP), initially requested to be provided by February 1, 2015 – announced as one of the follow-up initiatives linked to the ‘Framework’ proposed in 2014 for the Safeguard and Management Plan of Macau’s Historic Centre, in view of the celebration of the 10th Anniversary of the Historic Centre of Macau as World Heritage in 2015. The Committee asks the competent authorities to submit the plan ‘prior to its adoption, for review by the Advisory Bodies,’ adding that the timescale for its completion was not provided. In its report, China highlighted that ‘the local Government will carry out a public consultation concerning the PMP in 2017 in order to collect public opinions.’ In reply to criticisms and concerns raised by the Committee, the Cultural Affairs Bureau released a statement yesterday in which it shielded itself behind the State Party. The Cultural Affairs Bureau claims that the State Administration of Cultural Heritage of the People’s Republic of China ‘has praised the Macau SAR Government’s efforts in its works to safeguard cultural heritage, and that it considers [the Cureau] is effectively [proceeding] in the right direction, putting trust in its capacity to protect the Historic Centre of Macau’.
commercial and residential building (135 metres) A residential building (126 metres) located at Calçada do Gaio. Plans for expansion of Centro Hospitalar Conde São Januário, Macau’s public hospital complex
Some of the various associations which became involved in their efforts to reverse the government’s decision to approve the projects include:
Macau Architects’ Association (AAM) Association for the Protection of Macau’s Historical and Cultural Heritage New Macau Democratic Association (ANMD) General Union of the Neighbourhood Associations (gaai fong) League of the Guia Lighthouse Protectors Guia Lighthouse Protection Concerned Group
State Party’s report on Lou Kau Mansion In February 2016, a wall collapsed at the construction site of Cathedral Lane No.1-5 and Rua de S. Domingos No.16A-16E, causing slight damage to the first floor wall
and stained glass windows of Lou Kau Mansion. The project has been suspended and measures are being taken to ensure the structural safety of Lou Kau Mansion as well as repairing the slightly damaged wall and windows.
8 Business Daily Thursday, June 1 2017
Greater china Factories
PMI shows activity holds up on boost from steel, construction Growth impulse is also being challenged by a slowing trend in producer price inflation Yawen Chen and Ryan Woo
C
hina’s manufacturing and services sectors expanded at a solid pace in May thanks to robust construction and infrastructure investment, welcome news for authorities trying to strike a balance between maintaining stable economic growth and defusing debt risks. The official manufacturing Purchasing Managers’ Index (PMI) was at 51.2 in May, unchanged from April, a monthly survey by the National Bureau of Statistics showed yesterday. Analysts polled by Reuters had predicted a reading of 51.0. The survey results suggest authorities were having some success in stabilising the broader economy without risking a sharper slowdown in growth as they try to defuse bubble risks from years of credit-fueled stimulus. On the whole, “China’s economy is changing into a trend of stabilisation from a momentary spike and drop,” Zhang Liqun, an analyst with the China Logisticas Information Centre, said in a statement. Most analysts agree that momentum in China will slow after strong first quarter growth of 6.9 per cent, as Beijing’s crackdown on its financial sector is expected to take a toll on corporates’ financing costs. So far the slowdown has been benign, however, with some key sectors such as construction activity holding up well. The statistics bureau said construction remained robust despite slowing a notch from the previous month, as infrastructure investment speeded up, boosting demand for steel.
Indeed, activity in the steel industry expanded the most in a year in May, supported by higher new orders, a separate industry survey showed, suggesting still-solid demand in construction. Growth in the services sector also accelerated to 54.5 as commercial services such as retail and railway transportation expanded on rising demand. New orders for China’s manufacturers kept pace with April at 52.3, with export orders firming a touch by 0.1 percentage point to 50.7, suggesting external demand held up. Production stayed well within expansionary territory, though growth eased to 53.4 compared to last month’s 53.8.
Growth risks
The government has set a more modest growth target of around 6.5 per cent for 2017, after achieving a slightly higher 6.7 per cent target in 2016. The crackdown on financial risks, however, is seen pushing borrowing
costs up and dragging on growth. ANZ analysts estimate the average lending rate has edged up by around 30 basis points in the past few months. “We suspect that the current stability of growth will prove temporary,” said Julian Evans-Pritchard, a Singapore-based China economist at Capital Economics. “With the regulatory crackdown on financial risks still weighing on credit growth, it will be difficult to avoid a further slowdown in the coming months.” There are also doubts about whether other sectors of the economy will be able to pick up the slack if the property market slows as persistent curbs gradually take the heat out of the market. Those worries were inflamed last week when Moody’s Investors Service downgraded China’s credit ratings for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise. China’s growth impulse is also being challenged by a slowing trend in producer price inflation. Official data
showed on Saturday profits earned by Chinese industrial firms slowed to its weakest in four months in April. The input price sub-index dropped to 49.5 in May, according to the statistics bureau’s May PMI survey, after easing to 51.8 in April, as the tailwind from a commodities boom weakens. Output prices also slipped to 47.6 from April’s 48.7.
Key Points China May official manufacturing PMI 51.2 (vs April 51.2) China May official services PMI 54.5 (vs April 54.0) May new orders in line with April, production growth eases Export orders up 0.1 pct point to 50.7 Employment sub-index up 49.4 from 49.2 in April
China’s biggest steelmaker, Baoshan Iron & Steel, for instance, cut its main steel product prices for May and June after a long series of increases. Property sales growth also slipped in April and a strong rebound in commodity prices appears to have peaked, pointing to a continued slowdown in the industrial sector. On whole, however, analysts don’t expect economic growth to slow sharply this year, noting the government is keen to maintain stable economic and financial conditions heading into a key political leadership reshuffle later in the year. “In the months leading up to the 19th Party Congress in November, stability will remain the top priority for Chinese policymakers,” said ANZ’s chief China economist Raymond Yeung. Reuters
Business environment
EU business lobby urges Beijing to walk the talk on market opening But “Made in China 2025” plan calls for a dramatic increase in domestic products in 10 priority sectors, from robotics to biopharmaceuticals Michael Martina
A top European business lobby in China urged the country yesterday to “walk the talk” on free trade and globalisation, calling for an EU-China investment treaty within 12 months, as officials from both sides prepare for a summit this week. At the summit in Brussels today and Friday, European officials will press China for progress on an investment deal to widen market access for European companies in the world’s second-largest economy. Chinese President Xi Jinping has vowed greater openness in the economy, and Chinese officials say they are determined to promote the EU-China investment deal, negotiations for which were launched in 2013. But after 13 rounds of talks, EU officials have suggested it will be hard to make progress unless China moves forward with a so-called “negative list” of sectors placed off-limits to European investment.
“We want to be very ambitious. We would like to see a conclusion within 12 months. That means that very early we need to get to an offer for a negative list,” said Mats Harborn, the president of the European Union Chamber of Commerce in China.
