Mainland leads global smartphone apps market Technology Page 9
Tuesday, March 14 2017 Year V Nr. 1253 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm
www.macaubusinessdaily.com
Politics
Regulator
Legislative Assembly elections set for Sept. 17, campaign budgets capped at MOP3.55 million Page 3
Politics
CY Leung named vicechairman of CPPCC Page 7
Court
Ho Chio Meng names new defence lawyer Page 2
China fines individuals for stock manipulation Page 16
Partial promises Real estate
Homebuyers of incomplete residential project Pearl Horizon may request a refund from the developer, Polytech Group, says its chairman. Refunds would only be for first-hand buyers, however, a situation that representatives of the home purchasers believe could worsen the issue. Only completion of the project will resolve the conflict, say representatives. The Polytech chairman reiterates the fault lies with the gov’t for lack of development, and claims thecompany will ‘never run away irresponsibly’. Page 4
Property developer Lippo Limited has completely pulled out of a joint casino project with Caesars Entertainment in Incheon, South Korea. The disposal of its portion of the consortium yields US$12.2 million, with an aggregate amount receivable of US$23.5 million. The group highlighted an inability to ‘agree and finalise the investment’. The capital will be used for ‘general corporate purposes’ notes the group.
Gaming Page 7
HK Hang Seng Index March 13, 2017
A new policy
Insurance New AIA head Ng Keng Hooi will be hard pressed to fill the shoes of outgoing CEO Mark Tucker, who retires in September. Continuing expansion into key growth markets and wading through controls on capital outflows will be key, say experts. A ‘few tough years’ lie ahead for the insurance market, following AIA’s success with an Asia-centric model that drove a quadrupling of new business value in six years. Page 6
Openness expected
PBOC official Deputy governor of China’s central bank reiterated the support of the entity for opening financial markets for capital and investment to flow both in and out of the country. The central bank official added his comments to the chorus of voices confirming the openness drive expected this year. Page 8 23,829.67 +261.00 (+1.11%)
Worst Performers
Geely Automobile Holdings
+4.36%
Industrial & Commercial
+3.05%
AIA Group Ltd
-2.98%
Power Assets Holdings Ltd
AAC Technologies Holdings
+3.40%
Belle International Holdings
+2.52%
CLP Holdings Ltd
-0.96%
Sands China Ltd
+0.00%
China Resources Land Ltd
+3.38%
BOC Hong Kong Holdings
+2.43%
Wharf Holdings Ltd/The
-0.44%
Cathay Pacific Airways Ltd
+0.00%
China Construction Bank
+3.31%
Hang Lung Properties Ltd
+2.41%
Link REIT
-0.29%
China Mobile Ltd
Bank of China Ltd
+3.17%
Want Want China Holdings
+2.39%
MTR Corp Ltd
-0.24%
Sun Hung Kai Properties Ltd
16° 20° 17° 19° 18° 20° 18° 20° 18° 22°
-0.15%
+0.12% +0.80%
Today
Source: Bloomberg
Best Performers
WED
THU
I SSN 2226-8294
FRI
SAT
Source: AccuWeather
Getting out
2 Business Daily Tuesday, March 14 2017
Macau Smoking lounge
Gaming operators agree to proposed smoking lounge requirements The Health Bureau revealed that the city’s six gaming operators have all agreed with the requirements for smoking lounges proposed by the government. Meanwhile, the Legislative Assembly will only announce whether smoking lounges will be allowed, after the amended smoking bill has been finalised Cecilia U cecilia.u@macaubusinessdaily.com
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he Deputy Director of the Health Bureau, Cheang Seng Ip said that all six local gaming operators have agreed with the proposed specifications for smoking lounges in casinos made by the bureau, as reported by local broadcaster TDM Radio. The Health Bureau currently requires that smoking lounges in casinos generate a negative pressure of at
least -5 pascal (Pa), which is similar to operating rooms in hospitals and medical centres, for the prevention of cross-contamination from room to room. The Bureau is now discussing the details of operational procedures, said the Deputy Director. The MSAR Government announced that it is planning to alter the drafted bill proposing a full smoking ban in casinos, to allow for the establishment of smoking lounges, following the results of a survey conducted by the University of Macau (UM),
commissioned by the six local gaming operators, released last month. The survey concluded that 60 per cent of the 14,301 gaming and non-gaming employees interviewed, agree with ‘solutions that allow smoking lounges’ in casinos. Following the results disclosed by the gaming operators, the Macau Gaming Enterprises Staff Association of the Federation of Trade Unions released their own survey results, revealing that around 68.7 per cent of 1,981 survey respondents had expressed their desire to work in smoking-free casinos. The survey results also showed that 29.43 per cent of gaming workers supported the setting up of smoking lounges, while 60.98 per cent noted cases of casinos violating smoking regulations. Another gaming workers group,
the New Macau Gaming Professionals Association, also gathered a total of 503 signatures earlier this month, to condemn the Health Bureau for supporting the survey commissioned by the gaming operators.
