Legislators seek protection from ‘smear’ campaigns Election Page 2
Wednesday, March 1 2017 Year V Nr. 1244 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Manpower
Non-resident worker number dropped last month Page 4
Tourism
www.macaubusinessdaily.com
Yuan
Outbound residents increased as package tour visitors dropped
Chinese authorities target money supply growth for 2017 at 12 per cent Page 8
Page 5
ADB
Infrastructure need in Asia to reach US$26 trillion by 2030 Page 12
Galaxy, SJM post mixed results
Gaming
Gaming corporations Galaxy Entertainment Group and SJM Holdings Ltd. both released their 2016 annual results yesterday. Galaxy’s net profit increased by half y-o-y. With mass gaming revenue climbing 19 pct. SJM gaming revenues, however, fall in all segments. Recording a 5.6 pct y-o-y drop in profit. Pages 2 & 3
Reversing course
Luxury imports rebound
Total trade value of the MSAR dropped 2.6 pct y-o-y last month. But imports of gold jewellery surged 33.4 pct. Watches, handbags and wallets also saw notable growth. Despite total imports falling 2.9 pct y-o-y.
Demography China’s vice-minister of National Health and Family Planning said authorities were considering financing couples. If they want to have a second child. A shrinking labour force has resulted from years of reining in the birth rate. Page 10
Walking not running
Trade Page 6
HK Hang Seng Index February 28, 2017
23,775.78 -149.27 (-0.62%) Worst Performers
CLP Holdings Ltd
+1.34%
Hang Seng Bank Ltd
+0.00%
AAC Technologies Holdings
-2.55%
Tencent Holdings Ltd
-1.33%
Sands China Ltd
+0.94%
Cathay Pacific Airways Ltd
+0.00%
PetroChina Co Ltd
-1.99%
Hong Kong Exchanges &
-1.18%
Sino Land Co Ltd
+0.75%
Hong Kong & China Gas Co
+0.00%
China Life Insurance Co Ltd
-1.87%
Li & Fung Ltd
-1.14%
China Construction Bank
+0.47%
CK Hutchison Holdings Ltd
-0.05%
Swire Pacific Ltd
-1.41%
Belle International Holdings
-0.92%
China Resources Power
+0.28%
Hang Lung Properties Ltd
-0.10%
AIA Group Ltd
China Unicom Hong Kong
-0.84%
-1.40%
14° 22° 15° 20° 17° 19° 19° 20° 19° 22° Today
Source: Bloomberg
Best Performers
THU
FRI
I SSN 2226-8294
SAT
SUN
Source: AccuWeather
MICE Exhibitions held in the MSAR generated some MOP159 mln in receipts last year. Of which 41.5 pct, however, was from gov’t subsidies or from other entities. The balance of receipts was derived primarily from the rental of booths, according to DSEC. Page 6
2 Business Daily Wednesday, March 1 2017
Macau Politics
CE visiting Beijing for NPC meeting
O Lam, chief of the CE Office, Victor Chan, Director of the Government Chief Executive Fernando Chui Sai On is Information Bureau (GCS), and Fung Sio Weng, co-ordinator of the heading for Beijing on Friday to attend the opening ceremony of the 5th Session Protocol, Public Relations, and Foreign Affairs Office, will join the official trip. of the 12th National People’s Congress on March 5. Staying in the capital for four Meanwhile, Secretary for Administration and Justice Sonia Chan Hoi Fan will act days until March 6, the top official will visit the country’s Ministry of Education as the city’s deputy CE during Chui’s absence. and General Administration of Sport.
Gaming
SJM net profit falls 5.6 pct in 2016 Gaming revenue of the operator dropped 14.5 per cent as business in all segments went down
Cecilia U cecilia.u@macaubusinessdaily.com
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ocal gaming concessionaire SJM Holdings Ltd. posted a drop of 5.6 per cent yearon-year in its 2016 annual net profit, amounting to HK$2.33 billion (US$290.1 million), according to a company filing with the Hong Kong Stock Exchange yesterday. The gaming operator’s adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 11.5 per cent to approximately HK$3.4 billion. The company’s total revenue amounted to HK$41.8 billion for the year, down 14.5 per cent, as that derived from gaming dropped by 14.5 per cent year-on-year to some HK$41.3 billion. However, revenue generated from hotel, catering and other non-gaming sectors grew by 27.3 per cent year-on-year to HK$765 million. In terms of gaming segment, the corporation saw declines in all VIP, mass market and slot machine markets. The company’s VIP revenue plunged by 20.5 per cent year-onyear to HK$19.9 billion compared to HK$25.1 billion in 2015. In addition, the VIP sector saw a decrease in its chips sales of 14.9 per cent, amounting to HK$658 billion.
Mass market revenue experienced a decline of 8.2 per cent in 2016 to HK$20.3 billion, vis-à-vis HK$22.1 billion in 2015, while revenue from slot machines dipped 6.4 per cent year-on-year to HK$1.7 billion. As at the end of 2016, a total of 315 VIP gaming tables were operational with 20 VIP promoters in SJM’s properties, down by 71 tables and 1 promoter compared to 2015. Meanwhile, SJM operated a total of 1,301 mass market gaming tables and 2,132
slot machines as compared to 1,247 mass tables and 2,645 machines one year ago. Meanwhile, the company’s flagship property Grand Lisboa saw total revenue drop by 14 per cent yearon-year to HK$14.1 billion. VIP revenue from the property fell by 16.9 per cent year-on-year to HK$9.1 billion, while mass table revenue dropped 8.6 per cent year-on-year to HK$4.6 billion.
Remaining optimistic
Saying it is uncertain how long the unstable circumstances affecting the growth of gaming revenue will
persist, SJM noted in the filing that it ‘remains optimistic about its future prospects.’ The gaming operator explained its optimistic outlook is based upon ‘the potential for growth of visitation and spending’ in the city, as well as ‘infrastructure developments.’ The company added in the filing that its new casino project in Cotai – Grand Lisboa Palace – will be launched during the first half of next year. The gaming operator did not reveal the exact date of the reopening of Hotel Jai Alai, only saying the property will open in ‘later 2017.’
Elections
Legislators declare ‘smear’ campaigns off-limits They expressed the opinion that it is necessary for the Electoral Commission to establish a mechanism to avoid smear activities or false media reports about candidates
Cecilia U cecilia.u@macaubusinessdaily.com
Legislators urged the Electoral Commission of the Legislative Assembly Election to establish a mechanism to prevent smear campaigns during this year’s legislator elections. Meeting the Commission to provide opinions of the year’s electoral guidelines, directly elected legislator José Maria Pereira Coutinho perceived it was important for the Commission to provide guidelines for the local press in reporting the election in order to prevent candidates being bad-mouthed during the campaign. Indirectly elected legislator Ella Lei Cheng I also stressed the importance of the related guidelines. She pointed out many false reports and fake information was released during the course of previous elections. “But [the Electoral Commission] could not resolve the issue. Or it’s because they thought the information would not have any impact on the election,” she said. Meanwhile, directly elected legislator Melinda Chan Mei Yi questioned
how the Commission will handle online false or smear reports if the publishers are not based in Macau. Legislator Leong Veng Chai noted the unfairness that appeared in local media in which certain candidates are being reported on in the news. He said that the media in Hong Kong would report the news of all candidates. The Commission, which solely
sought to collect opinions from the incumbent legislators yesterday, did not respond to their enquiries or opinions during the session.
Hard to declare
On the other hand, several legislators expressed during the session that it would be difficult for candidates to follow the declaration system announced last week by the Electoral Commission. Mak Soi Kun said that it is hard to know about one’s relations with certain associations or groups. “Normally when we are being invited to a certain event, the invitation won’t state that you are attending the event
as an Honorary President [of the group],” he said. Candidates for this year’s Legislative Assembly election are required to declare in advance their participation in third-party events held 15 days prior to or on Election Day when such events involve the distribution of gifts or other benefits. They also need to declare their participation in these events even if the events have nothing to do with the election.
Promotion
Meanwhile, Ella Lei indicated to the Commission that they should provide clearer guidelines for candidates’ promotional activities. “Due to the advancement of online technology […] how to differentiate personal sharing or official promotion?” asked the unionist legislator. Legislator Wong Kit Cheng also pointed out that there are certain difficulties in preventing illegal promotion during the cooling-off period prior to or on Election Day, indicating that posts on social platform such as Facebook can reappear once viewers click “like” or are re-shared. In addition, legislator Song Pek Kei perceives it would be hard for current legislators who wish to be re-elected to avoid collusion between their current ads and that of their promotion campaign for the election. She opined that it would be unreasonable for these legislators to drop these ads on their current work to stay in line with the electoral regulations.
Business Daily Wednesday, March 1 2017 3
Macau
Gaming
Brighter Galaxy Galaxy Entertainment Group posted “solid” results for the past year, with annual net profit jumping by half from one year ago Nelson Moura nelson.moura@macaubusinessdaily.com
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aming operator Galaxy Entertainment Group Ltd. saw its net profit attributable to shareholders soar by 51 per cent year-on-year to HK$6.3 billion (US$784.4 million) for the whole year of 2016 while total gaming revenue went up by 2 per cent year-on-year to HK$49.5 billion. The group’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 18 per cent year-on-year to HK$10.3 billion and total revenue amounted to HK$52.8 billion, a year-on-year growth of 4 per cent. “We have delivered very credible and solid results given the challenging operating environment that we experienced for the majority of 2016,” chairman Lui Che Woo said during the group’s financial results presentation in Hong Kong yesterday. The gaming boss added that the city’s gaming market has stabilised since last year and is showing “positive developments”. In its results, the group stated its “solid results” for the year was driven by its focus ‘to drive profitable volumes and actively control costs’. The company’s gaming revenue derived from the mass market
jumped by 19 per cent year-onyear to HK$21 billion for the year as total VIP revenue declined by 8 per cent year-on-year to HK$26.5 billion. Nevertheless, deputy chairman of the group, Francis Lui Yiu Tung, perceives the city’s further regulations of increasing the transparency of junket operations would help the sector bounce back. “Less stable junkets have been removed,” he said. “And as the entire VIP system in Macau becomes more clear and more orderly; we believe VIP will get back on track.” The non-gaming revenue of the group also recorded a year-on-year increase of 18 per cent year-on-year to HK$3.2 billion.
Mass leading the way
According to the company’s results, its flagship property Galaxy Macau ‘experienced good luck in its gaming operations’ during the year, with property revenue increasing 7 per cent year-on-year to HK$38 billion, accounting for nearly 72 per cent of the group’s total revenue. In particular, mass gaming revenue at the property registered a year-onyear increase of 20 per cent to HK$13.9 billion whilst VIP revenue only recorded a slight decrease of 2 per cent year-on-year to HK$20 billion.
Chairman of Galaxy Entertainment Group, Lui Che Woo
Lui: “Well positioned” for Japan casino
During yesterday’s presentation, Mr. Lui Che Woo expressed the group’s interest in expanding its footprint to Japan for the first time, saying Galaxy is “well positioned to penetrate [Japan’s] gaming market” given its longstanding relationship with Japanese partners such as Hotel Okura. “The gaming industry in Japan is being legalised so all eyes are on the Japanese market;
however, the country’s service and entertainment industry is very well refined so we will take the route of partnership with local players to make room for development,” said Mr. Lui. Following Japan legalising gaming operations last December the city’s major gaming operators or their parent companies have all expressed interest in grabbing a slice of the cake in the Japanese market, with the exception of SJM Holdings Ltd.