“We want to be very ambitious. We would like to see a conclusion within 12 months” Mats Harborn, the president of the European Union Chamber of Commerce in China
“We would like to see that China walks the talk,” Harborn told reporters at a
briefing on the chamber’s annual survey on the business climate in China. “The negative list, we want it as short as possible,” he added. “Single digits when it comes to restricted industries.”
“Wake-up call”
In the survey, the chamber issued a “wake-up call to the whole of Europe” over growing competition from Chinese firms. Sixty per cent of respondents felt that by about 2020, Chinese companies would close key innovation gaps with foreign companies. Foreign companies also face discriminatory Chinese national security policies and uneven environmental enforcement, the chamber added. Companies had little confidence in China’s short-term reform agenda, the chamber added, with just 15 per cent feeling regulatory barriers would decrease over the next five years. Forty per cent expected them to increase, it added. Beijing’s “Made in China 2025” plan calls for a dramatic increase in domestic products in 10 priority sectors, from robotics to biopharmaceuticals, that the government hopes will speed an industrial upgrade as economic growth
slows. Chinese officials say foreign companies will enjoy the same preferential policies under those plans. Nonetheless, calls are growing in the United States and Europe for reciprocal market treatment in response
to what they see as Beijing’s mercantilism. Foreign companies also worry about new Chinese national security and cyber security regulations they feel are too broad and could be used to erect more market barriers. Reuters
Business Daily Thursday, June 1 2017 9
Greater China Markets
In Brief
Mainland funds maintain equity allocations amid tighter regulations, cash boost Average recommended allocations to financial and electronics stocks continued to rise Chinese fund managers have kept their suggested equity exposure for the next three months unchanged from the previous month, remaining cautious amid tighter regulations and liquidity conditions, a monthly Reuters poll showed. In a bid to defuse asset bubbles and systemic risks, China has tightened its grip on credit facilities and shadow banking, a development that has been a major concern for investors. The fund managers’ suggested equity allocations remained unchanged from 76.3 per cent a month earlier, which was the lowest in 6 months, according to a poll of eight China-based fund managers conducted this week. The fund managers have, meanwhile, cut their suggested bond allocations for the coming three months to 8.8 per cent from 11.3 per cent a month ago. They have boosted recommended cash allocations to 15 per cent, from 12.5 per cent in the previous month. “It’s still too early to see an acrossthe-board rebound given the correction in the bond market and the (tightening) regulations in the securities industry,” said a Shanghai-based fund manager. The stock market will tend to be rangebound given the still-tight
liquidity conditions, said another Shanghai-based fund manager, adding there could be a chance the market will rebound if deleveraging efforts ease.
‘The fund managers have cut their suggested bond allocations for the coming three months to 8.8 per cent from 11.3 per cent a month ago’ The fund mangers surveyed held broadly mixed views on asset allocations for the next month, with three suggesting cutting equity exposure, two suggesting raising, while another three recommended the same equity exposure.
Average recommended allocations to financial and electronics stocks continued to rise, while those to consumer shares continued to fall, as some fund managers started to hunt for bargains and cut defensive consumer plays after stock valuations fell amid the sharp correction in the major indexes. “The recent trend again proves the prominence of listed companies’ performance, and we shall embrace blue chips with good fundamentals and refrain from small-caps and stocks with poor results,” a South China-based fund manager pointed out. For the month, average allocations to electronics stocks were 25 per cent, a record high since the poll was launched. Average allocations to financial services stocks were 16.9 per cent, up from 15.6 per cent the previous month and the highest in 6 months, while those to consumer-related companies were down to 24.4 per cent from 27.5 per cent previously.
Currency
Central bank derivatives’ short position shrinks China’s central bank said yesterday that its holdings of short foreign currency positions in forwards and futures versus the yuan shrank in April. The People’s Bank of China held US$11.544 billion of such positions with commercial banks as of the end of April, down from US$12.09 billion one month earlier, official data showed. Yesterday’s data also showed that US$5.5 billion of short foreign currency positions were due to mature in up to one month. China started to report the data early last year.
Reuters
Real estate
Commodities
Soybean buyers from Mainland push to delay imports Chinese bean imports stood at 8.02 million tonnes in April Naveen Thukral and Dominique Patton
China’s soybean importers are pushing to postpone or cancel cargoes mainly ordered from suppliers in Brazil as they rack up hefty losses processing the commodity into cooking oil and animal feed ingredients, said three trade sources. China, which buys around 60 per cent of soybeans traded worldwide, took advantage of strong crushing profits at the beginning of the year and lower prices following bumper harvests in Brazil to aggressively buy the oilseed. But those profits have swung to the biggest losses in nearly three years after China’s edible oil markets were flooded with rapeseed oil auctioned from national reserves and by growing imports of other alternative vegetable oils. “Several importers are trying to delay shipments, even the big companies are asking shippers to delay,” said a soybean trader, declining to be identified as he was not authorised to speak with media. Soybean crushers in Shandong province, a key production hub in the country’s east, were this week losing RMB292 (US$43) on each tonne of soybeans processed, the worst since September 2014. “Some are even trying to washout cargoes but it is unlikely to be widespread,” the trader continued, using the industry term for cancelling cargoes with the seller’s consent. “It is very difficult to get the exact number on cancellations, but I think it will not be more than five to seven panamax cargoes.” Each panamax-sized vessel carries
Red-hot Hong Kong property market extends run Hong Kong’s private home prices hit a record high for the sixth month in a row in April, reflecting a market fervour that the authorities are eager to tame, according to government data released yesterday. The Asian financial hub is one of the least affordable places on earth, where a nano-apartment of less than 200 square feet can cost as much as US$500,000. The dearth of supply, low interest rates, and the flow of capital from mainland China pushed prices up over 137 percent since the financial crisis in 2008. Analyst comments
Mainland shows ‘appetite for pain’ on debt
about 60,000 tonnes of soybeans, representing processing losses of about US$2.58 million if crushed in Shandong. Consultancy Shanghai JC Intelligence said last week that four to five cargoes for May and June loading were cancelled, with another two or three resold to neighbouring countries. “Many importers are keen to washout cargoes, but they will not able to do that as everyone is heavily booked,” said a Singapore-based trader at an international trading company with soybean processing facilities in China. Chinese bean imports stood at 8.02 million tonnes in April, a record for
the month, customs data showed. That marked the fourth straight time imports had set records for their respective months. Imports in May and June will likely to hit around 9 to 9.5 million tonnes as previously booked cargoes arrive, sources said. “The industry is suffering a lot, especially the smaller players,” said the Singapore-based trader. “We have had big arrivals and this will continue until at least June or July, shipments will decline after that.” In July, soybean cargo arrivals at Chinese ports are expected to drop to about 8 million tonnes with further declines seen in the rest of the third quarter. Reuters
Charlene Chu, a banking analyst who made her name warning of the risks from China’s credit binge, said the country’s leaders are showing a “surprisingly high appetite for pain” with its recent crackdown on leverage in the world’s second-largest economy. China’s leaders have “a window of opportunity” to push through their curbs because of the strength in the real economy, Chu, a senior partner at Autonomous Research, said in an interview last week in Hong Kong. Based on Chinese statistics bureau data, Chu estimates that the country’s annual nominal gross domestic product is growing faster than 9 percent.