Finalisation today
The second-standing committee of the Legislative Assembly will discuss the amended bill for the smoking law at 3pm today. The Chairman of the second-standing committee, Chan Chak Mo confirmed to local Chinese Newspaper Macao Daily that the government has handed in a revised document of the bill. Regarding the details of the revised document, in particular, information about whether smoking lounges can be built and used inside casinos, Legislator Chan refused to disclose any information, but said the decision would be revealed after the meeting. Earlier, the committee had voted on the setting up of smoking lounges in casinos, with seven out of nine voting in support.
Education
New UM rector in 2018 The University of Macau (UM) Rector Wei Zhao has announced that he won’t be seeking to renew his position as rector, when his current term expires in 2018, as stated in a press release by the educational institution. Having served as rector since 2008, Mr. Wei will finish his decade in the role, marked by a transformation of the university from ‘a local higher education institution with rather humble beginnings to a comprehensive university with a definite degree of influence in Asia’. The university also added that in order to ensure a ‘smooth transition’ it would establish a selection committee to prepare a ‘worldwide search’ for the recruitment of a new rector, in accordance with the University Charter and Internal Regulations. In a response to the press, the Office of the Secretary for Social Affairs and Culture stated it ‘respected’ UM’s
autonomy to choose a new rector and the decision taken by Mr. Wei, adding that it is up to the University Council to recruit and propose a candidate for rector, which will then be nominated by the Chief Executive. The university also announced yesterday that a paper co-authored by UM Professor Yuen Ka-Veng was ranked the second most cited paper among over 120 papers published in 2015 and 2016 in the ‘Computer-Aided Civil and Infrastructure Engineering’ journal. N.M.
Tourism
Long live Macau tourism in Portugal The operations of the Macau Tourism Promotion and Information Centre in Portugal have been extended to June 15, 2019, according to a dispatch published in the Official Gazette yesterday. The Centre, created by an official dispatch in 2005, is currently located in the facilities of the Economic and Commercial Delegation of Macau – China, in Lisbon, Portugal. I t s r o l e i s t o p r o m o t e th e development and implementation of actions linked to tourism promotions of Macau in both the Portuguese- and
Spanish-speaking markets, according to the 2005 dispatch. Currently, the Macao Government Tourism Office (MGTO) has three delegations abroad located in Lisbon, Beijing, and Taiwan. In addition, MGTO has several representative offices around the world, including in India, Indonesia, Japan, New Zealand, the United States and Russia. MGTO does not have any offices in Africa or Latin America. S.Z.
Court
Oriana Pun to defend Ho Chio Meng Lawyer Oriana Pun will step in as the new defence lawyer for former top official Ho Chio Meng, according to broadcaster TDM. The lawyer will request additional time beyond the mandated 30 days to prepare the defence, she told the broadcaster. The news comes in advance of tomorrow’s deadline that Ho was given for choosing a new lawyer, following his former defence abandoning the case last week.
The lawyer is a member of the board of the Macau Lawyers Association (AAM) and speaks Portuguese. The former Prosecutor-general is up on over 1,500 charges relating to allegedly forming a criminal organization, and illicit payments and hiring practices with allegedly linked companies for services provided to the Public Prosecutions Office (MP), among other charges.