The mass-only Broadway Macau also saw gaming revenue from mass market tables surge 58 per cent yearon-year to HK$449 million while that from electronic machines jumped by half year-on-year to HK$30 million, driving total property revenue up by 59 per cent year-on-year to HK$676 million. However, StarWorld Macau on the Peninsula registered a decline in total revenue of 9 per cent yearon-year to HK$11.8 billion as its VIP gaming revenue fell by 22 per cent to HK$6.6 billion, despite that derived from the mass tables growing by 18 per cent to HK$4.9 billion.
Phase 3 & 4 works soon
Saying it is confident in the medium to longer-term outlook of the MSAR, the company said in the results that it will ‘potentially’ kick off the construction
of Galaxy Phase III and Phase IV within this quarter or early next quarter. According to Francis Lui, the construction of Phase III is currently pending the green light from the Macau Government while Phase IV is still under planning. But the deputy chairman believes the two projects – with total investment costing from HK$40 billion to HK$50 billion - are not likely to see “any more future delays”. Questioned about the company’s projection for the year’s gaming revenue, the company executive indicated business performance “was not as good as expected” in January but he is confident that the mass segment “will continue to grow faster” and possibly reach “a double digit growth”. The group also said in the results that the company was encouraged by the last five months of 2016 where the city started to see recovery in gaming revenue growth. ‘We hope that this will develop into a definitive trend over the course of 2017 and beyond,’ the company wrote.
4 Business Daily Wednesday, March 1 2017
Macau Opinion
José I. Duarte* Sinking again There is renewed talk about the future of the old Lai Chi Vun shipyards in Coloane. They are one of the remaining symbols of a bygone era. Then, Macau had a place in the business of building junks. As the orders dwindled, the activity came to a halt at the beginning of the century, when the last operating shipyard ceased activity. Since then, the place has been mostly abandoned, leaving aside the occasional visitor in search of a picture in a very unusual and evocative photographic setting. Inevitably, as the economic activities stopped, the premises started deteriorating. And, as the business was unlikely ever to recover, the need to consider their preservation and future use soon became evident. They represent a unique and irreplaceable element of the history of this city. The assumption should always be on the side of preservation. Firstly, as a testimony to the unique nature and history of this place; secondly, as a tool for both the education of younger generations and the promotion of culturally oriented tourism (the diversification thing). It is, therefore, reassuring to read a posting on this topic by the government’s own press office. The public authorities recognise the unique value of the shipyards, as one of the ‘rare places where it is still possible to visualize the old art of construction of big junks,’ providing ‘a rare comprehensive illustration [of the activity] in the Pearl River Delta region.’ Further, the authorities are looking for ways to ‘revitalize the legacy left by the industry,’ namely ‘preserving the premises,’ the ‘general environmental setting and characteristics’ of the old industrial area, and the ‘local customs and atmosphere,’ with a view also to ‘promote cultural tourism.’ Immediate measures to protect the area – namely, the ‘traditional urban structure’ and the shipyards - should be carried out while the services set up broader ‘implementation plans.’ Oops! Sorry, dear readers, sorry! That was December 2012! Fast forward, to February 2017. The premises are in terrible condition! In spite of repeated requests by the authorities, the holders of the shipyard licences ‘failed to abide by their maintenance responsibilities.’ The government will start the demolition of the shipyards shortly in order to ‘guarantee the safety of citizens and tourists.’ What to say? Another heritage offence is in the making. Is it just negligence? Callousness? Something else? Will someone take responsibility for it? Is there a bit of shame being felt somewhere, by somebody? So many questions! *economist and permanent contributor to this newspaper.
Manpower
Fewer non-resident workers in January In particular, those working in the construction industry and those from Hong Kong both registered significant decreases from one year ago Kam Leong kamleong@macaubusinessdaily.com
S
ome 177,662 non-resident workers were toiling in the MSAR as at the end of January, a decline of 2.1 per cent year-on-year, with those in the construction industry declining sharply, according to official data released by the Labour Affairs Bureau. As at the end of the month, the construction industry supported 33,810 non-residents, plunging 20.9 per cent
year-on-year compared to 42,755 one year ago. The number of foreign workers in the industry accounted for about 19 per cent of the city’s non-resident employment, following the sector of hotels and restaurants, which employed 50,238 non-resident workers as at the end of the period, a yearon-year growth of 4 per cent. However, those working in culture, entertainment, gaming and other activities decreased 2.5 per cent year-on-year to 13,497 from 13,848
one year ago. According to DSAL, the sector includes 957 construction workers directly recruited by the city’s gaming corporations. Workers in the wholesale and retail trade business amounted to 19,908 in the month, up 1.8 per cent yearon-year, while those in real estate or other industrial and commercial services amounted to 19,024, a growth of 7.5 per cent year-on-year. The number of non-resident domestic helpers rose by 6.2 per cent year-on-year to 25,483 vis-a-vis 24,005 during the same month of last year.
Origins
In terms of origin, the majority of the city’s non-resident workers came from Mainland China, some 112,884, accounting for 63.5 per cent of the total. The majority of Mainland Chinese labourers were engaged in hotels and restaurants, and the construction sector. Meanwhile, some 5,828 workers from Hong Kong were employed in the territory as at the end of the month, slumping 34 per cent from 8,821 one year ago. Nearly 40 per cent of these workers worked in the local construction industry, followed by those working in hotels & restaurants plus culture, entertainment, gaming and activities. Workers from the Philippines and Vietnam occupied 26,932 and14,920 of the total, with those engaged in domestic work accounting for 48 per cent and 53.9 per cent of this sector, respectively.
Junkets
Neptune returns to profit The group saw HK$39.8 million in interim profit, as compared to a HK$250.5 million loss Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
Local junket operator Neptune Group Limited saw a complete turnaround in its profit results for the final six months of last year when compared to the previous year, according to the company’s filing with the Hong Kong Stock Exchange. Going from a loss of HK250.5 million (US$31.3 million) in the last half of 2015, the group turned around to a HK$39.8 million profit in the final months of 2016 despite not seeing a large increase in revenue – which ticked up from HK$132.95 million to HK$135.93 million. The underlying profit to shareholders was HK$25.9 million for the period. In addition, the group’s general and administrative expenses posted an increase of 53.9 per cent yearon-year for the period to HK$4.36 million during the second half of ‘yet another year of difficult economic conditions,’ according to the filing. However, commenting upon the uptick, the group noted that ‘signs of improving customer patronage and gaming turnovers have been witnessed this year,’ adding that ‘whilst the overall market sentiment remained conservative, the recovery signs have been at least a welcome one after past years of double digit downturn since mid-2014.’
Optimism
Overall, regarding the market, the junket group notes it is ‘optimistic […] since the industry has shown
the first sight of a positive growth,’ and the company saw rolling chip turnover revenue ‘just under’ HK$136 million for the six-month period, a HK$3 million increase from the same period in 2015. ‘While General and Administrative expenses have marginally increased, extra efforts and focus in 2016 have been placed by management to collect trade receivables that have been long overdue from some of our business partners,’ notes the group, calling the result of its efforts ‘a positive one.’ The group focused on collecting debts ‘over 365 days’ old, amounting to an outstanding amount for the
group of HK$654 million in 2015, which they managed to nearly halve to HK$363 million for 2016, bringing ‘much needed cash flow to our balance sheet.’ ‘Our group’s cash flow has accordingly recorded significant increment after successful collection of the receivables,’ notes the filing. ‘With the additional cash on hand, our group will keep developing the new money lending business and continue exploring new investment opportunities,’ notes the filing. The group reported that its cash and cash equivalents as at end-2016 amounted to HK$664.7 million, a 347.6 per cent increase from the HK$148.5 the group had on hand at end-2015. It further stated its intent to continue actively collecting debts, noting that ‘the hard efforts will not be let off and we will continue to manage the trade receivables effectively and ensure repayment schedule has been met.’
Business Daily Wednesday, March 1 2017 5
Macau Tourism
You can come, but we’re leaving Tourism to and from Korea continues to boom, while inbound Mainland tourism falters Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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hile package tour numbers decreased in January of this year, compared to 2016, local residents choosing to go abroad increased by 14.8 per cent year-on-year; in particular, those on package tours increased 25.6 per cent year-on-year, according to the most recent data by the Statistics and Census Service (DSEC). With 117,000 local residents travelling abroad, nearly all of the locations indicated in the data show double digit increases in outbound local residents year-on-year during the month. Waving the flag was the Republic of Korea, which garnered a 125.5 per cent year-on-year increase in outbound tourists, at 10,700 residents. This was seen in both package tours and individual arrangements, which saw a 120.2 per cent and a 144.2 per cent increase year-on-year, hitting 2,600 residents and 8,100 residents, respectively. Within Asia, the next highest increase was seen in travellers to Singapore, which increased 116.3 per cent to 9,000 residents, slightly ahead of the 113.1 per cent increase seen in package tourism to Thailand, yearon-year, hitting 3,800. However, tourism to Singapore was
driven by a 165.6 per cent increase in individual arrangements, with a slight 15.1 per cent increase in package tours. European countries, excluding the UK, also saw a 118.2 per cent yearon-year increase for January, yearon-year, driven by a 368.7 per cent increase in residents on package tours to the region. Tourism to the United States during the first month of American President Donald Trump in office saw just a 0.2 per cent increase year-on-year. The two countries that saw double digit decreases in outbound resident tourism were Hong Kong and Malaysia. The neighbouring SAR posted a 38.1 per cent drop, with double digit decreases in both individual
arrangement travellers and package tours – 38.6 per cent and 32.9 per cent. Malaysia saw an uptick in package tour tourism, at 78.2 per cent, with a 38.9 per cent drop in individual arrangements contributing to the 24.9 per cent overall drop in tourism to the country in January.
Inbound tourism
Inbound travellers on package tours including the MSAR saw an 8.7 per cent drop year-on-year during the month, hitting 491,300, while those only visiting Macau on tours reached 415,500. Travellers from Mainland China saw a 9 per cent drop to the MSAR during the first month of the year, reaching 402,200, about 75 per cent of the total 532,400. Those from
Guangdong Province saw an 11 per cent year-on-year decrease in number, to 145,100 travellers. Travellers from the neighbouring SAR saw a 22.5 per cent drop in arrivals during the month, while Indonesia, Japan and Singapore all underwent declines of over 20 per cent, year-on-year. The average length of stay of visitors during the month was unchanged from the same month last year, at 1.4 nights, while the average occupancy rate of hotels and guesthouses increased by 4.4 percentage points year-on-year. The majority of these guests, at 65.2 per cent, were from the Mainland, with the second biggest group from Hong Kong, at 12.2 per cent, followed by Taiwan, at 3.9 per cent of the total.