10 Business Daily Thursday, June 1 2017
Greater China Commodities
Glut, Chinese gamblers fuel iron ore’s biggest rout in a year Imported iron ore at China’s ports reached 136.6 million tonnes on May 26 Manolo Serapio Jr
A stubborn glut and selling by Chinese speculators have slashed iron ore prices this year, with traders and industry officials predicting further declines as memories fade of the steelmaking commodity’s stunning recovery in 2016. Prolonged price weakness would make business tougher again for top miners like Vale, Rio Tinto and BHP , whose earnings were roiled as iron ore markets tumbled 70 per cent in the three years through 2015. Weaker prices could also hit marginal suppliers such as Iran, potentially forcing that country out of the market again after boosting shipments to top buyer China earlier this year. Iron ore prices have plunged nearly 40 per cent from this year’s peak, trading at just below US$60 a tonne this week, with stockpiles at Chinese ports swelling to their largest in 13 years. In May alone, iron ore has fallen 15 per cent, on course for its steepest monthly drop in a year. In 2016, the commodity rallied over 80 per cent. “Demand is still healthy but there’s way too much supply,” said a trader at a global trading firm in Singapore that is looking for Chinese buyers for about 1.5 million tonnes of iron ore in coming weeks. He asked not to be identified. “If you’re an iron ore buyer and
you see it’s an oversupplied market, and supply will only increase from here, would you have any incentive to buy more today?” Imported iron ore at China’s ports reached 136.6 million tonnes on May 26, the highest since SteelHome consultancy began tracking the data in 2004. That is enough to build the Eiffel Tower in Paris more than 13,000 times over. Global iron ore output is forecast to expand an average of 1 per cent annually from this year to 3.3 billion tonnes by 2021, the same average growth during 2012-2016, BMI Research said.
Army of speculators
Declining prices have been amplified by China’s army of speculators,
the ones behind the wild swings in iron ore futures traded on the Dalian Commodity Exchange (DCE). Dalian futures, launched in October 2013, gave many Chinese investors their first real chance to play in the iron ore futures market, and have largely influenced physical pricing. “DCE is the primary driver and it’s always been the primary driver. That’s not going to change because iron ore is a China market,” said Kelly Teoh, broker at Clarksons Platou Futures. The volume of iron ore futures traded on the DCE so far in May reached nearly 2.8 billion tonnes, about twice annual global seaborne trade and the largest since April 2016, according to exchange data. As the most-traded contract
dropped 32 per cent from this year’s high to mid-May, open interest - or open contracts - grew to 2.45 million lots, the highest since November 2015. “There is clear evidence of speculation in China’s iron ore and steel futures,” said Julius Baer analyst Carsten Menke. “Speculation always amplifies trends, to the upside and to the downside.” Australia’s Fortescue Metals Group, the world’s No. 4 iron ore miner, said it was generating strong margins even at current prices. Fortescue CEO Nev Power expects China’s steel output to rise “around 5 per cent compared to this time last year” with demand backed by the nation’s continuing “industrialisation and urbanisation”. Reuters
M&A
CIC purportedly in lead to buy Logicor in US$13 billion deal Prime European warehouses are forecast to generate average returns of 7.6 per cent annually over the next five years Sarah Syed and Sharon Smyth
China Investment Corp. is the front-runner in the race to acquire Blackstone Group LP’s European logistics business Logicor for about 12 billion euros (US$13.4 billion), a person familiar with the situation said. Temasek Holdings Pte and Mapletree Investments Pte Ltd. are also still in the bidding process, the person said, asking not to be identified because the talks are private. The news was first reported on Monday by Estates Gazette magazine. Blackstone, which created Logicor in 2012, is cashing out as demand for European logistics properties from investors and tenants grows. Logistics properties have become increasingly attractive to sovereign wealth and pension funds after the growth of internet shopping boosted demand
from occupiers. CIC owns a stake in New Yorkbased Blackstone after investing in the company in 2007 and 2008. A CIC entity owned about 4.6 per cent of the asset manager as of February, according to Blackstone’s annual report. A spokeswoman for Blackstone didn’t immediately reply to telephone calls and an email requesting comment. An email to CIC’s Beijing-based press office outside normal working hours didn’t receive an immediate reply. Representatives for Temasek and Mapletree declined to comment. Prime European warehouses are forecast to generate average returns of 7.6 per cent annually over the next five years, compared with 6.4 per cent for malls and 5.2 per cent for offices, according to a March report by Deutsche Bank AG. Logicor, based
in London, owns about 13.7 million square meters of logistical space across Europe, rented to companies including Amazon.com Inc. and DHL Worldwide Express. Carlyle Group LP said Tuesday that it had agreed to buy a 180,000 square-meter logistics portfolio in France from Prologis Inc. The private equity fund is building up investments in the industry to take advantage of the growth in online
shopping, it said in a statement. For CIC, the investment would be one of a dwindling number of outbound Chinese acquisitions as the country’s acquirers cope with tighter capital controls and wary sellers. Chinese firms have agreed to spend about US$47 billion on overseas targets so far this year, down 62 per cent from the same period a year ago, according to data compiled by Bloomberg. Bloomberg News
Business Daily Thursday, June 1 2017 11
Asia Industry
Japan’s factory output races in April Manufacturers surveyed expect output to fall 2.5 per cent in May Minami Funakoshi
J
apan’s factory output rebounded in April from March and grew at the fastest pace in almost six years, taking production to its highest level since 2008. Japan’s industrial output rose 4.0 per cent in April from the previous month, the strongest growth since posting a 4.2 per cent gain in June 2011, although slightly shy of the median estimate in a Reuters poll for a 4.3 per cent rise.