Business Daily Tuesday, March 14 2017 3
Macau Legislative Assembly
Ready, set, elections The date for the Legislative Assembly elections has been announced: September 17. Authorities will cap candidate spending at MOP3.55 mln, reducing it by more than a third Nelson Moura nelson.moura@macaubusinessdaily.com
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he government has announced that the 2017 Legislative Assembly (AL) elections will take place on September 17, according to a dispatch in the Official Gazette. In addition to the election date, the maximum amount allowed for campaign expenses for each candidate was also announced, capped at below MOP3.55 million, a 37.1 per cent reduction from the maximum candidate expense amount of MOP5.65 million that was allowed in the AL elections of 2013. According to the new
Electoral Law, the maximum amount was established though analysis of the MSAR population, the number of registered voters and the city’s economic development. The maximum amount is required to be equal to less than 0.004 per cent of the average MSAR government revenues over the last 10 years. Candidacy expenses have to be presented to the Electoral Committee within 90 days of the election date, with the penalty for candidates exceeding the expense limit ranging from a six-month prison sentence to a MOP1 million fine. The announcement finally sets a date for the 307,020
voters registered in the MSAR to elect 14 of the 33 total legislators in the AL, with 12 being elected by associations and seven directly elected by Chief Executive Fernando Chui Sai On. Prospective candidates have to make their applications to the Electoral Commission 70 days before the election date, with electoral campaigning only allowed 15 days before election day.
Controlling expenses
Despite establishing a limit on electoral expenses, no limit for donations received by candidates and associations was set, with the law stipulating that donations – either monetary, via services, or in the form of objects can only be received from MSAR residents and must be declared to the authorities. Reducing the expense limit was one of the amendments demanded by MSAR residents during a 30-day public consultation last year
regarding changes to the AL Election Law. The Election Law changes were approved by the assembly in December of 2016, imposing requirements such as demanding that candidates pay a guarantee deposit of MOP25,000 (US$3,125) which will be retained by the government if the candidate does not get a certain number of votes. One of the most contentious
changes involves a mandate that candidates will have to declare their loyalty to the MSAR and that they will uphold the city’s Basic Law. The alteration was added after two pro-democracy legislators were barred from taking a seat in the Hong Kong Legislative Assembly for performing allegiance pledges deemed illegal by the Mainland China central government.
Rights
Consumer protection bill to be submitted next legislative year The Consumer Council has confirmed that the amended consumer protection bill will be submitted in the next legislative year, by the end of this year. The confirmation comes in response to an enquiry by legislator Si Ka Lon, with the Council explaining that the bill will have to be submitted in the next legislative year, given that this year’s term provides too little time to evaluate it, due to its many amended articles. The council added that it will continue to improve the bill prior to its submission to the Legislative Assembly. Legislator Si also questioned the Council as to whether conflicts have appeared between consumers and shops that are not partaking in the Certified Shop Adherents scheme. The current scheme does not allow the council to forcibly request
the shops in question to resolve the conflicts, but instead such incidents can only be resolved by litigation brought about by the consumer. The MSAR government had initially set a target date for the new law for the first quarter of last year. The council will also consider including online stores within the proposed bill. For disputes related to online stores that are registered locally, the council will directly contact stores and resolve issues via agents and arbitrators, it notes. Meanwhile, for cases involving online stores that are overseas, the council will refer the case to allied associations outside the territory related to consumer rights. The lawmaker also asked if the Certified Shop Adherents scheme would be further improved to ensure that the rights of shops and consumers
Consumer Council Certified Shop award ceremony 2016
Society
Government allows creation of new pension fund management company The government has authorised the creation of a pension fund management company named Sociedade Gestora de Fundos de Pensões Macau, S.A., according to a release in the Official Gazette. According to the most recent data provided by the Monetary Authority of Macau (AMCM), as at the end of September 2016, a total of MOP16.5 billion (US$2.1 billion) was being
managed by nine local private fund managers, while a total of 58 pension funds were registered in the city, of which 54 were open funds. As of January 1 this year, the monthly contribution to the city’s Social Security Fund (FSS) paid by employers and employees, doubled from the previous MOP45 to MOP90, with employers paying MOP60 and employees paying MOP30. N.M.
are fully protected. The Consumer Council replied that it has been raising the threshold for shops to be certified, as well as strengthening its supervision
activities. Guidance services are also provided for shops that were not certified last year, to assist them to reach the required standards. C.U.