6 Business Daily Wednesday, March 1 2017
Macau
Imports of gold jewellery soar by 33.4 per cent year-on-year last month
Imports and exports
Sliding trade Although the city’s imports of luxury products, namely, gold jewellery, watches, handbags and wallets all recorded increases Kam Leong kamleong@macaubusinessdaily.com
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acau’s total merchandise trade value fell by 2.6 per cent year-onyear to MOP7.53 billion (US$941.3 million) for the month of January as local exports and imports both registered decreases. According to the official data of
the Statistics and Census Service (DSEC), total imports of the MSAR dropped by 2.9 per cent year-on-year in the month, amounting to some MOP6.56 billion, while total exports also recorded a slight decrease of 0.4 per cent year-on-year to MOP971.1 million despite a notable 19.7 per cent increase apparent in domestic exports of MOP169.4 million. In terms of imports, the city saw those of gold jewellery rebound
MICE
Nearly half of exhibition receipts subsidised Financial supports contributed 41.5 per cent of the total receipts of exhibitors holding events in the territory last year, yesterday’s official data of the Statistics and Census Service (DSEC) reveals. During the whole year of 2016, a total of 55 exhibitions took place in the MSAR, a decrease of 23 yearon-year. According to the organisers of 54 exhibitions, their total receipts amounted to MOP159 million (US$19.9 million) for the whole year, of which some MOP66 million comprised financial aid from the MSAR Government or other organisations. Meanwhile, receipts from the rental of exhibition booths amounted to MOP88 million, accounting for 55.4 per cent of the total. These 54 exhibitions together attracted 4,787 exhibitors, of which 36.7 per cent were local while 25.8 per cent hailed from the Mainland. According to 1,400 interviewed exhibitors, some 97.5 per cent of their
receipts were generated by the sale of products, while rental paid for their exhibition booth accounted for 56.2 per cent of their expenditure. The 55 exhibitions in the year attracted 1.5 million attendees and occupied a total floor area of 309,000 square metres, down 37.3 per cent and 21.8 per cent year-on-year, respectively, according to DSEC. Meanwhile, professional visitors to the events totalled 99,000, of whom more than half were locals while some 21 per cent were from Mainland China. In the year, the city also hosted 1,195 meetings & conferences plus 26 incentive events. The year’s meetings & conferences attracted the participation of some 176,000 individuals, an increase of nearly half from one year ago, while incentive events attracted 45,000 participants. The overall average duration of meetings & conferences was 1.5 days, down 0.1 days year-on-year. K.L.
33.4 per cent year-on-year to some MOP720.7 million for the month, while watches surged by 27.2 per cent year-on-year to MOP457.3 million. In addition, the importation of handbags & wallets increased by 19.3 per cent year-on-year to MOP272.2 million. However, imports of construction materials to the MSAR plunged 39.6 per cent year-on-year to MOP126.6 million. Local imports of mobile phones fell 4.3 per cent year-on-year to some MOP662.8 million. By place of origin, MOP2.33 billion of the city’s imports were from the Mainland, which represents a yearon-year decrease of 13 per cent. In particular, local imports from the nine provinces of the Pan Pearl River Delta fell 7.9 per cent year-on-year to some MOP822 million. Nevertheless, local imports from the Portuguese-speaking countries soared 22.8 per cent year-on-year to some MOP62 million during the month, while those from the European Union ticked up 6.4 per cent year-on-year to MOP1.68 billion. On the other hand, the city’s exports of diamond & diamond jewellery
surged 74.6 per cent year-on-year to MOP145.9 million, in addition to a 17.5 per cent increase in tobacco & wines, at MOP60.4 million. Exports of watches, however, decreased by 18 per cent year-on-year to MOP96.4 million while electronic components also fell by 6.1 per cent year-on-year to MOP80.2 million. Total exports of textiles and garments, meanwhile, plunged 39.3 per cent year-on-year to MOP43.9 million during the month. According to DSEC, over half, some 66.2 per cent, of the city’s exports went to Hong Kong, up 1.4 per cent year-on-year to MOP643 million. In addition, those to the U.S. and the European Union grew 110.2 per cent and 21.6 per cent year-on-year, amounting to some MOP22 million and MOP21 million, respectively. However, the city’s exports to Mainland China dropped by 19.8 per cent year-on-year to MOP111 million, of which those to the nine provinces of the Pan Pearl River Delta posted a more significant drop of 24.1 per cent, accounting for some MOP100 million.
Telecommunications
Mobile subscribers exceed 1.94 mln The city’s mobile service subscribers reached over 1.94 million as at end-January, with nearly half 3G service subscribers, according to the latest telecommunications service statistics released by the Macao Post and Telecommunications Bureau. For the month, a total of 999,761 users were using 3G services in the city, of which post-paid subscribers amounted to 314,245 while those using 3G prepaid services totalled 685,516. Some 944,204 users were using LTD services, of which 380,150 were post-paid subscribers and 564,054 were prepaid users. Subscribers to Internet services
totalled 179,097 in the month. Of the total, 111,695 were fibre broadband subscribers, while the other 67,274 were subscribers to ADSL broadband. In terms of fixed line services, some 133,284 fixed lines were registered as at the end of the month, of which 79,475 were residential lines and 53,089 were commercial lines. A total of 4.9 million local mobile messages (SMS) were sent during the month, according to the data. In addition, there were 2,660 commercial WiFi hotspots, while the number of government-backed WiFi Go service provided a total of 201 access points as at the end of the month. S.Z.
Business Daily Wednesday, March 1 2017 7
Gaming
Competition
Overseas casinos to eye Vietnam more closely than ever The country’s plan to allow Vietnamese to gamble in the territory’s own casinos will take effect this month Nguyen Dieu Tu Uyen and Luu Van Dat
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ietnam’s revolutionary founder Ho Chi Minh relied on lottery ticket sales to raise money for schools and hospitals during the war years. Now Hanoi’s Communist leaders are looking to casinos, horse betting and modern lottery-ticket machines to do the same. So far this year, Prime Minister Nguyen Xuan Phuc has issued two decrees aimed at upping Vietnam’s game in the regional competition for gambling revenue while reducing the country’s growing budget deficit. A pilot plan to take effect in March will allow Vietnamese to gamble in the country’s casinos for the first time—currently only foreigners can. Another will allow bets nationwide on horse and dog races, as well as international soccer matches. This follows what officials call an “American-style” lottery started last year by the finance ministry in partnership with Malaysia’s Berjaya Corp. “They need tax revenues,” said Alexandre Legendre, a Hanoi-based partner at Leadco Legal Counsel, which has advised foreign investors on the country’s gambling opportunities. “The fiscal situation of the country is under pressure.” Vietnamese going abroad to such gambling locales as Macau, Singapore—and just across the border in Cambodia—spend an estimated US$800 million on gambling every year, according to Augustine Ha Ton
Vinh, an adviser to the Van Don Special Economic Zone where a casino funded by local investor Sun Group is planned about 175 kilometers northeast of Hanoi.
Bring the money home
Now the government will aim to keep that money at home. New legal outlets for gambling would be greeted enthusiastically by Vietnamese, who spent about US$13 billion on lottery tickets from 2011 through 2015, with revenue growing an average of 12 per cent annually, according to the finance ministry. The Southern Lottery Council, which comprises lottery companies in 21 provinces, pulled in almost US$3 billion last year—up more than 200 per cent from 2007, according to the organization. Gaming industry investments will also boost the economy. An additional foreign investment of US$3 billion into Vietnam’s casino businesses could increase gross domestic product by 0.58 per cent in the first year, according the Institute for Regional Sustainable Development in Hanoi. The new computerized Berjaya joint venture, Vietlott, supplements and even competes with Vietnam’s provincially operated lotteries. The local, five-decades-old operations provide a form of social welfare for elderly, poor and disabled ticket sellers who wander in and out of street cafes selling paper tickets. Vietlott reported revenue of more than US$70 million last year after rolling out operations in about 20 per cent of the country’s provinces starting last July. Nguyen Van Thanh, who at age 55 left his comfortable administrative job at a state-owned insurance company, stands all day selling Vietlott tickets for 10,000 dong, or about 45 U.S. cents, in the garage of a Soviet-style apartment complex across the street from the State Bank of
Vietnam in Hanoi. He sells as much as US$1,300 in lottery tickets a day. “Vietnamese people like to gamble,” he said. “We like being lucky.” For years, the government has been ambivalent about gambling. Allowing Vietnamese to enter casinos built for foreigners is an experiment that will last for three years while the program is assessed. Ho Chi Minh personally approved of the first lottery in late 1961 to raise money for the construction of schools and hospitals in Hanoi, according to Duong Trung Quoc, a parliamentarian and secretary general of the Vietnam Association of Historical Sciences. While lottery revenue has funded education and social welfare for decades, the government nonetheless fears unrest from what officials call “social evils” associated with gambling, such as prostitution, drunkenness, and heavy indebtedness. Until the latest decrees, Vietnamese have only been allowed to legally play state-run lotteries and place bets at a highly regulated dog-racing operation in the southern province of Ba Ria-Vung Tau.
Casinos for locals
The first casinos open to locals most likely will be far from urban areas, said Ben Lee, managing partner at Asian gaming consultancy IGamiX. An earlier decree written by politburo members—and later revised by the prime minister to exclude specific projects—awarded the first licenses to Vingroup JSC to build on the southern island of Phu Quoc and Sun Group’s Van Don in the north. After the new decree, the politburo will still decide which of the country’s eight casinos and proposed new projects get licenses. “Local gaming near an urban center encourages what they are trying to avoid—problem gambling among the people who can least afford it,” Lee said.
Guidelines requiring Vietnamese to be age 21 and prove a stable monthly income are aimed at people like Ho Chi Minh City electrician Vu Anh Tuan, 35, whose monthly earnings of US$263 can’t pay off his US$13,000 gambling debt. Tuan, who has a twoyear-old daughter, sold his motorbike and said he’s pressuring his mother to sell their house. He has friends whose debts are higher and one who is now homeless. “My wife and I argue all the time over the debt from football betting,” Tuan said. Vietnam’s economy grew slower than the government expected last year, and its budget deficit is widening due to declining revenue from state-owned oil companies and an agricultural sector hit by drought. The country’s 2016 debt is estimated at 64 per cent of gross domestic product compared with 41 per cent in Thailand and 56 per cent in Malaysia, according to the World Bank. Vietnam is following the lead of other Asian governments that are endorsing legal gambling in a region that embraces games of chance. Japan’s parliament passed a bill legalizing casinos in December, while Universal Entertainment Corp. is preparing to open a US$2.4 billion casino in Manila. “Vietnamese people like to gamble. We like being lucky.” Overseas gaming companies have long eyed Vietnam for expansion. Las Vegas Sands Corp. has for years considered a resort in Ho Chi Minh City and Hanoi, George Tanasijevich, the company’s managing director for global development, said in a statement. The company is “eager to proceed” with a project depending on future casino regulations, he said, adding that the three-year pilot program presents uncertainty and risks. Hong Kong’s Chow Tai Fook Enterprises Ltd. and VinaCapital Investment Management Ltd. are investing in a US$4 billion project in the prime minister’s home province of Quang Nam along the central coast. In January, former hedge-fund manager Phil Falcone, the largest investor in the Grand Ho Tram Strip casino resort a two-hour drive from Ho Chi Minh City, met with the prime minister in Hanoi. Longstanding provincial lottery sellers fear all this new competition— and for good reason. Confined to a wheelchair, Nguyen Thi Tien, 70, sets up a wooden table every afternoon to sell lottery tickets on a sun-washed street clogged with motorbikes and lined with clothing shops, restaurants and other lottery sellers in Ho Chi Minh City’s Chinatown. Since Vietlott began operating last summer, she has experienced a 50 per cent drop in ticket sales, reducing her daily income to less than US$3 a day. “In the future, there will be other kinds of gambling, and I am afraid that there will be fewer people buying traditional tickets, which are essential to people like me,” said Tien, an umbrella at her side and a jar of iced lemon juice on the table. Bloomberg
8 Business Daily Wednesday, March 1 2017
Greater china Monetary tools
Authorities eye 12 pct broad money supply rise in 2017 Last year’s M2 target reflected Beijing’s focus on meeting its economic growth targets Kevin Yao
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hina plans to target broad money supply growth of around 12 per cent in 2017, slightly lower than last year’s goal, policy sources said, signalling a bid to contain debt risks while keeping growth on track. Under its new “prudent and neutral” policy, the People’s Bank of China (PBOC) has adopted a modest tightening bias in a bid to cool torrid credit expansion, though it is treading cautiously to avoid hurting the economy.