peak at 107.4, as robust overseas demand continued to support growth. “Output grew at a very high level in April. I think production will continue to grow as a trend,” said Norio Miyagawa, senior economist at Mizuho Securities. “The result kicked off a start to the second quarter that gives us hope for positive growth,” Miyagawa added. Overall inventories increased 1.5 per cent in April from March, the
fifth straight rising month, as stocks of cars and trucks rose. The rise in inventory of cars may have been partly due to holidays in early May that delayed shipments, a Cabinet Office official said. The official noted that production and inventories were not completely balanced, with companies starting to build larger inventories. “I don’t think inventories will continue to rise at a worrying level,” said Takeshi Minami, chief economist
at Norinchukin Research Institute. Manufacturers surveyed expect output to fall 2.5 per cent in May on decreased output of transport equipment, fabricated metals, and iron and steel, but to rise 1.8 per cent in June. Japan’s economy grew in the first quarter at the fastest rate in a year to mark the longest period of expansion in a decade, thanks to solid exports and a helpful boost from private consumption. Reuters
Key Points April factory output +4.0 pct vs f’cast +4.3 pct Manufacturers expect output to dip in May, rise in June April output hits highest level since Oct 2008 Inventories rose for 5th straight month Japan economy recovering on robust global demand Cars and car parts, plus equipment for making flat panel displays and semiconductors, were the fastest-growing among the 11 sectors in the 15-sector index showing growth. The seasonally-adjusted production index for April hit 103.8, the highest level since October 2008’s
Official visit
Vietnam to ink deals for up to US$17 bln in U.S. goods, services Prime Minister’s comments came after U.S. Trade Representative Robert Lighthizer expressed concern about the rapid growth of the U.S. trade deficit with Vietnam David Lawder and David Brunnstrom
Vietnamese Prime Minister Nguyen Xuan Phuc said he would sign deals for U.S. goods and services worth US$15 billion to US$17 billion during his visit to Washington, D.C., mainly for high technology products and for services. “Vietnam will increase the import of high technologies and services from the United States, and on the occasion of this visit, many important deals will be made,” Phuc told a U.S. Chamber of Commerce dinner. Phuc, who is due to meet with U.S. President Donald Trump at the end of a three-day visit to the United States, did not provide any further details of the transactions. GE Power Chief Executive Officer Steve Bolze told the dinner that General Electric Co will sign new business worth about US$6 billion with Vietnam, but also offered no details. Phuc’s comments came after U.S. Trade Representative Robert Lighthizer expressed concern about the
rapid growth of the U.S. trade deficit with Vietnam, saying this was a new challenge for the two countries and he was looking to Phuc to help address it. “Over the last decade, our bilateral trade deficit has risen from about US$7 billion to nearly US$32 billion,” Lighthizer said. “This concerning growth in our trade deficit presents new challenges and shows us that there is considerable potential to improve further our important trade relationship.” Lighthizer and other Trump administration trade officials have pledged to work to reduce U.S. bilateral trade deficits with major trading partners. The US$32 billion deficit with Vietnam last year -- the sixth largest U.S. trade deficit -- reflects growing imports of Vietnamese semiconductors and other electronics products in addition to more traditional sectors such as footwear, apparel and furniture. The trade issue has become a potential irritant in a relationship where
Washington and Hanoi have stepped up security cooperation in recent years given shared concerns about China’s increasingly assertive behaviour in East Asia. Phuc’s meeting with Trump makes him the first southeast Asian leader to visit the White House under the new administration. It reflected calls, letters, diplomatic contacts and lower-level visits that
started long before Trump took office in Washington, where Vietnam retains a lobbyist at US$30,000 a month. Vietnam was disappointed when Trump ditched the 12-nation Trans-Pacific Partnership (TPP) trade pact, in which Hanoi was expected to be one of the main beneficiaries, and focused U.S. trade policy on reducing deficits. Reuters
12 Business Daily Thursday, June 1 2017
Asia Factories
South Korean industrial output limps even as exports surge Production of semiconductors and cars dropped 9.2 per cent and 2.6 per cent on-month respectively Cynthia Kim
S
outh Korea’s industrial output declined unexpectedly in April from March ev e n as ex p o rts surged for the sixth straight month. Industrial output fell 2.2 per cent in April from March on a seasonally adjusted basis, data from Statistics Korea showed yesterday, missing the 0.8 per cent rise expected by economists in a Reuters survey. In annual terms, factory output in April rose 1.7 per cent after a revised 3.3 per cent gain in the previous month. The March industrial production index was revised up to a 1.2 per cent rise onmonth from the 1 per cent rise reported earlier.
Yesterday’s unflattering outcome adds an element of uncertainty for the Bank of Korea, which plans in July to upgrade the economic growth outlook for this year from the current 2.6 per cent. Production of semiconductors and cars dropped 9.2 per cent and 2.6 per cent on-month respectively, indicating the limits to growth for local industries’ limits soaring exports. “Demand for semiconductors, which has been boosting overall exports, seems to be slowing the second quarter,” said Park Jung-woo, economist, Korea Investment and Securities. “Exports posted double-digit growth throughout the first quarter, and cannot maintain that so the pace of expansion will come down
to a high-single digit in the months ahead,” Park said. South Korea last month raised its export outlook for the year after first quarter economic growth accelerated to 0.9 per cent from 0.5 per cent quarterly expansion in the previous period.
Key Points April factory output -2.2 pct m/m s/adj (Reuters poll +0.8 pct) April factory output +1.7 pct y/y (Reuters poll +5.0 pct) Decline in monthly terms due to reduction in semiconductors, cars
“Growth momentum is still there and will continue to improve,” a Statistics Korea official from said after the data was released. Market participants will be looking to May export numbers due June 1 for further
clues on global demand, with analysts predicting a 13.6 per cent jump from a year earlier.
Service sector output rose 0.1 per cent in April in seasonally adjusted monthly terms. Reuters
Report
RBNZ: Fewer financial risks, but still wary about house prices The central bank reiterated that pockets of the dairy sector were overly-indebted, while global uncertainties remained high Ana Nicolaci da Costa and Charlotte Greenfield
The Reserve Bank of New Zealand (RBNZ) said yesterday risks at home and abroad to the country’s financial system had receded in recent months, but it remained wary of any rise in house prices or global protectionism. While the global economic outlook had improved and domestic house price growth slowed, political uncertainty in the world remained high and the rate of house building in New Zealand was insufficient to meet demand, it said in its half-yearly Financial Stability Report. The central bank said it would soon
release a consultation paper proposing the addition of restrictions on high debt to income loans into its macroprudential arsenal to combat the risk of a sharp downturn in house prices. It said it had no immediate plans to use such tools even if they became available. “The Reserve Bank would not apply it at this stage, given that LVR (loanto-value ratio) restrictions appear to be mitigating housing risks,” the RBNZ said in its report. “Should high house price growth return and the proportion of housing lending at high DTI (debt-to-income) ratios remains high, a DTI restriction could be warranted.”
The central bank reiterated that pockets of the dairy sector were overly-indebted, while global uncertainties remained high. “I think there’s still a great deal of uncertainty about where the U.S. might go on trade policy,” RBNZ Governor Graeme Wheeler told a news conference. “But it’s not just the U.S. There (are) issues around China and the debt situation. There (are) issues around North Korea, as we know, and around the Middle East, around Syria.” In March, Wheeler had said U.S. President Donald Trump’s ‘America First’ policy was the greatest source of uncertainty for the trade-dependent economy.
Loan restrictions
New Zealand’s housing market has grown more than 50 percent in value over the last decade, which has raised
concerns about high mortgage debt and the systemic risk that poses if the market should collapse. The RBNZ already requires investors to make a 40 percent downpayment on investment properties and is also seeking powers to impose lending restrictions based on borrowers’ DTI ratios. Wheeler said the consultation paper on DTI restrictions may be released in the next couple of weeks. If introduced, the restrictions would not necessarily be targeted at investors or contain specific DTI ratio levels, the RBNZ said.