4 Business Daily Tuesday, March 14 2017
Macau Property
Boss: “Polytec may refund Pearl Horizon buyers” However, the refund scheme may only apply to first-hand purchasers, the company’s chairman Or Wai Sheun said yesterday Kam Leong kamleong@macaubusinessdaily.com
H
ome buyers of the uncompleted Pearl Horizon residential project may request a refund from the developer Polytec Group, said the company’s chairman Or Wai Sheun yesterday, while a representative of the buyers expressed doubt as to whether the proposal can resolve “this complicated issue”. A National Committee member of the Chinese People’s Political Consultative Conference, Mr. Or said in Beijing yesterday that the company would treat refund requests seriously. “If they request a refund from us, and if they’re first-hand home buyers, we will take the requests seriously to see how we can refund them,” said the businessman, as quoted by local broadcaster TDM. However, he added that the company will not accept requests filed by second-hand or third-hand home buyers, as it is hard to confirm how much they paid to purchase the units, adding that most of the home buyers hoped to see their units completed rather than getting back their money. Speaking to Business Daily, the
Chairman of the Pearl Horizon Condominium Owners United Association, Kou Meng Pok expressed his concern that just refunding first-hand buyers would only worsen the conflicts in the issue, given the fact that most of the home buyers are second-hand or third hand buyers. “The only way to solve the issue is to get the project completed,” Mr. Kou said in a phone interview yesterday. “Or, other buyers will ask why only first-hand buyers can be refunded. Moreover, how can the company calculate the amount of refunds to the buyers that are repaying mortgage loans to banks?” Nevertheless, the association chairman believes that by announcing the possible refund scheme for the first time, the company is finally willing to take some responsibility for the situation.
“Liability not on us”
Pearl Horizon, located on a site known as lot-P of the Areia Preta zone on the Macau peninsula, is designed to house 18 towers with a total of 5,000-plus residential units. The MSAR Government announced that the developer’s land grant for the plot was invalid in
January 2016, following the developer’s failure to complete the project before its land use term expired in December 2015. “For the delay of the Pearl Horizon project, we’re sure that Polytec is not the liable party,” Mr. Or said yesterday. “We hope to reach a consensus with the government to resolve the issue. We’re not talking about who should bear the liability, but about how we can restart the construction as soon as possible.” According to the government’s previous disclosures, over 3,000 of the Pearl Horizon units have already been sold off-plan. Asked whether the company would transfer its assets to other subsidiaries or declare bankruptcy to avoid paying compensation to buyers, the company boss claimed: “These are only the thoughts of certain individuals. Polytec has been based in Macau for a few decades. We have never run away irresponsibly.”
“P+P1” completion in May
The developer currently has another high-end residential project under development in the same district, on lots “ P+P1”, for which the land concession will expire on July 5 this year. “We expect Lots P+P1 will be
completed by May. We hope that the company can coordinate to issue occupancy permits in June,” the businessman said yesterday. He added that he is confident that the project will not turn into another “negative issue” in the territory. According to the company’s interim report, released last September, the foundation works of the project have been completed while ‘the superstructure work is progressing smoothly’. Meanwhile, the businessman declined to comment on reports regarding the National People’s Congress' determination that the city’s current land law is in line with the Basic Law, the broadcaster reported.
More actions
On the other hand, Mr. Kou told Business Daily that homeowners had petitioned the city’s former Secretary for Transport and Public Works, Lao Si Io earlier this week. He said owners would gather outside the Macau Science Centre if the former secretary – who is currently the chairman of the science centre does not give any response this week. He added that homeowners are trying to meet with the President of Legislative Assembly, Ho Iat Seng, as well.
Politics
Former IC head knowledgeable of illicit hiring The former head of the Cultural Affairs Bureau, Ung Vai Meng knew of the illicit hiring practices in place at the bureau, according to the current president of ICM, Leung Hio Ming. According to broadcaster TDM, Mr. Leung noted that Ung Vai Meng had requested department heads to investigate the issue, noting that the request was brought up during ICM’s bi-monthly meetings starting in the second half of 2015. The illicit hiring practices were brought to light in a report by local anti-graft watchdog the Commission Against Corruption (CCAC), who slammed ICM, stating it had been using illegal methods to recruit a large number of its workers, some of whom were even relatives of leaders and department chiefs, according to its investigation report, released last Friday. According to CCAC, the number of workers recruited by the Bureau via acquisition of services once reached one sixth of the department’s total employees in 2014, at 112, with the number dropping to 94 in 2016 when the body commenced its investigations into the bureau.