Key Points M2 growth target to be lowered to around 12 pct in 2017 M2 rose 11.3 pct in 2016, missing 13 pct target
intervention to support the yuan currency, which effectively drained yuan liquidity from the economy. Still, the PBOC injected more cash through its open market operations, medium-term lending facility (MLF) and standing lending facility (SLF), underpinning record lending of RMB12.65 trillion (US$1.84 trillion) in 2016. Last year’s M2 target reflected Beijing’s focus on meeting its economic growth targets, but top leaders have pledged this year to shift the emphasis to addressing financial risks and asset bubbles. Reuters has reported that China will lower its 2017 economic growth target to around 6.5 per cent from last year’s 6.5-7 per cent. The economy expanded 6.7 per cent in 2016. Last week, state media cited a party statement issued after a meeting of the Politburo that China must
maintain stable economic development and social harmony ahead of the 19th Communist Party Congress in the autumn. Key economic targets will be announced at the opening of the annual parliament meeting on March 5.
Tightening bias
There have already been some substantive indicators of tighter monetary policy this year. The central bank raised interest rates on its reverse repurchase agreements (repos) and the SLF on Feb. 3, following a rise in rates on the MLF in late January. “The central bank could raise such policy rates further. But we cannot see any possibility of raising benchmark interest rates in the near term,” said one of the sources. New yuan loans hit 2.03 trillion yuan in January, the second highest on record, due to a rush among lenders to maintain market share, while M2 rose an annual 11.3 per cent in January.
The central bank said in a working paper published on Feb. 15 that the debt deleveraging process should be managed prudently to help avoid a liquidity crisis and asset bubbles. China’s debt-to-GDP ratio rose to 277 per cent at the end of 2016 from 254 per cent the previous year, with an increasing share of new credit being used to pay debt servicing costs, UBS analysts said in a recent note. “A decline in driving force from capital investment on economic growth is behind the rapid rise in leverage,” Ruan Jianhong, head of the Survey and Statistics Department at the central bank, said in remarks published on Friday. In 2011, capital investment of 1 yuan could yield an increase of 0.32 yuan in GDP, but that has fallen to 0.16 yuan in 2015, Ruan told the official Financial News in an interview. “We need to maintain appropriate economic growth. If growth slows sharply, various risks may be exposed,” said one of the sources. Reuters
C.bank seen keeping policy neutral with tightening bias C.bank could push up funding costs for banks -policy sources The M2 growth target was endorsed by leaders at the closed-door Central Economic Work Conference in December, according to sources with knowledge of the meeting outcome. “It’s not necessary to maintain last year’s high money supply growth,” said a source who advises the government. “A money supply rise of 11 per cent should be enough for supporting growth, but we probably need to have some extra space, considering risks in the process of deleveraging.” China’s State Council Information Office, the government’s public relations arm, has yet to respond to a request for comment. In 2016 the money supply target was around 13 per cent, though it ultimately grew just 11.3 per cent due to the effects of the central bank’s
Investors
Domestic funds trim suggested equity exposure They have however cut allocation to consumer and technology stocks, as investors turned to blue-chips Chinese fund managers have trimmed suggested equity exposure for the next three months after a steady runup in stocks in recent months, but recommended accumulating financial stocks and cyclical sectors such as metals and machinery benefiting from a building boom, a monthly Reuters poll showed. The fund managers cut their suggested equity allocations to 81.9 per cent, according to a poll of eight China-based fund managers conducted this week, down from 82.1 per cent a month earlier, which was the highest in 19 months. The fund managers have meanwhile raised their suggested bond allocations for the coming three months to 6.3 per cent from 5 per cent a month ago, betting on a rebound after sharp falls in bond prices recently, as the central bank is expected to keep liquidity relatively stable. They have reduced recommended cash allocations to 11.9 per cent, from 12.9 per cent in the previous month.
“The market will remain range bound, as most participants are uncertain about future trends,” a Shanghai-based fund manager said. “For the short run, the market will continue to benefit from economic recovery, and is expected
to remain range bound for some time as it approaches previous highs,” another Shanghai-based fund manger said. The fund managers recommended higher allocation to financial stocks with lower valuations, and cyclical sectors such as metals and machinery, which benefited from fast growth in producer price inflation. They have however cut allocation to consumer and technology stocks, as investors turned to blue-chips.
Compared with last month, average allocation to machinery stocks has been raised to 8.1 per cent from 5.0 per cent, allocations to metals have been increased to 6.3 per cent from 2.9 per cent, while allocations for electronics and technology have been cut to 16.9 per cent from 21.4 per cent.
‘Average allocation to machinery stocks has been raised to 8.1 per cent from 5.0 per cent’ “The upward trend for cyclical stocks will continue for a while and we are optimistic about bank and construction stocks that are related to the ‘One Belt, One-Road’ Initiative,” a Shanghai-based fund manger said. China’s producer price inflation (PPI) picked up more than expected in January to near six-year highs and consumer inflation (CPI) also rose more than expected, nearing a three-year high as fuel and food prices jumped. Reuters
Business Daily Wednesday, March 1 2017 9
Greater China In Brief Foreign-invested firms
Central bank reassures on profit repatriation
Challenges/Risks
Government says economy faces global uncertainties, overcapacity at home Vice head of the National Bureau of Statistics said maintaining mild inflation will be favourable for China’s economy China’s economy faces risks from international uncertainties and excess factory capacity this year, the statistics bureau said yesterday. The world’s second-largest economy grew 6.7 per cent last year, easing from the pace in 2015 but roughly in the middle of the government’s target range of 6.5-7 per cent. Yet, even as China’s exports are finally showing signs of recovering after a multi-year slump, the outlook for global demand is being clouded by a feared rise in U.S. trade protectionism. “The international situation is still complex and volatile, there are still many uncertainties and there are contradictions between domestic overcapacity and structural upgrading,” Li Xiaochao, vice head of the
National Bureau of Statistics, said a statement posted on the agency’s website. Li pointed to problems of deep adjustments of the world economy, weak global trade and the trend of deglobalisation. China far exceeded its targets to reduce bloated industrial overcapacity last year by forcing the closure of many inefficient steel plants and coal mines. It has earmarked further reductions for 2017, though market watchers say much of the outdated operations are being replaced with leaner and cleaner ones, doing little to reduce overcapacity and the threat of oversupply. Li also said maintaining mild inflation will be favourable for China’s
economy, as price pressures start to build again globally after years of weakness. Consumer inflation accelerated to 2.5 per cent in January from a year earlier, the highest for a month since May 2014, while producer price inflation accelerated to 6.9 per cent -- the fastest since August 2011 -- as a construction boom fuelled demand for materials from steel to cement. About 57 per cent of the 1.38 billion mainland Chinese lived in towns and cities at the end of 2016, the statistics bureau said in a report on China’s economy and social development yesterday. The urbanization rate rose 1.25 percentage points from a year earlier, it said. The government hopes 60 per cent of China’s population will be urban residents by 2020. China’s working-age population was at 907.5 million at the end of 2016, down 3.5 million from a year earlier, it said. Reuters
Regulator
Foreign-Exchange market opened to overseas bond investors China is giving overseas investors access to its foreign-exchange derivatives market to allow hedging of bond positions, in the latest bid to attract inflows Foreign institutions that invest in the interbank bond market can trade products including forwards, swaps, cross-currency swaps and options with domestic settlement agents, the State Administration of Foreign Exchange said in a statement posted on its website Monday. Access is limited to the hedging needs of private-sector investors’ onshore bond positions, the regulator said. The People’s Bank of China opened the interbank bond market to foreign institutional investors last year to attract long-term inflows amid a weakening currency and a flight of capital. Ma Jun, chief economist at the research bureau of the People’s
Bank of China, said last week that regulators were taking steps to further open the bond market to boost the chance of inclusion in global bond indexes. Monday’s announcement is a “significant” development in market liberalization, Goldman Sachs Group Inc. said in a research note. “The opening up is bolder than most had been expecting, as there is no specific restrictions on the notional amount of FX exposure,” said Becky Liu, Hong Kong-based head of China macro strategy at Standard Chartered Plc. “We expect this move to invite strong capital inflows into China’s onshore bond market, and it could lead to a narrowing of China’s capital
outflows in the months ahead.” The measure addressed one of the main concerns that investors had around China’s bond market, given the volatile offshore yuan market, analysts led by Danny Suwanapruti at Goldman Sachs wrote in a note published yesterday. Several more steps need to be taken, such as market access, liquidity, reporting rules, settlement dates and clarification on the taxation of non-residents, they said.
“The opening up is bolder than most had been expecting, as there is no specific restrictions on the notional amount of FX exposure” Becky Liu, Hong Kong-based head of China macro strategy at Standard Chartered
Overseas investors held RMB852.6 billion (US$124 billion) of onshore bonds at the end of last year, or 1.5 per cent of the RMB56.3 trillion market, which is the world’s third largest. Foreign inflows are likely to accelerate this year to RMB980 billion-1 trillion, according to Standard Chartered. Bloomberg News
Repatriation of profits by foreign-invested companies can be handled normally, China’s central bank said yesterday. China has achieved convertibility under the current account and real and legal international payments and transfers are not restricted, including those of dividend and goods and services trade, said the People’s Bank of China (headquarters pictured) in a statement. The statement said the procedures can be handled directly by commercial banks with real and effective transaction documents. If foreign-invested companies have any problems repatriating profits, they can report them to the central bank or the country’s foreign exchange regulator.