Key Points RBNZ says global and domestic risks have lessened Any resurgence in house prices would be a concern - RBNZ Paper on debt to income restrictions due in weeks - RBNZ
Reserve Bank of New Zealand headquarters
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“If we did introduce something at some stage, we would probably have a speed limit aspect to it, just like the LVRs,” Wheeler added. House price growth has eased in recent months, but there is some concern the impact from LVR restrictions could be temporary and that short supply and record migration could continue to put pressure on New Zealand’s housing market. Some economists said DTI limits were likely still some way off and may not materialise. “We don’t think there will be a case for applying DTI limits any time soon,” Michael Gordon, economist at Westpac Bank said. “The housing market has slowed significantly as mortgage rates have risen from their lows, and our view is that the slowdown will ‘stick’ this time.” Reuters Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Thursday, June 1 2017 13
Asia Private poll
In Brief
Japanese fund managers trim equity exposure in May Poll respondents increased North American stock exposure to 30.5 per cent in May from 28.0 per cent in April Japanese fund managers trimmed their model portfolios’ exposure to equities in May, a Reuters poll found, in a month in which U.S. political turmoil curtailed institutional investors’ appetite for riskier assets. The survey of five Japan-based fund managers conducted between May 17 and 24 showed respondents on average wanted to allocate 38.1 per cent of their model portfolios to stocks in May, from 39.1 per cent in April.
“Equities are expected to remain at high levels once excessive risk aversion runs its course”
Poll respondents increased North American stock exposure to 30.5 per cent in May from 28.0 per cent in April. They also raised their allocations to Japanese stocks to 46.3 per cent from 43.8 per cent, while cutting exposure to British stocks to 2.5 per cent from 5.0 per cent. “Equities are expected to remain at high levels once excessive risk aversion runs its course,” said Yuichi Kodama, chief economist at Meiji Yasuda Insurance. “Geopolitical risks as well as U.S. and European political uncertainty
remain, but corporate earnings this fiscal year are likely to be strong thanks to the strength seen in various economies.” The respondents slightly increased their overall exposure to safe-haven bonds to 55.9 per cent in May from 55.5 per cent in April. They raised their North American bond holdings to 33.9 per cent in May from 31.9 per cent in April. U.S. debt became more affordable for investors earlier in May, with the 10-year Treasury yield rising above 2.40 per cent from a five-month low of 2.16 per cent touched mid-April. Respondents increased euro zone bonds to 21.5 per cent from 20.5 per cent and trimmed Japanese bonds to 36.0 per cent from 37.3 per cent. Reuters
Singapore’s bank lending rises Total bank lending in Singapore in April rose 7.0 per cent from a year earlier, helped by increases in loans to financial institutions as well as housing and bridging loans, central bank data showed yesterday. Loans and advances by domestic banking units in the city-state amounted to S$631.2 billion (US$455.87 billion) in April, up from S$627.9 billion in March and S$589.8 billion in April 2016. Loans and advances in Asian currency units (ACU) increased to S$551.4 billion in April from S$542.9 billion in March. The ACU market refers to loans denominated in currencies other than the Singapore dollar. Commodities
Indian sugar output expected to jump India’s 2017/18 sugar production will likely jump a quarter from the previous year to 25 million tonnes as decent monsoon rains are forecast, the head of an industry body told Reuters. That rebound in output to volumes near consumption levels could sap demand for imports from the world’s biggest consumer of the sweetener, dragging on international prices that are already near their lowest in over a year. India was forced to import 500,000 tonnes of sugar in the 2016/17 crop year ending Sept. 30 after a strong El Niño weather pattern prompted severe drought in 2015.
Yuichi Kodama, chief economist at Meiji Yasuda Insurance Helped by strong corporate earnings, the S&P 500 rose to a record high in mid-May before sliding on strife that gripped Washington, building uncertainty over U.S. President Donald Trump’s political future amid reports he tried to quash a federal probe into alleged election meddling by Russia. Still, U.S. equities had recovered most of their losses towards the month’s end, with their global peers following a similar pattern.
Monetary stance
S. Korea’s c. bank board member says policy rate should remain accommodative Inflation hovering around the central bank’s target of 2 per cent this year has muted calls to ease interest rates further A board member of South Korea’s central bank said yesterday that monetary policy should stay accommodative as boosting private consumption is still a challenge when inflation is not expected to exceed the central bank’s target in the medium term.
Financial sector
Bank of Korea board member Koh Seung-beom said the central bank also needs to play a more active role in supporting small- and medium-sized companies struggling with their finances even though interest rates are at a record low of 1.25 per cent. advertisement
“Going forward we will need to keep monetary policy accommodative,” Koh told reporters at a news conference. “It’s good to see improvements in exports and facility investments thanks to a recovery in global demand, but there doesn’t seem to be a solid recovery in consumption so we can’t say domestic demand is strong.” Koh, known as a dove on the central bank’s seven-member policy board, did not provide more details on the policy financing programme in place to support small businesses. He noted that inflation would not exceed the central bank’s target of 2 per cent in the medium term, which would support its stance that interest rates should stay easy while the government drafts fiscal stimulus measures. The central bank last lowered its policy rate in June 2016 and has kept it at 1.25 per cent since then. Inflation hovering around the central bank’s target of 2 per cent this year has muted calls to ease interest rates further this year, and some economists predict the next policy move would be a hike. In a survey of 19 economists conducted by Reuters in May, nine predicted a rate hike next year as the central bank’s next move, while 10 said the BOK board would not adjust policy rates for some time. Koh said he was closely watching soaring household debt as the high level of borrowings was increasingly an important factor in monetary policies. Reuters
Record delayed
Toshiba unable to present audited results Toshiba Corp said yesterday it would not be able to present its audited annual business results for the fiscal year ended March at its general shareholders meeting on June 28. Toshiba has been unable to submit its results to regulators as it has been at odds with auditor PricewaterhouseCoopers Aarata (PwC) since a surprise write-down at its now bankrupt Westinghouse nuclear unit. “At this point, completion of the auditing is expected to take some more time,” the Japanese conglomerate said in a statement. Industry
Thai factory output falls Thailand’s industrial output contracted more than expected, due mainly to lower production of cars and jewellery, suggesting economic recovery remains fragile. The Industry Ministry said on Wednesday its manufacturing production index (MPI) in April dropped 1.7 per cent from a year earlier. A Reuters poll forecast a fall of 0.6 per cent. March’s index was revised to a 0.01 per cent rise year-on-year from a 0.53 per cent fall. Capacity utilisation at factories fell to 53.6 per cent in April from a revised 67.03 per cent in March, due partly to more holidays in April.