Former head of ICM, Ung Vai Meng
The current director claims that, despite having worked in the bureau for over 20 years, he only became aware of the contents of the CCAC investigation report last month, the same month he became head of the bureau. He further added that he had not fully been informed of the details of the report and refused to disclose when the investigation would finish. C.U.
Business Daily Tuesday, March 14 2017 5
Macau Crime
Slow DNA Judiciary Police state that five years since first being proposed, there still no date for the creation of a MSAR DNA database due to the ‘slow’ legislative process
After five years in development, the Macau Judiciary Police (PJ) announced that its DNA database continues to be without a set date for completion due to the ‘complexity’ of the city’s legislative process. According to the police authorities, a proposal for the database has already been evaluated by authorities in the justice departments and the Office for Personal Data Protection (GPDP) and is currently waiting to be sent for evaluation at the Legislative Assembly (AL). ‘The legislative procedures in this area are slow, therefore the development of the DNA database is still ongoing,’ stated the PJ, adding that this makes it ‘impossible’ to say exactly when the proposal will be submitted to the AL. The idea of a DNA database was proposed in 2012 by the then-PJ Director and now Secretary for Security,
Wong Sio Chak, with the proposal for a ‘legislative study for creating, extracting and managing a DNA database’ to be applied in ‘investigation and forensic science’ being included in the 2013 Governance Action Lines (LAG). The PJ expects the future development of the database will improve the efficiency of law enforcement, adding it would look to establish it ‘as quickly as possible’ after its approval by the AL. DNA databases allow for the cross examining of samples collected at crime scenes with existing registered samples, for identification purposes. After the implementation of a DNA database in Portugal seven years ago, a total of 8,139 samples have been registered and processed, of which 71 per cent were from convicted felons. N.M. with Lusa
Banking
Entry point The Chairman of Chinese investment group Fosun Industrial Holdings Ltd. says his group will look to develop Portuguese bank Millennium BCP operations in the MSAR and Mainland China The founder and Chairman of Chinese investment group Fosun Industrial Holdings Ltd., Guo Guangchang said the group will promote the development of Banco Comercial Português SA (Millennium BCP) operations in Macau and
Mainland China, according to Portuguese newspaper Expresso. After the Portuguese bank - which operates Millennium BCP Macau - underwent a 1.3 billion euro (MOP11.1 billion/US$1.39 billion) capital increase in February of this
year, the Chinese group increased the share under its control to 24 per cent. Developing the bank’s operations in the MSAR is part of the group’s strategy to create ‘synergies’ between China and the Portuguese-speaking world, Mr. Guo explained, without offering specifics on how that development would take place. The businessman - considered by Forbes as the 22nd richest man in China in 2017 - also said the group would look for investments in Brazil and Africa, with its three main areas of focus being health, entertainment and insurance.
For the whole of 2016, Millennium BCP registered a 90 per cent yearly decrease in profits, to 23.9 million euros, while its Macau branch finished the year with MOP165.7 million (US$27 million) in profits, a 17.6 per cent
year-on-year decline. In Portugal, Fosun also owns Fidelidade insurance company and healthcare company Luz Saude, as well as a stake of more than 5 per cent in national grid company REN. N.M.