Rights cancelled
LeSports said to default on soccer TV contract Chinese sports media company LeSports has been stripped of its rights to broadcast Asian Football Confederation soccer games after defaulting on payments, according to people familiar with the matter. The company, a subsidiary of billionaire Jia Yueting’s smartphoneto-taxi service business LeEco, missed a payment in January and another deadline to pay a portion of its US$100 million contract by last week, said the people, who asked not to be identified because the matter is subject to a lawsuit. LeSports’ Hong Kong office declined to comment, as did a China-based spokesman for LeEco. Brokerage
CLSA shuts U.S. equity research The brokerage owned by China’s Citic Securities Co., shut down its U.S. equity-research operations Monday, laying off more than half of workers based in the country. Hong Kongbased CLSA dismissed 90 U.S.-based employees on Monday, most of whom worked in research, including research sales support staff, as well as a few traders, according to spokeswoman Simone Wheeler. The terminations include analysts Mike Mayo, a managing director who covered banks, and Avi Silver and Ed Maguire, both of whom wrote about technology firms, she said. Mayo and Maguire declined to comment while Silver didn’t immediately return messages left after business hours.
10 Business Daily Wednesday, March 1 2017
Greater China Demography
Government considering financial rewards to encourage second children The working-age population has been shrinking as a result of aging and low birth rates
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hina is weighing subsidies for couples who have a second child to help increase the birth-rate after authorities scrapped a decades-old one-child policy in 2015, official media reported. The government is considering measures such as “birth rewards and subsidies” to help encourage more people to have another child, Wang Peian, vice-minister of the National Health and Family Planning Commission, said at a conference on Saturday, according to a report yesterday by the state-run China Daily. Such incentives, if adopted, would represent a fundamental shift in the Communist Party’s approach to family planning, from limiting births to encouraging them. After decades of
penalizing many couples who had more than one child, now the world’s second-largest economy, which has gained for decades from having an abundant young workforce, is facing a hangover of its one-child policy implemented in late 1970s. Allowing all couples to have two children still falls short of reversing a trend that threatens to impose a drag on economic growth. And a limited baby boom could still be dampened by the rising costs of child-rearing. Wang said that affordability has become a constraint on Chinese families’ decisions to have a second child, according to China Daily. Wang’s comments are in line with the advice from one of the nation’s top demographers. Policy makers should use public services
-- including kindergartens, schools and child care -- to lower costs and encourage cash-squeezed parents to have more children, Cai Fang, vice president of the Chinese Academy of Social Sciences in Beijing and a member of the Standing Committee of the National People’s Congress, recently told Bloomberg News in an interview. Wang said that such a “baby bonus” policy would not be easy because it should be applied evenly nationwide, China Daily reported. The population authority alone can’t handle such a plan as it requires consensus and cooperation among all authorities, Wang said. Government subsidies may not be a panacea. They had limited success in countries such as Singapore because people tend to have fewer children when they’re wealthier and more educated, according to Chen Xingdong, chief China economist at BNP
Paribas SA in Beijing. “The mind-set of the entire nation is switching from controlling births to worrying about low births,” Chen said. “But many parents would still be reluctant to have kids even if the government encourages them to.”
“But many parents would still be reluctant to have kids even if the government encourages them to” Chen Xingdong, chief China economist at BNP Paribas SA in Beijing
Births reached 17.86 million last year, a 1.3-million increase from 2015, official statistics show. The policy would lead to about 17 million additional births by 2020, and add 30 million young workers by 2050, the family planning commission said in late 2015. The larger labour supply would boost the economy’s potential growth rate by 0.5 percentage point, it said. The working-age population has been shrinking as a result of aging and low birth rates, draining the labour supply. About one in three Chinese will be older than 60 by 2050, compared with about one in seven now, posing challenges to the social welfare system. Bloomberg News
Environment
Total energy consumption rose 1.4 pct in 2016 China has introduced targets and standards to improve industrial energy efficiency in a bid to cut pollution and reduce carbon dioxide emissions China’s total energy consumption grew 1.4 per cent to 4.36 billion tonnes of standard coal in 2016, according to preliminary calculations published by the National Bureau of Statistics yesterday.
Key Points Total energy production down 4.2 pct in 2016 Coal accounts for 62 pct of energy consumption mix Greenpeace says CO2 emissions showed zero growth Total energy production was down 4.2 per cent compared to the previous year at 3.46 billion tonnes of coal equivalent, the statistics bureau said in its annual statistical bulletin. The share of coal in China’s total energy consumption mix stood at 62
per cent over 2016, it said. The figure for 2015 was 64 per cent, according to last year’s bulletin. Environmental group Greenpeace said the data indicated that China’s
total carbon dioxide (CO2) emissions were steady in 2016, driven largely by a 1.3 per cent decline in coal consumption over the year. The National Bureau of Statistics does not publish regular data for China’s carbon dioxide emissions. Greenpeace said China appeared virtually certain to overachieve its 2020 climate targets “if the rapid shift to clean energy and away from
over-reliance on polluting industries continues.” It expected a further 1 per cent drop in CO2 emissions in 2017. China has introduced targets and standards to improve industrial energy efficiency in a bid to cut pollution and reduce carbon dioxide emissions. The country’s economic slowdown has also had an impact on overall consumption. The government far exceeded its targets to eliminate 250 million tonnes of coal and 45 million tonnes of steel capacity last year. Reuters
Business Daily Wednesday, March 1 2017 11
Asia GDP
Australia’s current account deficit shrinks to smallest in 15 yrs Government spending likely added 0.2 to 0.3 percentage points to growth Wayne Cole
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ustralia boasted the smallest current account deficit in 15 years last q u a r t e r as b o o m i n g resource exports delivered a whopping turnaround of A$8 billion to the nation’s finances, boosting company profits and economic growth. The improvement should also lessen the risk of the country losing its triple A credit rating given ratings agency Standard & Poor’s cited a reliance on foreign funding as one reason it might downgrade. Yesterday’s data from the Australian Bureau of Statistics showed the current account deficit shrank by two-thirds to A$3.9 billion (US$2.99 billion) in the fourth quarter of last year. The swing was driven mostly by rising prices for Australia’s major resource exports including iron ore and coal which delivered a goods and services surplus of A$4.7 billion. Scott Haslem, an economist at UBS reckons that, with prices for iron ore holding strong, Australia could actually record its first current account surplus since 1975 this quarter. “The extent and duration of the spike of commodity prices, and subsequent material improvement
of Australia’s trade and external position, was largely unexpected,” said Haslem. He noted that when S&P warned about the credit rating, it had forecast a current account deficit of around 4 per cent of GDP this year. Now it was more likely to be 1 per cent. Miners also shipped more product, helping add 0.2 percentage points to real economic growth in the fourth quarter. A separate release yesterday showed government spending likely added 0.2 to 0.3 percentage points
to growth, after being a drag the previous quarter. As a result figures on gross domestic product (GDP) due on Wednesday are expected to show growth of 0.7 per cent, bouncing from a shock 0.5 per cent contraction in the third quarter. Such an outcome would keep alive Australia’s 25-year run without a technical recession - two consecutive negative readings for GDP - and on course to surpass the all-time record currently held by the Netherlands. Annual growth would still only be a tepid 1.9 per cent, with the economy barely expanding over the second half of the year, but the bonanza from exports will be a big boost to
measures of national income and nominal growth. The impact on incomes was highlighted in data out Monday showing company profits in Australia surged 20 per cent in the fourth quarter, led by a near-50 per cent jump for miners. Andrew Hanlan, a senior economist at Westpac, estimates GDP in current dollars soared 2.7 per cent in the quarter and lifted the annual pace to a five-year high of 5.5 per cent. That would be a boon for the conservative government of Malcolm Turnbull since it is nominal growth that drives tax revenues and it needs all the money it can get to plug a persistent budget deficit. Reuters
That would be a boon for the conservative government of Malcolm Turnbull. Lusa
Industry
Japanese factory output unexpectedly falls Separate official data showed Japanese retail sales rose 1.0 per cent in January Tetsushi Kajimoto
Japan’s industrial output unexpectedly fell in January for the first time in six months, pressured by a slowdown in shipments of cars to the United States in a sign of an economy grappling for a more sure-footed recovery. While Asian exports, including Japanese sales, have started to recover from late last year, the jury is still out on whether the uptick is sustainable in the wake of rising protectionism in the United States. Data by the Ministry of Economy, Trade and Industry yesterday showed industrial output fell 0.8 per cent in January, versus a median market forecast for a 0.3 per cent increase and a revised 0.7 per cent gain the previous month. It was the sharpest month-onmonth decline since May 2016, and the outlook allowed for little cheer as manufacturers surveyed by the ministry tipped output to rise 3.5 per cent in February and then decrease by a bigger 5.0 per cent rate in March. “Factory output will probably slow down this quarter as a reaction to
solid production in October-December,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. “Still, output is likely to remain in a moderate pickup backed by IT-related demand for smart phones in China and economic recovery in the United States and Europe as well as resource-exporting countries and emerging markets, although uncertainty remains over the outlook on U.S. economic policies.” Separate data by the ministry showed Japanese retail sales rose 1.0 per cent in January on-year, versus expectations for a 0.9 per cent gain. That was the third straight month of annual gains, indicating a gradual pickup in consumer spending.