14 Business Daily Thursday, June 1 2017
International In Brief Trade
German exports to U.S. to rise this year Germany’s DIHK Chambers of Commerce yesterday raised its forecast for exports to the United States for 2017 despite widespread concerns about protectionism since Donald Trump became president. “We think export growth of up to 10 per cent is possible in 2017,” DIHK foreign trade economist Volker Treier told Reuters. German exports to the U.S. surpassed imports from the U.S. by just under 14 billion euros in the first quarter - the biggest trade surplus Germany has with any country. German shipments to the U.S. have surged since Trump took office in January. Settlement
Brazil’s J&F agrees to pay in leniency agreement J&F Investimentos, controlling shareholder of the world’s largest meatpacker, JBS SA, agreed with Brazilian prosecutors late on Tuesday to pay a 10.3 billion real (US$3.2 billion) fine for its role in corruption scandals. In a statement, prosecutors in five different corruption probes said the holding company owned by the Batista family will pay the leniency fine over 25 years, starting in December. Prosecutors said it was the largest ever such fine worldwide. J&F was able to reduce the final value by 900 million reais from the initial 11.2 billion reais proposed by Brazilian prosecutors.
Prices
Euro-area inflation slows more than forecast before ECB meeting While sentiment indicators have signalled strong economic momentum, consumer prices continue to lag the recovery Piotr Skolimowski
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uro-area inflation slowed more than economists forecast, giving ammunition for European Central Bank policy makers who say it’s too early to commit to an exit from monetary stimulus. Consumer-price growth decelerated to 1.4 per cent in May -- the weakest reading this year -- from 1.9 per cent a month earlier, Eurostat said yesterday. A measure that strips out volatile components such as energy and food fell to 0.9 per cent, also weaker than expected. In a separate release, the European Union’s statistics office said unemployment declined to 9.3 per cent, its lowest level since March 2009. ECB President Mario Draghi has tried to downplay expectations that the Governing Council will do much more than acknowledge the latest economic progress -- let alone put the ECB on an exit course -- at its meeting next week in Tallinn. Actual proof that price trends remain weak should help him hammer home the
message that the central bank has to remain patient and quell the urge of some of his colleagues to take more decisive steps. “More subdued inflation will help Draghi make the case that the exit can be slow,” said Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam. “At the same time, they need to keep the momentum in this discussion going without letting markets run ahead of themselves so it’s a very fine balancing act.” While sentiment indicators have signalled strong economic momentum, consumer prices continue to lag the recovery. Inflation slowed more than anticipated in at least three major euro-area economies. IHS Markit, which publishes a monthly activity index, last week captured the disconnect between weak price growth and a strengthening economy where companies are stepping up hiring to meet demand. Growth -- envisaged to clock in at as much as 0.7 per cent in the second quarter -- is consistent with tighter monetary policy, it argued, if it wasn’t for weakening inflation.
Anti-money laundering
U.S. Fed fines Deutsche Bank The Federal Reserve this week said it had fined Deutsche Bank AG US$41 million for failing to ensure its systems would detect money laundering regulations and it said the lender agreed to increase its controls. The New York Fed found that the German bank had faulty systems to detect suspicious transactions between 2011 and 2015, the central bank said in its filing. On Tuesday afternoon, a Deutsche Bank spokesman said: “We are committed to implementing every remediation measure referenced in the Fed’s order and to meeting their expectations.” Angola
SOE funds fibre cable from Brazil to Florida The state-ruled Angola Development Bank (BDA), is going to fund a submarine cable between Brazil and the U.S.A. to the sum of US$130 million (€116 million). The project, led by Angola Cables is going to lay a submarine fibre optic cable between Angola and Brazil, called the South Atlantic Cable System (SACS), and another between Brazil and the U.S.A. called the Americas Cable. The 6,000 k cable between Africa and South America will connect Luanda (Angola) and Fortaleza (Brazil) with four pairs of fibres capable of carrying 40 Tbps (terabits per second) and is already being laid, also funded by the BDA.
Draghi stressed on Monday in Brussels that “downside risks to the growth outlook are further diminishing,” highlighting one of the key signals that the ECB could send next week. Some policy makers have said they now consider risks to the economy’s outlook as broadly balanced.
Gradual approach
Executive Board member Benoit Coeure warned earlier this month that “too much gradualism” in adjusting the ECB’s policy stance bears the risk of larger market adjustments once decisions are finally taken, while defending the current plan to finish QE before raising rates.
“More subdued inflation will help Draghi make the case that the exit can be slow” Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam
Bundesbank President Jens Weidmann, one of the fiercest critics of the central bank’s asset-purchase program, has argued that questions about the timing of an exit are legitimate, even though he noted that an expansionary stance “continues to be appropriate in principle.” The comments suggest that next week’s meeting may only yield minor changes to policy communication, such as the removal of an explicit pledge to cut rates further if needed or the recognition that risks to the recovery are no longer skewed to the downside. “Draghi and others stressed that the most important argument for not considering an exit so far is that despite the surprisingly strong economy there were no signs of inflation rising on a sustained basis,” said Michael Schubert, an economist at Commerzbank AG in Frankfurt. “On balance, we are assuming that at next Thursday’s meeting the ECB will retreat in part but not entirely from its easing bias.” Bloomberg News
Brexit
Returning expats could hit UK healthcare Under a reciprocal scheme, British pensioners have the right to go to any EU member state and receive the same health rights as the local population Britain’s healthcare system faces spiralling costs if expat pensioners living in other parts of the European Union return after Britain leaves the bloc, a study by an independent health charity warned yesterday. Some 190,000 British pensioners are currently receiving healthcare in different EU countries at a cost of around £500 million a year for Britain’s state-run National Health Service (NHS). But the Nuffield Trust study said this could rise to £1 billion (US$1.3 billion) if the pensioners returned due to higher health costs in Britain compared to other EU countries.
If the NHS needed to host people currently receiving care abroad it would also have to create additional bed spaces -- the equivalent of two extra hospitals. Under a reciprocal scheme, British pensioners have the right to go to any EU member state and receive the same health rights as the local population. The Nuffield Trust urged Brexit negotiators to try to secure a deal that would mean that expats continue to receive care in the countries they reside in. “The NHS and social care were already under pressure from tight funding settlements and growing staffing problems well before the EU referendum last year,” the report’s author Mark Dayan said. “But if we handle it badly, leaving the EU could make these problems even worse,” he said. Asked about the issue during an election campaign stop in Plymouth in southwest England, British Prime Minister Theresa May said: “I want to see reciprocal arrangements so their
rights are protected”. The report also warned about the impact of lower immigration as the NHS is heavily reliant on being able to recruit medical staff from the EU.