6 Business Daily Tuesday, March 14 2017
Macau
Insurance
As Tucker steps down, new AIA chief has big shoes to fill Beyond slowing growth, AIA and its rivals, which have been lightly regulated compared to their banking peers, will face a greater compliance burden going forward Michelle Price and Sumeet Chatterjee
I
nsurer AIA Group Ltd's new CEO, Ng Keng Hooi, will have big shoes to fill as the group faces the prospect of slower growth and digital disruption
in some of its key Asian markets, industry insiders and analysts said on Monday. The group’s shares fell 3.3 per cent on Monday afternoon in Hong Kong as investors digested the news that current CEO Mark Tucker will be
retiring in September after what was regarded as a stellar seven-year stint at the helm. “Clearly, Tucker has been a driving force at AIA and anybody taking on that CEO role is stepping into a big legacy,” said Keith Pogson, senior partner of APAC financial services at EY. “There will now have to be a period of thoughtful reflection as to how AIA moves forward post Tucker.” A one-time professional footballer who has held several leadership jobs including running Britain’s Prudential, Tucker is leaving the world’s third-largest life insurer as it faces new headwinds amid a regulatory crackdown in China and sluggish growth in markets including Thailand and South Korea. He will be succeeded on Sept. 1 by Ng, who has served as AIA regional chief executive for the past six and a half years. Ng, 62, joined AIA in 2010, before which he was group CEO of Singapore-based Great Eastern Holdings and served a 20-year stint at Prudential. Tucker, 59, is a tough act to follow. Since taking the company public shortly after his appointment in 2010, the British-born executive has presided over a doubling in AIA share’s price - driven for the most part by a pivot in focus towards Asia. Over the past seven years, the company has expanded rapidly into key growth markets including India and China, leading to a quadrupling in the value of new business at AIA to US$2.8 billion between 2010 and November 2016, according to the company. “Under his leadership, AIA has achieved impressive growth via steady topline expansion, ongoing p r o d u ct m i x i m p r o v e m e n t, expansion in distribution channels, accretive acquisitions, as well as expansion into new markets,” analysts at Citi wrote on Monday, noting the company was still wellpositioned with an experienced senior management team.
Capital controls
The group put in another strong performance in 2016 buoyed by steady demand for policies in Hong Kong, with mainland Chinese seeking overseas investment opportunities to cushion the impact of a weakening yuan. China and Hong Kong together accounted for about half of new business growth globally at AIA. But last year’s surge in mainland Chinese seeking policies in Hong Kong has led Beijing to crack down
on such purchases, and worries about further regulatory tightening are weighing on investor sentiment, according to analysts and industry insiders. AIA shares dropped 15 per cent in the December quarter, and were down 6 per cent for 2016 - their first annual decline since the insurer’s market IPO. Citi said on Monday the group’s historical growth had set a high base and that much of the easiest expansion had already been realised under Tucker’s tenure. “We also continue to believe lingering capital controls in China may further dampen growth from here,” it said. The group’s other major markets include Singapore and Malaysia - the Southeast Asian countries that have become a battleground for foreign insurers attracted by the region’s lower insurance penetration levels. Industry insiders said these markets had also seen a tough start to the year.
Key Points Tucker to retire from AIA in Sept., joining HSBC as chairman The 59-year old Brit to be replaced by regional CEO Ng Keng Hooi Tucker’s retirement comes amid growing challenges for AIA Analysts say group still well-positioned, transition manageable
“It has been a difficult start to the year for the insurance industry. The very profitable Mainland (Chinese) business is showing signs of slowing down because of the crackdown on capital outflow channels,” said a senior executive at a rival group in Hong Kong. “Secondly, some other regional markets like Thailand, which have been strong growth areas, have showed a decline recently. So the Asian insurance industry is braced for a few tough years.” Beyond slowing growth, AIA and its rivals, which have been lightly regulated compared to their banking peers, will face a greater compliance burden going forward as well as increased competition from digitally-savvy competitors. “Are you opening yourself up to being disrupted, and how does digital fit into that picture? These are the big challenges in the Asian insurance market,” Pogson said. Reuters
Business Daily Tuesday, March 14 2017 7
Macau Gaming
Lippo officially quits Incheon gaming project The company sold its interests in the casino project amid “uncertainties” Kam Leong kamleong@macaubusinessdaily.com
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roperty developer Lippo Limited has disposed of its entire interest in a joint casino project in Incheon, South Korea, with American casino operator Caesars Entertainment Corp., selling it to a new consortium between the latter and Chinese Guangzhou R&F Properties Co., Limited.
According to Lippo’s filing with the Hong Kong Stock Exchange last week, the whole consideration of the disposal totalled US$12.2 million (HK$94.7 million), while the aggregate amount received and receivable by Lippo will amount to some US$23.5 million. In March 2014, the initial consortium between Lippo and Caesars LOCZ Korea Corp. - was given the green light by the Ministry of Culture,
Sports and Tourism of the Republic of Korea to design, develop, construct and own the gaming project in Incheon. The joint venture comprised Lippo’s wholly-owned subsidiary Lippo Worldwide, partly-owned OUE International, and Caesars Entertainment’s subsidiary Caesars Korea. ‘Members of the consortium were unable to agree and finalise the investment in the project, the form that the company’s investment should take, and the terms of the definitive agreements governing the project,’ Lippo explained in the filing.