with deflation, after three years of aggressive asset purchases failed to accelerate inflation to 2 per cent. The ministry maintained its assessment on industrial output, saying production was picking up. But that view had to be squared off by evidence showing momentum in the world’s third-largest economy remained soft, underscoring a fragile recovery and an uncertain outlook. The worry for Japan - and policy makers globally - is the uncertainty over the economic policies of U.S. President Donald Trump, whose repeated pledges to pull back from
free trade have raised concerns that protectionism will spread. The ministry said factories curbed production due in part to a slowdown in shipments of cars to the United States, where Trump has ratcheted up his criticism of major nations, including Japan, for stealing U.S. jobs. Last month, Trump took aim at Toyota Motor Corp, warning the world’s largest automaker that it would face a “big border tax” if it exported Mexico-built cars to the U.S. market. Data this month showed Japan’s exports to the U.S. fell 6.6 per cent in January from a year ago, extending a largely weak trend for shipments to the world’s largest economy seen through much 2016. Reuters
Trump uncertainty
Japan’s economy grew an annualised 1.0 per cent in October-December, slowing from 1.4 per cent in the third quarter. Faced with a slow recovery and tepid consumer prices, the Bank of Japan revamped its policy framework in September last year to one better suited for a long-term battle
Last month, Trump took aim at Toyota Motor Corp, warning the world’s largest automaker that it would face a “big border tax” if it exported Mexico-built cars to the U.S. market
12 Business Daily Wednesday, March 1 2017
Asia Infrastructure
ADB says emerging Asia needs US$26 trillion by 2030 Governments around the region are promising major new spending on public works Enda Curran and Karl Lester Yap
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sia’s infrastructure race is just getting started. Emerging economies across the region will need to invest as much as US$26 trillion on building everything from transport networks to clean water through 2030 to maintain growth, eradicate poverty and offset climate change. That’s according to an Asian Development Bank report released yesterday that highlights the need for massive construction and upgrading of public works and for much greater private sector investment. Leaving out spending to mitigate climate change, some US$22.6 trillion will still be needed over the same period, the ADB said. Big-ticket investment of US$14.7 trillion is needed for power, US$8.4
trillion for transport, US$2.3 trillion for telecommunication costs and US$800 billion for water and sanitation, adjusted for climate change. The bulk of infrastructure work is needed in East Asia, which accounts for 61 per cent of the ADB estimate. As a percentage of gross domestic product, the Pacific leads all other sub regions needing investment valued at 9.1 per cent of GDP, followed by South Asia at 8.8 per cent. The new projection of a US$1.7 trillion annual infrastructure need, adjusted for climate change, is more than double the US$750 billion that the Manila-based development bank estimated in 2009--though the latest report looks at 45 of the ADB’s developing members compared with 32 last time and uses 2015 prices compared to 2008 ones. Governments around the region are promising major new spending on
public works, often with competing promises of heavy investment from China and Japan. At the same time, the new China-backed Asian Infrastructure Investment Bank has also begun funding projects, offering an alternative to the U.S.-influenced World Bank and Japanese-driven ADB. Philippine President Rodrigo Duterte has embarked on an ambitious US$160 billion infrastructure plan as he seeks to sustain growth of about 7 per cent, among the fastest in the world. Malaysia, which already boasts world-class infrastructure, is pushing ahead with more projects including new rail lines in capital city Kuala Lumpur, the 2,000-kilometer Pan Borneo Highway and the West Coast Expressway. While Indonesian President Joko Widodo struggled to get infrastructure off the ground in his early years in office, momentum is now building with the government speeding up projects including an uninterrupted toll-road connection in the country’s
main islands and construction of a 720-kilometer railway from Jakarta to Surabaya. India’s government estimates it needs more than US$1.5 trillion to meet its infrastructure needs over the next decade as it undertakes a massive modernization of its decrepit railways and roads. It also aims to link each of its 700,000 villages, offering more avenues for development of the hinterland that houses 70 per cent of its 1.3 billion population. In Pakistan, Prime Minister Nawaz Sharif is pegging his 2018 re-election campaign on bridging chronic energy and infrastructure gaps as his administration targets a 7 per cent economic growth rate within two years. Constrained by resources, Pakistan is turning to China which has pledged to invest in projects worth about US$55 billion as part of a socalled economic corridor. Still, the ADB report also cautioned that widespread reforms are needed to attract private investment. More must be done to make public-private partnerships attractive and deeper capital markets are necessary to lure Asia’s substantial savings rates. “Mobilizing private capital flows to fund the financing gap that cannot be met by public financing is still a major challenge,” said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight in Singapore. There are other constraints too. While governments around Asia are promising hundreds of billions of dollars for new works, it’s also a challenge to get projects started and completed within budget and on time. The region is dogged by other issues such as corruption, inhospitable terrain and complicated land rights. “With Asia’s fairly high savings rates, financing doesn’t seem to be the problem,” said Rahul Bajoria, a senior economist at Barclays Plc in Singapore. “Execution really has been the issue.” Bloomberg News
Inflation data
Japan’s PM defends Bank of Japan strategy Central bank Governor Haruhiko Kuroda acknowledged that Japan was still distant from achieving his 2 per cent inflation target Leika Kihara
Prime Minister Shinzo Abe said the Bank of Japan’s (BOJ) aggressive monetary easing is aimed not just at accelerating inflation but also at spurring growth, in a sign the government was keen to deflect mounting pressure on the BOJ as it struggles to meet its 2 per cent price goal. Abe said that while the BOJ played a key role in pushing up inflation, it also helped stimulate the economy and create more jobs with its aggressive money printing. “I hope the BOJ conducts monetary policy to achieve its 2 per cent inflation target, as well as focus on stimulating the economy,” Abe told parliament yesterday. The remarks were made amid increasing criticism from opposition lawmakers about the repeated delays in achieving the BOJ’s inflation target, and come in the wake of fresh
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challenges to growth from rising protectionism in the United States. As economic growth slowed in the fourth quarter, with anaemic inflation, Abe has been under pressure to defend the BOJ’s strategy.
“Long-term interest rates may rise if the economy improves and pushes up inflation to 2 per cent,” Kuroda told the same parliament committee. The central bank chief also conceded that long-term rates could rise as the economy picks up speed, but he emphasised the BOJ’s current framework would prevent a destabilising increase in back-end yields.
After three years of aggressive asset purchases failed to accelerate inflation to its target, the BOJ revamped its framework in September last year to one better suited for a long-term battle against deflation. It now targets short- and long-term rates to control Japan’s yield curve. The BOJ blamed an unexpected slump in oil prices, the hit to household spending from a sales tax hike and Japan’s sticky deflationary mindset for pushing back the timeline for achieving its price target. Reuters
Key Points BOJ’s policy helped create jobs - PM Abe Japan inflation expectations to heighten - BOJ Kuroda BOJ policy will cap unwelcome rise in yields - Kuroda BOJ Governor Haruhiko Kuroda acknowledged that Japan was still distant from achieving his 2 per cent inflation target, but he said long-term inflation expectations were likely to heighten as economic growth accelerates.
Japan’s Prime Minister Shinzo Abe
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Business Daily Wednesday, March 1 2017 13
Asia In Brief Deals
Malaysia, Saudi Arabia firms sign over US$2 bln worth of deals
Monetary stance
Malaysia c.bank likely to hold key rate as economy recovers Following the July rate cut many analysts expected a second, but the central bank held off as the ringgit was under pressure Malaysia’s central bank is expected to hold its benchmark rate on Thursday, as the economy has improved after struggling due to poor global oil and commodity prices for more than a year. Southeast Asia’s third-largest economy saw stronger growth over the past two quarters on an uptick in exports, though recovery has been offset by continued weakness in the ringgit currency. Nine out of 10 economists polled by Reuters forecast Bank Negara Malaysia (BNM, pictured) will keep its overnight rate at 3.00 per cent on Thursday. Kenanga Investment Bank said economic indicators in recent months provide little reason for the central bank to follow up on its 25 basis point cut in July, and that the present rate is “accommodative” for growth.
“The probability of a rate cut has largely receded... currently we think the rate will hold at 3.00 per cent for 2017,” said Kenanga economist Ian Lim. After slowing for five straight quarters, annual growth rose to 4.3 per cent in July-September and 4.5 per cent in 2016’s final quarter. Fullyear 2016 growth came in at 4.2 per cent, the slowest since the economy contracted in 2009.
Currency pressure
Following the July rate cut - the first in more than seven years - many analysts expected a second, but the central bank held off as the ringgit was under pressure. In November, the central bank stepped in to discourage ringgit trade in the non-deliverable forwards (NDF) market, and later introduced measures
to boost onshore ringgit trade. Rahul Bajoria of Barclays said a quickened pace of annual consumer inflation, which hit 3.2 per cent in January, and stronger economic expansion suggest the central bank will remain “comfortable” with the current rate.
Key Points Malaysia c.bank expected to keep main rate at 3.00 pct Probability of rate cut has “largely receded” - Kenanga Decision due on Thursday, March 2 at 0700 GMT Irvin Seah, an economist at DBS bank, said the higher inflation and “tentative signs of recovery” give BNM little room to move. “We see no chance of further easing, and to revert to a tightening stance may be premature,” Seah said. The government expects growth of 4.0-5.0 per cent this year. Reuters
GDP quality
Spending on health care amounted to barely one per cent of gross domestic product
“There is no time for complacency and the main message today is that the reform momentum must be maintained so there can be more inclusive growth” Jose Angel Gurria, OECD secretary-general
But “growth has not been sufficiently inclusive on a number of dimensions, as reflected in a still high poverty rate”, the Paris-based group said in its 142-page country survey. It added that spending on health care amounted to barely one per cent of gross domestic product.
Industry
Thai factory output below forecast Thailand’s industrial output rose for a third straight month in January, boosted by steel and electronics, but the increase fell short of expectations, suggesting the economic recovery remains fragile. The Industry Ministry said yesterday its manufacturing production index (MPI) in January rose 1.3 per cent from a year earlier. A Reuters poll forecast a rise of 3.50 per cent. In December, output rose 0.54 per cent from a year earlier. Industrial goods accounted for around 80 per cent of total exports, which rose a less-than-expected 8.8 per cent in January from a year earlier after December’s 6.2 per cent increase, customs data showed. Loan facility
OECD says India needs more inclusive growth
India’s rapid economic growth has lifted 140 million people out of poverty in the past decade but many of its people still lack access to electricity and toilets, the OECD said yesterday. GDP per capita has risen by more than five per cent per year since the mid-1990s and reforms introduced since Prime Minister Narendra Modi’s election in 2014 have “brought a new growth impetus and improved the outlook”, the Organisation for Economic Cooperation and Development said in a report.
Malaysian companies and their Saudi Arabian counterparts signed yesterday preliminary agreements for seven deals worth more than US$2 billion, as the oil-rich gulf nation seeks to build ties and investment opportunities in Asia. The deals, valued at 9.74 billion ringgit (US$2.19 billion), will cover joint ventures and cooperation in several sectors including oil and gas, Islamic finance, shariah compliant products, the halal industry and manufacturing, Malaysia’s Trade Minister Mustapa Mohamed said at a press conference.
India has been the fastest-growing major economy for much of Modi’s premiership and although the government has lowered its forecast since its decision in November to pull high-value bank notes from circulation, it is still expected to expand 7.1 per cent in 2016-17. The OECD said reforms by successive governments, such as the implementation of inflation targets and a loosening of foreign direct investment (FDI) rules, had been major factors behind the growth. “The pace of reform is quite remarkable,” said the report, adding that “about 140 million people have been taken out of poverty in less than 10 years”. But, “there is no time for complacency and the main message today is that the reform momentum must be maintained so there can be more
inclusive growth,” said OECD secretary-general Jose Angel Gurria at the report’s launch in Delhi. The report called on the government to do more to improve access to basic services. “Many Indians still lack access to core public services, such as electricity and sanitation,” the report said. “Public spending on health care, at slightly more than one per cent of GDP, is low. Although almost all children have access to primary education, the quality is uneven.” Government figures released in 2015 showed more than 300 million people in India still had no access to electricity while hundreds of millions of people also lack access to proper toilets. Modi has pledged that his government will provide power and toilets to every household in his term of office and claims to have already built more than 20 million toilets since coming to power. AFP
S.Korea c.bank to boost support for SMEs South Korea’s central bank said yesterday it plans to increase support for smalland medium-sized businesses through its key loan facility as part of its efforts to prop up the economy. In a report submitted to parliament, the Bank of Korea said it will improve credit policies of the Bank Intermediated Lending Support Facility, the bank’s main tool to provide cheap loans to small businesses. The expanded support will go to companies that are active with hiring or are under hardships due to ongoing corporate restructuring, the report said, without elaborating. Investment
Vietnam’s FDI inflow up Vietnam has received an estimated US$1.55 billion in actual inflows of foreign direct investment (FDI) in the first two months of 2017, up 3.3 per cent from the same period a year earlier, government data showed yesterday. Total registered capital including new FDI pledges, additional funds to finance existing projects and stake acquisition so far this year rose 21.5 per cent from a year earlier to a combined US$3.4 billion as of Feb. 20. Singapore’s investors in February extended its leading position in direct investment amount into the country with US$881.7 million, followed by China and South Korea.