“But if we handle it badly, leaving the EU could make these problems even worse” Mark Dayan, author of the Nuffield Trust study
Mark Porter from the British Medical Association said: “Politicians must keep the health service and its patients at the forefront during Brexit negotiations and reduce the impact that leaving the EU will have on health and social care across the UK”. AFP
Business Daily Thursday, June 1 2017 15
Opinion Business Wires
The Phnom Penh Post A legal dispute over the shareholding structure of Donaco International, an Australia-listed casino resort operator that owns the Star Vegas Resort and Club in Poipet and the Aristo International hotel in Vietnam, has resurfaced. According to a press report, a new affidavit has been filed in a Malaysian court questioning the combined share of 49.2 per cent held by Lim Keong Yew and Lim Keong Hoe, the grandsons of Lim Goh Tong, who passed away in 2007. The affidavit contests that Keong Yew and Keong Hoe were not listed as beneficiaries in Goh Tong’s will, and that their involvement in Donaco is unfounded.
Viet Nam News The country’s industrial production index (IIP) surged 5.7 per cent yearon-year in the first five months this year, the General Statistics Office (GSO) reported. The five-month IIP growth was higher than the 5.1 per cent increase seen in the first four months and was double the increase seen in the first two months. The numbers proved that the national industrial production had been improving, GSO statisticians said. The processing and manufacturing industry, which accounted for over 70 per cent of the total industrial output, saw a yearly IIP rise of 9.7 per cent.
The Asahi Shimbun Softbank Corp. will use artificial intelligence to drastically cut the time spent screening applications from university students who hope to join the company on a main career track in April 2018. The tech giant’s announcement on May 29 marks the first time any Japanese company has made public its use of the IBM Watson AI system in its selection process, according to IBM Japan Ltd. As the AI engine analyses and evaluates the content of papers instantly, Softbank said it will reduce the time officials spend screening the “entry sheets” to a quarter of that prior.
The World Bank has bigger problems than bad writing
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conomists, to put it mildly, are not known for their communication skills. The typical economics paper is written in a formal, stilted style, laden with phrases like “in the following subsection” and “it has been shown that.” Jargon flies thick and fast, interspersed with highly formalized mathematical definitions and propositions. For a non-economist to hack through the verbal jungle of the typical paper is often an impossible task. Why is econ so abstruse? A simple explanation is that economists are just math nerds who were never forced to communicate well. A hardened cynic might suggest that the purpose is to create a secret language that can only be understood by insiders, in order thwart outside scrutiny. I suspect that econ is far from the worst offender when it comes to using jargon as an artificial barrier to entry, but it’s possible some of this is going on. In any case, Paul Romer, chief economist of the World Bank, seems to have tried to change this situation. After assuming leadership of the Bank’s research arm last year, the Development Economics Group, Romer apparently initiated a crusade against stilted writing, even going so far as to count how many times researchers used the word “and.” The researchers were having none of it, however, and successfully campaigned to force Romer to give up leadership of the group. Romer’s budget cuts and elimination of positions within the bank probably didn’t endear him to his subordinates, either. This is sad, but was probably inevitable. An aggressive, maverick leader rarely succeeds in shaking up a sleepy, hidebound organization overnight. To truly change the institutional culture of a place like the World Bank would take a long time and a lot of painful inside baseball -- it’s not the kind of thing that can be accomplished with a quick frontal assault. Romer isn’t the first reformer to get bogged down in that particular organization -- President Jim Yong Kim, who attempted a massive restructuring of the Bank in 2014, caused turmoil and even provoked a work stoppage. So Romer’s efforts were probably always a lowpercentage shot. But it was a good try. From an outside perspective, it certainly looks as if the World Bank is an institution in need of great change. And the problem goes far beyond poor communication. First of all, the Bank’s original mission -- to lend money to developing countries -- is becoming less and less important. As Center for Global Development researchers Scott Morris and Madeleine Gleave noted in a 2015 report, the rapid growth of the world economy means that most countries just don’t need the bank anymore: The Bank will continue to play an essential role in a relatively small number of fragile states, but the
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Inquirer.net No golden age of infrastructure (in Philippines) may be forthcoming if Congress fails to pass soon the comprehensive tax reform package bill, according to Socioeconomic Planning Secretary Ernesto Pernia, who warned that the government’s ambitious “build, build, build” program might become a “small build” or “no build” one. The bill seeks to raise additional revenue to fund various programs of the government. Pernia said the Philippines would also have to go slow when it comes to entering agreements with foreign partners such as China because the country would have to balance spending and indebtedness with its capacity to pay.
Noah Smith a Bloomberg View
rest of its core lending model could very quickly become irrelevant to most of its other current borrowers…On its current path, the World Bank will soon enough be viewed as no longer essential. Morris and Gleave suggest a number of other roles the Bank could step into, including disease response, funding scientific research, making municipal loans or simply acting as a think tank. But this isn’t very encouraging -- it paints the picture of an organization shambling onward out of sheer momentum, an expensive bureaucracy looking for a purpose. In 2014, the Financial Times wondered openly if the Bank was “sliding into irrelevance.” Meanwhile, the World Bank’s sister institution, the International Monetary Fund, has its own problems. Created to make emergency loans to countries in crisis, the IMF advocated fiscal austerity that probably often ended up making the situation worse. In recent years, the Fund’s macroeconomists, led by Chief Economists Olivier Blanchard and Maurice Obstfeld, have almost completely reversed the organization’s standard approach to fiscal policy. But that leaves the uncomfortable question of why the Fund’s institutional culture allowed such a wrongheaded approach to persist for so long in the first place. A picture is beginning to emerge of global financial institutions that are too hidebound and conservative. Faced with changes in both the global economy and economists’ understanding of recessions, both the World Bank and the IMF have too often resisted change rather than embrace it. It’s worth wondering if the root of the problem comes from the culture of economics. Economists are, in general, an insular and hierarchical bunch. They are used to having the quality and value of their work judged only by other economists. The outside world is expected to pay economists’ salaries and listen to their advice, but not to question the value of what they do. But when this ivory-tower approach is applied to real-world organizations, the result can be unacceptable institutional inertia. Perhaps it was this insular culture, rather than just bad writing, that Romer had really intended to shake up. If so, the deck was stacked against him from the start. Making economists open up and engage with the wider world -- and make themselves vulnerable to criticism by intelligent outsiders -- may be a task too great even for a famous and brilliant individual like Romer. Bloomberg News
A picture is beginning to emerge of global financial institutions that are too hidebound and conservative
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16 Business Daily Thursday, June 1 2017
Closing Real estate
Nan Fung wins commercial Hong Kong site for record US$3.2 Billion
The Kai Tak auction marked the second big commercial property sale awarded to a local, A Nan Fung Group unit outbid 11 other developers non-mainland developer this month. While the price was the highest total, other sites have to win property in Hong Kong’s Kai Tak area fetched more per square foot. Henderson Land for HK$24.6 billion (US$3.2 billion), the highest Development Co. outbid eight other developers amount ever for a commercial site sold by the earlier in May to pay HK$23.3 billion for a former government. car park in Central, which retains the record on The site, designated for non-industrial use, has that basis. a maximum gross floor area of 177,670 square meters, the Lands Department said in a statement The land price is “relatively high”, said Patrick Wong, an analyst at Bloomberg Intelligence, “It on its website. The price would translate into could be driven by the high price of the Central HK$12,864 per square foot, according to site sold earlier.” Bloomberg News Bloomberg calculations based on official data.