‘In view of the above uncertainties, the Board considers that the exit is beneficial to the group as it will release the capital which had been tied up in the project over the past few years for use for general corporate purposes of the Group,’ the developer added.
Uncertainties
Last December, the company announced in its interim report that it had received “conditional approval” from the South Korean authorities for the exit, following the company entering into a memorandum of implementation with Caesars on the withdrawal in August the same year. But the company’s intention to quit the project apparently came much earlier than that. In December 2015, it released two filings saying the Korean casino project was clouded with ‘uncertainties’ as its consortium with Caesars had not mutually agreed on all the conditions in their conditional land sale and purchase agreement. In March 2016, the company announced it was considering quitting the gaming development given that there was no certainty as to whether a final license for the project would be granted by the South Korean authorities, as well as in consideration of the gaming outlook in North Asia and the volatility of the global economy. The original consortium between Lippo and Caesars planned to invest 743.7 billion won (HK$4.92 billion/ US$61.3 million) in the first phase of the project by 2018, and a total of 2.3 trillion won for the whole project, which planned to include a foreigner-only casino, hotels, residential buildings, convention centres and a shopping mall.
Gaming
CPPCC
Francis Lui confident about Japan gaming license
Leung Chun-ying elected vice chairman of CPPCC National Committee
Deputy chairman of casino operator Galaxy Entertainment Group Ltd, Francis Lui Yiu Tung, is confident that the company can seize a chance to establish a foothold in the Japanese gaming market. In an interview with Hong Kong Economic Times, published yesterday, the company executive said Galaxy Entertainment had studied possible gaming developments in Tokyo and Osaka, however consolidated plans will need to wait for the country’s confirmation of its implementation timetable. Last month, the gaming corporation announced its interest in developing the Japanese market for the first time, following the country legalising gaming operations in December 2016. Asked by the news outlet whether the company is able to invest as much as its Macau market rival Las Vegas Sands Corp. – whose boss Sheldon Adelson expressed a desire to invest some US$100 million (MOP800 million) in a Japan casino - Mr. Lui indicated his company could afford
a huge investment as well, given its strong balance sheet and cashin-hand amounting to some HK$16 billion. “The Lui family’s long-term development history in the country gives us advantages. We’re very confident,” the report quoted the deputy chairman as saying. During the company’s annual results presentation last month, Mr. Lui’s father and chairman of the company, Lui Che Woo, said the group is “well positioned to penetrate into [Japan’s] gaming market” given its long-standing relationship with Japanese partners such as Hotel Okura. In addition to Galaxy Entertainment and Las Vegas Sands, other gaming operators in the city, or their parent companies – with the exception of SJM Holdings Ltd- have all expressed their interest in securing a gaming license in Japan. In particular, the chairman of Melco Crown Entertainment Ltd, Lawrence Ho Yau Lung said last month: “We’ll absolutely spend whatever we need to win [a license].”