14 Business Daily Wednesday, March 1 2017
International In Brief GDP
Nigeria’s growth drops, but oil looking up Nigeria’s battered economy suffered a year-long contraction in 2016, official data showed yesterday, but the oil sector showed signs of recovery, raising hopes for an end to recession. The latest figures showed that the gross domestic product (GDP) shrunk by 1.5 per cent last year, largely due to oil production disruptions caused by attacks on infrastructure by militants demanding a greater share of revenues. The economy shrunk by 1.3 per cent in the fourth quarter alone, the figures showed. But the slowdown in the oil sector eased as a result of on-going government negotiations with rebels. Trade Minister
Russia proposes creating aluminium OPEC Russia is proposing the creation of an OPEC-like organisation for the global aluminium industry, TASS news agency quoted Russian Industry and Trade Minister Denis Manturov as saying on Monday. Russia’s Rusal was overtaken by China’s Hongqiao as the world’s biggest aluminium producer several years ago, as Rusal cut back its production capacity due to a fall in prices. Manturov told reporters about the idea of an aluminium-making group on the side-lines of an economic conference in Russia’s Black Sea resort of Sochi. “It is currently at the stage of a proposal,” Manturov told reporters.
Oil industry
Saudi Arabia wants prices to rise to around US$60 in 2017 A Gulf industry source said OPEC and non-OPEC members may extend the supply curb pact because a return to a pump-at-will oil policy would crash prices and destabilize markets again
T
his is the level the OPEC heavyweight and its Gulf allies - the United Arab Emirates, Kuwait and Qatar - believe would encourage investment in new fields but not lead to a jump in U.S. shale output, five sources from OPEC countries and the oil industry said. The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers pledged last year to cut production by about 1.8 million barrels per day (bpd) from Jan. 1. The first cut in eight years is intended to boost prices and get rid of a supply glut. Crude prices have risen by more than 14 per cent since the November pact but are still only trading around US$56 a barrel despite record compliance by OPEC and non-OPEC members. OPEC officials have repeatedly said the group does not target a specific oil price and their focus is on drawing global oil inventories and helping the market to re-balance. But behind closed doors, Riyadh and its Gulf OPEC allies hope to see a higher level because the low price has pressured their finances and stoked
fears of a future supply shortage. However, they do not want the price to be so high that it encourages rival U.S. shale producers, which were hard hit by the slump in oil prices, to ramp up production again. Advances in technology have made it easier for them to adapt quickly to oil price fluctuations.
Key Points Riyadh sees US$60 as good level to encourage investment - sources Saudis believe oil at US$60 would not lead to shale spike- sources Higher price would help Saudi finances, Aramco IPO OPEC sources see 2017 shale output rising by about 300,000 bpd Over US$1 trillion worth of oil projects have been cancelled or delayed since mid-2014. A decline in investments in future oil projects triggered worries that this could lead to a supply shortage and spike in oil prices. Oil fields take around four years
to develop before production can start whereas U.S. shale oil can now be extracted within a few months of a decision.
Absorbing shale
U.S. shale producers started to grow production again when crude prices first topped US$50 a barrel in May 2016 after a two-year price slump due to a global glut starting in mid 2014. U.S. drillers have added more than 280 oilrigs since the end of May, and the U.S. Energy Information Administration (EIA) has forecast that U.S. domestic production will rise by 430,000 bpd between December 2016 and December 2017. Despite the advances in technology, an OPEC source said that shale producers who survived the downturn may be cautious about responding quickly to a change in oil prices. Another OPEC source said it was difficult to see oil prices rising to US$60 or above this year due to a lingering oversupply. That source also said that even if shale oil production rose by more than 300,000 bpd the market could absorb it if it comes during the cold winter season when demand peaks. OPEC could extend its oil supply-reduction pact with non-members or even apply deeper cuts from July if global crude inventories fail to drop to a targeted level, OPEC sources have told Reuters. Reuters
Households inflation
UK consumer morale dips British consumer morale edged lower in February as rising inflation following last year’s Brexit vote made householders warier about the outlook for their finances, surveys showed. Two separate reports conducted by market research firms GfK and pollster YouGov pointed to increased financial pressure on households in the year ahead. That added to signs that consumer spending - the driving force behind Britain’s economy over the last few years - is starting to wilt as price pressures mount. GfK’s monthly consumer sentiment index dipped to -6 from -5 in January, in line with forecasts in a Reuters poll of economists. Angola
Half the currency supplied last week used for food imports The sale of foreign currency by the National Bank of Angola to the country’s commercial banks practically doubled last week, to €348.6 million, almost half of which was used to import food and for airlines to receive foreign currency again. In the previous week the central bank’s foreign cash injections totalled €182.3 million and two weeks ago they totalled €142.6 million. According to the report from the central bank the foreign currency provided was the equivalent of US$389.5 million and was used to cover imports of food (€126.4 million), and operations in the industrial sector (€18.7 million) and to import parts and accessories for the transport sector (€37.6 million).
Manufacturing
U.S. core capital goods orders fall Orders for machinery and fabricated metal products rose New orders for key U.S.-made capital goods unexpectedly fell in January after three straight months of strong gains, but did little to change views that manufacturing was recovering from a prolonged downturn amid rising commodity prices. Last month’s drop is likely to be temporary as business confidence has surged in recent months on promises by the Trump administration to cut corporate taxes and ease regulations. In addition domestic demand is firming. The Commerce Department said on Monday that non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4 per cent after an upwardly revised 1.1 per cent increase in December. These so-called core capital goods were previously reported to have gained 0.7 per cent in December. There were declines in orders for primary metals and electrical equipment, appliances and components, as well as computers and electronic products.
A separate report on Monday showed contracts to purchase previously owned homes fell to a oneyear low in January amid a dearth of properties for sale. This suggests that home resales could decline in February after hitting a 10-year high in January. The recent surge in business confidence spilled over into investment on capital goods. January’s drop in core capital goods orders likely reflects caution among businesses as they await details of the proposed stimulus. Business investment picked up in the fourth quarter, with spending on equipment increasing at a 3.1 per cent rate after four straight quarterly declines. Manufacturing, which accounts for about 12 per cent of the U.S. economy, was in a slump for more than a year as a collapse in oil prices undercut demand for machinery. A strong dollar, however, remains a challenge for manufacturers as it makes their goods less competitive on overseas markets. Shipments of core capital goods fell 0.6 per cent last month after jumping 1.6 per cent in December. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.
A 6.0 per cent surge in demand for transportation equipment buoyed overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, which leapt 1.8 per cent last month. Durable goods orders decreased 0.8 per cent in December. Last month’s surged reflected a 69.9 per cent jump in civilian aircraft orders. The surge came even as Boeing reported on its website that it had received orders for only 26 aircraft last month. Economists believe not all of the 290 aircraft ordered in December were reflected in the durable goods orders report for that month.
Key Points Core capital goods orders fall 0.4 per cent in January Shipments of core capital goods decline 0.6 per cent Durable goods orders jump 1.8 per cent Orders for defence aircraft soared 59.9 per cent. Pointing to continued manufacturing recovery, unfilled orders of core capital goods - a proxy for production in the pipeline - increased 0.5 per cent, a seventh consecutive monthly advance. Reuters
Business Daily Wednesday, March 1 2017 15
Opinion Business Wires
The Phnom Penh Post Cambodians spent about US$600 million abroad last year, state media reported yesterday, while official figures showed a 20 percent annual increase in outbound tourism. Tourism Minister Thong Khon estimated that Cambodians travelling abroad spent US$600 million in 2016, state news agency AKP said, citing an unnamed local media source. At the same time, Cambodian outbound tourism grew to 1.4 million in 2016, up from 1.2 million the previous year, according to Ministry of Tourism’s annual figures. Ho Vandy, deputy secretary-general of Cambodia’s National Tourism Alliance, attributed growing incomes for both the increase in outbound tourism and higher travel spending.
The Straits Times Singapore’s code of corporate governance is under review, with a council established to take another look at the guidelines. The code was last reviewed in 2012, when changes were introduced to strengthen board independence and enhance remuneration practices and disclosures. “A review of the CG Code (Code of Corporate Governance) and practices is thus timely to ensure that they continue to support sustained corporate performance and maintain investor confidence in our capital markets,” said the Monetary Authority of Singapore. The council will look at how the “comply-or-explain” regime under the code of corporate governance can be made more effective.
Inquirer.net A combination of higher minimum fare in public utility vehicles and increases in electricity as well as oil prices likely pushed (Philippine) inflation to its highest level in over two years, Bangko Sentral ng Pilipinas (pictured) Governor Amando M. Tetangco Jr. said Monday. “The BSP forecast suggests that February inflation could settle within the 3.1-3.9 percent range. The increase in domestic petroleum prices, jeepney and taxi fares, and electricity rates of Meralco-serviced areas could exert upside pressures to inflation during the month,” Tetangco said in a text message to reporters.
Don’t cry for corporate America
C
orporate tax cuts are coming in the United States. While this push predates last November’s presidential election, President Donald Trump’s Make-America-GreatAgain mantra has sealed the deal. Beleaguered U.S. businesses, goes the argument, are being squeezed by confiscatory taxes and onerous regulations – strangling corporate earnings and putting unrelenting pressure on capital spending, job creation, and productivity, while sapping America’s competitive vitality. Apparently, the time has come to give businesses a break. But this argument raises an obvious question: If the problem is so simple, why hasn’t this fix already been tried? The answer is surprising. For starters, it is a real stretch to bemoan the state of corporate earnings in the U.S.. Commerce Department statistics show that after-tax corporate profits (technically, after-tax profits from current production, adjusted for inventory and depreciation-accounting distortions) stood at a solid 9.7 per cent of national income in the third quarter of 2016. While that is down from the 11 per cent peak hit in 2012 – owing to tepid economic growth, which typically puts pressure on profit margins – it hardly attests to a chronic earnings problem. Far from anaemic, the current GDP share of aftertax profits is well above the post-1980 average of 7.6 per cent. Trends in corporate taxes, which stood at just 3.5 per cent of national income in the third quarter of 2016, support a similar verdict. Yes, the figure is higher than the post-2000 level of 3 per cent (which represents the lowest 15-year average tax burden for corporate America since the 2.9 per cent reading in the mid1990s); but it is well below the 5.2 per cent average share recorded during the boom years of the post-World War II era, from 1950 to 1969. In other words, while there may be reason to criticize the structure and complexities of the U.S. corporate tax burden, there is little to suggest that overall corporate taxes are excessive. Conversely, the share of national income going to labour has been declining. In the third quarter of 2016, worker compensation – wages, salaries, fringe benefits, and other so-called supplements such as social security, pension contributions, and medical benefits – stood at 62.6 per cent of national income. While that represents a bit of a rebound from the 61.2 per cent low recorded in the 2012-2014 period, it is two percentage points below the post-1980 average of 64.6 per cent. In other words, the pendulum of economic returns has swung decisively away from labour toward owners of capital – not exactly a compelling argument in favour of relief for purportedly hard-pressed American businesses. But what about the seemingly chronic weakness in capital spending and job creation, widely thought to be additional manifestations of overly burdened U.S. companies? Yes, both business investment and employment growth have been glaring weak spots in the current recovery. There is a distinct possibility, however, that this is due less to onerous taxes and regulatory strangulation, and more to an unprecedented shortfall of aggregate demand. Economists long ago settled the debate over
“
Bangkok Post Airlines are gearing up to deal with unpleasant effects arising from the partial closure of a runway at Suvarnabhumi airport (pictured) for repairs. The airline industry yesterday warned of a series of inevitable consequences, such as delays in arrivals and departures, extended holding patterns, missed connections for passengers and even landings diverted to U-tapao airport in Rayong. Those are the likeliest scenarios from March 3 to May 2 as a 1,250-metre section of the northern runway, 4,000 metres in overall length, closes for resurfacing and the B1 taxiway also undergoes repairs.