Hang Seng Index
Hong Kong stocks cap longest run of monthly gains since 2013 Rallies in technology and financial stocks lifted the Hang Seng Index in May Sofia Horta e Costa
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ong Kong’s benchmark stock index capped a fifth month of gains, its longest winning streak in more than four years, as improving earnings outweighed concerns about China’s campaign to cut leverage. The Hang Seng Index advanced 4.3 per cent in May to be among Asia’s best performers. The gauge retreated 0.2 per cent yesterday at the close. Geely Automobile Holdings Ltd. surged 7.5 per cent, extending the top performance on the index for the month. Cogobuy Group sank 23 per cent, the most on record. The value of shares traded in Hong Kong was the highest in 21 months as MSCI Inc. rebalanced its indexes. The Shanghai Composite Index advanced 0.2 per cent after a two-day break, paring its monthly loss to 1.2 per cent. Rallies in technology and financial stocks lifted the Hang Seng Index in May, with Tencent Holdings Ltd., HSBC Holdings Plc and Ping An Insurance Group Co. contributing to more than half of the gauge’s advance. This year’s surge has attracted short sellers to Hong Kong, where sudden declines for companies like AAC Technologies Holdings Inc. and Cogobuy are becoming more frequent. The picture is less bright on the mainland, where local investors are suffering a third month of losses. “People are still expecting Hong Kong stocks to outperform,” said
Banny Lam, head of research at CEB International Investment Corp. in Hong Kong. “The concern is that we’ll have tighter liquidity in June, and everyone will be looking at whether the PBOC injects more money into the system.”
“People are still expecting Hong Kong stocks to outperform” Banny Lam, head of research at CEB International Investment Corp
its highest level since Nov. 4, before trading at 6.7828. While the Shanghai Composite Index spent the first half of May trading at oversold levels, it has now erased all its losses for the year amid speculation that state funds were active in the market. The measure has bounced back 1.8 per cent in the past four days, resisting a short-lived decline brought about by Moody’s Investors Service’s first rating cut of China’s sovereign debt since 1989. Shanghai Bailian Group Co. surged by the daily limit after saying Alibaba plans to buy an 18 per cent stake in its Lianhua Supermarket unit, according to a Shanghai Stock Exchange filing Friday. Bailian last surged by the daily limit in February on the two days following reports it
would team up with Alibaba to explore retail strategies. Insurers rallied in Hong Kong. Mainland investors are hunting for bargains as southbound trade resumes after a holiday, and the industry is seen as a good bet due to attractive valuations and discounts to peers on the mainland, said Grace Zhou, Hong Kong-based analyst with ICBC International. New China Life Insurance Co. gained 3.1 per cent, while China Taiping Insurance Holdings Co. climbed 2.5 per cent. Geely closed at a 23-year high. Mainland investors had their first chance to buy its shares through the trading links since the company announced the purchase of Malaysia’s national carmaker Proton Holdings Bhd. Geely gained 23 per cent this month. Bloomberg News
China’s benchmark seven-day repurchase rate has climbed every June over the past 10 years as financial institutions hoard cash toward the end of the second quarter and fight for deposits. In 2013, the combination of this and the central bank’s reluctance to inject liquidity caused a cash crunch that rippled through global markets. Offshore liquidity has also been tightening: the overnight yuan interbank rate in Hong Kong, known as Hibor, surged 15.7 per centage points yesterday to 21.08 per cent, the highest since Jan. 6, while the offshore yuan’s overnight deposit rate jumped to 50 per cent. The yuan’s exchange rate in Hong Kong soared as much as 0.83 per cent to 6.7677 per dollar,
Portugal
Funding
Forex
Final GDP figures confirm fastest year-on-year growth since 2007
Online tutor Yuanfudao raises funds from Warburg Pincus, Tencent
Goldman fund manager sees dollar rising 10 per cent versus yen, euro
Portugal’s National Statistics Institute (INE) yesterday confirmed that the country’s gross domestic product swelled by 1.0 per cent in the first quarter of the year from the previous quarter, and that it was 2.8 per cent larger than in the same period of 2016. In the final national accounts for the quarter, the INE confirmed its ‘flash estimate’ of 15 May, which showed precisely these increases. That followed a 0.7 per cent quarter-on-quarter increase in the fourth quarter of 2016, when year-on-year GDP growth was 2.0 per cent. The year-on-year figure represents the strongest growth in almost a decade: it was back in the fourth quarter of 2007 that the economy last swelled by 2.8 per cent on the year. According to the INE, the growth was driven above all by strong exports, while domestic demand was slightly weaker than in the previous quarter. Within this, consumption growth slowed while capital spending accelerated. The flash estimate had beaten the forecasts of most analysts surveyed by Lusa, who were expecting figures of between 0.7 per cent and 0.9 per cent for quarterly growth and between 2.4 per cent and 2.7 per cent for year-on-year growth. Lusa
Chinese online tutoring company Yuanfudao said yesterday it raised US$120 million from private equity firm Warburg Pincus and Tencent Holdings, putting it among a raft of unicorns valued at more than US$1 billion in the world’s second largest economy. Warburg Pincus led the funding round, which also had Tencent, China’s biggest social network and a previous backer of Yuanfudao, among investors, Yuanfudao said in a statement. It did not say how much of a stake Warburg Pincus and Tencent got for the cash infusion. The Beijing-based company offers live tutoring to over 160 million students that use its mobile apps, with about 1 million of them paying users, Yuanfudao added. Previous backers of Yuanfudao also include venture capital firms IDG Capital and Matrix Partners China. A US$1 billion valuation for technology startups used to be so rare, venture capital investors used the term unicorn to describe them. The number of unicorns has soared in recent years as institutional investors poured billions of dollars looking for the next Alibaba Group Holding or Facebook Inc. Reuters
The dollar is set to strengthen about 10 per cent against the yen and euro as the Federal Reserve raises interest rates at least two more times this year, according to Goldman Sachs Asset Management. Treasury 10-year yields will climb by about 50 basis points in the “medium term” as a healthy U.S. economy convinces policy makers to keep pushing rates higher, said Philip Moffitt, Asia-Pacific head of fixed income at the money manager, which oversees more than US$1 trillion. “The U.S. is still in very good shape,” Sydney-based Moffitt said in a telephone interview last week. “Our strategy is to have smaller positions based on our long-term view and try to hold on to them and then add when we think we get an opportunity.” The dollar has been a barometer of faith in President Donald Trump’s ability to bolster the U.S. economy. The currency surged following his election victory in November on his pledges to cut taxes and spend more on infrastructure, before erasing almost all those gains as political turmoil in Washington clouded his agenda. The U.S. currency has dropped 5.1 per cent against the yen this year and 5.9 per cent versus the euro. Bloomberg News