Stephen S. Roach a faculty member at Yale University and former Chairman of Morgan Stanley Asia
what drives business capital spending: factors affecting the cost of capital (interest rates, taxes, and regulations) or those that influence future demand. The demand-driven models (operating through so-called “accelerator” effects) won hands down. This is logical. Businesses can be expected to expand capacity and hire workers only if they anticipate that their markets will grow in the future. For the U.S., that may also be a stretch. Since the first quarter of 2008, inflation-adjusted personal consumption expenditures in the U.S. have grown by just 1.6 per cent annually, on average – fully two percentage points below the 3.6 per cent norm in the 12 preceding years. In fact, the current period is the weakest 35 quarters of real consumption growth in post-WWII history. If past is prologue – as it is for many businesses as they frame their expectations – the focus on tax relief and deregulation could ring hollow, without addressing weak consumer demand. It’s the same story with competitiveness. Trump repeatedly bemoans the loss of America’s oncedominant competitive position. To restore it, Trump’s “America first” campaign is framed around an explicit endorsement of protectionism, underscored by the haunting words of his inaugural address: “Protection will lead to great prosperity and strength.” But Trump’s narrative of a oncegreat America that has supposedly lost its competitive edge is at odds with the best available evidence: an annual compendium published by the World Economic Forum (WEF), which provides a detailed assessment of 114 individual competitive metrics for some 138 countries. In the WEF’s 2016-17 Global Competiveness Report, the U.S. came in third in terms of overall international competitiveness (behind Switzerland and Singapore) – maintaining pretty much the same position it has held over the past decade. Yes, the U.S. scores poorly on corporate tax rates, regulation, and government bureaucracy; but it more than compensates for those shortcomings with exceedingly high rankings for capacity for innovation (2/138), company spending on research and development (2/138), and availability of scientists and engineers (2/138). Impressive scores on financial-market development, labour-market efficiency, and several aspects of business sophistication are also big pluses for America’s consistently high rankings in the WEF’s global tally. In short, the U.S. has hardly lost its competitive edge. In an ideal world, it would be nice to streamline, simplify, and even reduce tax and regulatory burdens on U.S. businesses. But business is not the weak link in the U.S. economic chain; workers are far more vulnerable. Economic returns have shifted dramatically from the providers of labour to the owners of capital over the past 25 years. That, more than anything, speaks to the need for an urgent reordering of the priorities in America’s national economic-policy debate. Project Syndicate
The focus on tax relief and deregulation could ring hollow, without addressing weak consumer demand
”
16 Business Daily Wednesday, March 1 2017
Closing Technology
Xiaomi unveils in-house chipset to cut prices
of our industry and tightly integrate the development of our hardware with our software Chinese smartphone firm Xiaomi Inc announced helping us to make even better smartphones,” its first in-house designed chipset yesterday, as Xiaomi Chief Executive Officer Lei Jun said in a it works to streamline production, lower prices, statement. and gain greater control over handset design to The Mi 5c will retail at RMB1499 ($218) from March 3. counter the impact of slowing sales. Xiaomi was briefly the world’s most valuable The Surge S1, deployed in Xiaomi’s newest start-up following its last round of fundraising smartphone, the Mi 5c, is the first chipset which manages data flow - from the company’s in 2014. It has since seen sales tumble due wholly-owned chip research subsidiary, Beijing to competition from the likes of Huawei Technologies Co Ltd and brands Vivo and Pinecone Electronics. Oppo. Reuters “We need to master the core technologies
Hospitality
Waldorf Astoria closes for facelift The Waldorf says it invented the concept of 24-hour room service Catherine Triomphe
I
t’s goodbye for now to the grand Art Deco lobby and celebrities crossing paths en route to “The Towers” at the Waldorf Astoria: one of the world’s most luxurious hotels is closing for renovation. The legendary establishment opened at its Park Avenue location in midtown Manhattan in 1931 with more than 1,400 rooms, the largest -- and tallest -- anywhere at the time. It has hosted a stream of international political leaders, movie stars, tycoons and power players of all kinds for more than 85 years. From Marilyn Monroe to Grace Kelly, US presidents Herbert Hoover to Barack Obama, as well as global leaders in town for the United Nations General Assembly every year, the Waldorf Astoria has been the place to be. The hotel is massive, occupying a full city block of prime New York real estate. Famous for its upscale services, the Waldorf says it invented the concept of 24-hour room service. The Art Deco style is carried through details down to the door handles in the lobby bathrooms. However, the grande dame is showing her age.
today. The work is due to last two to three years. The Chinese company bought the historic gem in 2014 from the Hilton hotel chain for US$1.95 billion. Although it has released no official renovation plan, Anbang is expected to convert a large number of rooms into luxury apartments with boutique stores on the ground floor, leaving only a small part of the building as a hotel. The facade -- which became an official landmark in 1993, joining the Empire State Building and Brooklyn Bridge -- is in no danger. But the interior is not protected under the landmark designation, and some are worried that such treasures as the four-story grand ballroom and sprawling mosaic by the French artist Louis Rigal decorating the entrance will disappear forever,
despite Anbang’s promise to consult preservation officials. “I’m very, very sad,” said 70-yearold Donna Karpa from Washington, a regular from the age of five who was in town for the weekend. “I’d come every year as a little girl,” she said. “We would come with my family for Christmas and we’d see the Rockettes (dance show) and we would go ice skating at Rockefeller Center. It’s great and the location is wonderful!” Sandra Thomson, a Briton from Birmingham, left enchanted after six days in the hotel with her family to celebrate her daughter’s 18th birthday. “We just absolutely loved it!” she said. “I love the architecture, all the Art Deco and also the history. It’s just an icon of America, isn’t it? And you want to experience it.”
‘All the one-percenters’
Besides the guests’ many wows, the
‘Very, very sad’
Guests have complained about dated rooms, peeling paint and issues with cleanliness. The hotel’s owner, Anbang Insurance Group, says it will close the hotel for major renovations starting
hotel’s employees -- 1,400 of them in total -- chiefly remember the rich, famous and powerful who have frequented the Waldorf every day. A stay by Angelina Jolie and Brad Pitt -- one of Hollywood’s most glamorous couples until their breakup last year -- is still fresh in everyone’s minds. But each has a favourite memory of a striking encounter. Michael Romei, head concierge of the 42-story central tower known as the “The Towers” -- a hotel-within-a-hotel boasting the most luxurious suites -- has stopped counting the celebrities he’s met during his 23 years of service. His best memory: “Being blessed by the Dalai Lama.” “This is such a great place to work!” said Paul Hopkins, who has been a bellhop here for a dozen years. “Right in the elevators, you can meet so many celebrities, all the different presidents, lots of CEOs, all the one-percenters!” Some criticize Obama’s break with decades of tradition in 2015 following Anbang’s takeover by deciding not to stay at the Waldorf and to no longer put up US diplomats here during the UN’s General Assembly. Ivona -- a hostess at the hotel’s Peacock Alley restaurant who declined to give her last name -- called it a “slap in the face.” But just like many of the guests, the hotel’s employees agree that even if they adore the place, it’s time to refresh. “We love the nostalgia, but it’s kind of dated,” said Ron Ruth, an aircraft mechanic from San Francisco who came for his 23rd wedding anniversary. “The heating and the cooling, and the bathrooms are really small, too small for my wife!” AFP
Results
China leading
M&A
Rolls-Royce freezes pay for 8,000 managers
Global fintech investment up 10 pct in 2016
Saudi Aramco to buy US$7 bln stake in Petronas’ refinery
Rolls-Royce Holdings Plc will freeze salaries for 8,000 managers as Europe’s biggest aircraft-engine maker deepens cost cuts after earnings fell by almost half in 2016. While raises for managers and executive staff will be announced as usual in March, they won’t be implemented until September, with no backdated payments, Chief Executive Officer Warren East said in an internal message to staff, which was disclosed to Bloomberg and confirmed by the company. The move could save Rolls about 15 million pounds (US$19 million), based on last year’s 2 per cent average wage award. Factory workers and engineers will still get an increase from the usual date. Rolls-Royce is extending cost cuts after underlying pretax profit fell 49 per cent to 813 million pounds, with only a “modest” gain expected in 2017. East, who has also eliminated 700 middle-management posts, opted to delay the raise rather than make a smaller award earlier so that future gains will accrue from a higher base, according to the company. “We have maintained reasonable increases for the last few years and this will enable us to continue to invest in the program and capabilities that will make us a more resilient business,” the company said. Bloomberg News
Global investment in financial technology venture firms grew 10 per cent last year to US$23.2 billion, consultancy firm Accenture said on Tuesday, fuelled by huge investor appetite in China and Japan. Fintech investment in China more than tripled to US$10 billion from 55 deals last year, representing 90 per cent of fintech ventures in the Asia-Pacific region. Japan also saw a large spike with fintech ventures totalling US$154 million from 14 deals in 2016, more than double the previous year’s US$65 million, said Accenture, whose analysis was based on data from CB Insights. Fintech ventures typically leverage technology, such as cloud data storage or smartphones, to provide cheap and easy-to-access services from loans and insurance to payment services and crowdfunding. Investment in Chinese fintech ventures was buoyed by blockbuster deals such as a US$4.5 billion fundraising round at Ant Financial Services Group, an affiliate of e-commerce giant Alibaba Group Holding Ltd. China’s second-largest e-commerce company JD.com Inc also raised US$1 billion for a consumer finance subsidiary, Accenture said. Reuters
Saudi oil giant Aramco will buy an equity stake in Malaysian firm Petronas’ major refining and petrochemical project, the companies said yesterday, pumping in US$7 billion in its biggest downstream investment outside the kingdom. The deal will boost Aramco’s downstream business ahead of a planned initial public offering next year and also bolsters Malaysia’s state-controlled Petroliam Nasional Bhd - known as Petronas - after it cut spending because of the slump in oil prices. In a joint statement, the firms said Aramco will take a 50 per cent stake in select ventures and assets in the Refinery and Petrochemical Integrated Development (RAPID) project developed by Petronas. The deal signing was witnessed by Malaysian Prime Minister Najib Razak and Saudi King Salman, currently on a state visit to Malaysia - the first in over a decade. “Malaysia offers tremendous growth opportunities and today’s agreement further strengthens Saudi Aramco’s position as the leading supplier of petroleum feedstock to Malaysia and Southeast Asia,” Aramco Chief Executive Officer Amin Nasser said. “With RAPID’s strategic location in a prolific hub, it would also serve to enhance energy security in the Asia-Pacific region.” Reuters