This year, Hong Kong will celebrate the 20th anniversary of its return to the Mainland and a new chief executive will be elected Leung Chun-ying (also known as CY Leung), chief executive of the Hong Kong Special Administrative Region (HKSAR), was elected Monday vice chairman of the 12th National Committee of the Chinese People’s Political Consultative Conference (CPPCC). He was elected at the closing meeting of the annual session of the top political advisory body. Jonathan Choi Koon-shun, a CPPCC National Committee member from Hong Kong, said the election result is well-deserved for Leung, who has implemented the “one country, two systems” principle and the Basic Law of the HKSAR in a comprehensive and faithful manner since he assumed office as the chief executive. In dealing with the illegal “Occupy Central” movement, opposing “Hong Kong Independence” and addressing other major issues, he has been firm in stance and resolute in action, effectively safeguarding national sovereignty, security and development interests, as well as Hong Kong’s overall interests, Choi said. “Leung’s achievements are there for all to see,” he added. Leung has made important contribution to Hong Kong’s prosperity and stability, said Annie Wu Suk-ching, also a CPPCC National Committee member from Hong Kong. Wu cited Leung’s efforts to integrate Hong Kong’s development into the country’s economic and social development plan for the 2016-2020 period and the Belt and Road Initiative, as
well as his proposal that Hong Kong take advantage of its role as a “super link” connecting the mainland and the world to board the country’s express train of development. As the vice chairman of the CPPCC National Committee, Leung could serve the country and Hong Kong at a higher level, and would surely perform his duties well, said Stephen Tai Tak Fung, a CPPCC National Committee member from Hong Kong. Leung was elected chief executive of HKSAR in March 2012 and took office on July 1 the same year. This year, Hong Kong will celebrate the 20th anniversary of its return to the motherland and a new chief executive will be elected. Leung announced late last year that he would not seek re-election in 2017 due to family reasons. His term ends on June 30 this year. Xinhua
8 Business Daily Tuesday, March 14 2017
Greater China Monetary policy
PBOC’s official says market opening to let money flow in and out Deputy Governor said that more domestic companies investing overseas is "generally a good thing"
C
hina’s policy makers support opening financial markets for capital and investment to flow both in and out of the country, according to central bank Deputy Governor Pan Gongsheng. China will push ahead on oversight and enforce existing regulations on foreign exchange, Pan said in an interview Sunday with Bloomberg News and Caixin Magazine. Scrutiny of foreign companies transferring profits out is “not excessive,” he added. A healthy foreign-exchange market helps all participants, said Pan, who also heads the State Administration of Foreign Exchange, which executes currency policy. With U.S. tightening looming and the People’s Bank of China interest rate at a record low, China’s capital outflow pressures are poised to intensify this year. The central bank has stepped up scrutiny of requests to move money out of the country since last year, and it’s also speeding reforms to open up the domestic bond market to lure more foreign investors. “China has always had these reviews, and those meeting requirements can transfer money freely,” he said. “Companies can lodge a complaint with the foreign-exchange authority if they have any problems.” Funds in yuan aren’t fully convertible to other currencies under current
capital account rules. Companies must provide supporting documentation including tax records and audit reports when they plan to transfer profit out of the country. China also has a US$50,000 cap on how much foreign currency individuals are allowed to convert each year. PBOC Governor Zhou Xiaochuan said at a rare briefing Friday that excessive capital flowed in after developed economies rolled out stimulus amid the global financial crisis, and a considerable amount of capital will flow out as the global economy
stabilizes. He said China is improving some capital flow policies that haven’t been strictly enforced in the past. Pan said in the interview in Beijing that more domestic companies investing overseas is “generally a good thing” and that the central bank supports qualified companies conducting “orderly, steadily” overseas investment. Companies that move too fast in making overseas investments don’t necessarily have good experiences, he said, and “only those who have travelled steadily can have a good trip.” There has been “irrational and abnormal” investment activity, and it’s necessary for regulators to give guidance on those investments, Pan said. While it can be difficult to
distinguish whether foreign investments are legitimate or not, Pan said, some scenarios deserve special attention from regulators, including companies investing outside of their main business areas and small domestic parent companies setting up large foreign subsidiaries.
“The central bank’s main task this year is to give foreign investors better access to the domestic bond market, not tightening capital controls to keep the yuan stable” Tommy Xie, an economist for OCBC in Singapore
Pan Gongsheng, Deputy Governor of People’s Bank of China and Director of the State Administration of Foreign Exchange. Lusa
“The central bank’s main task this year is to give foreign investors better access to the domestic bond market, not tightening capital controls to keep the yuan stable,” said Tommy Xie, an economist for OCBC in Singapore. Allowing more overseas investors to access the bond market can increase inflows, which will help China’s financial markets, he said. Bloomberg News
Hainan
Sun-seeking retirees flock to ‘Mainland’s Florida’ More than 70 per cent of apartment-buyers in Hainan in 2015 did not live on the island Julien Girault
Blessed by palm-fringed beaches and balmy weather, the island province of Hainan is fast becoming known as “China’s Florida,” drawing masses of retirees fleeing the biting cold of their hometowns. “At home in Harbin, it (can be) -30 degrees (-22 Fahrenheit), it’s unbearable! But here the climate is perfect,” said a 71-year-old pensioner who gave only her surname, Wang. Hailing from the capital of the polluted, frigid, rust-belt province of Heilongjiang on the Siberian border, Wang and her husband have migrated each winter to the Hainan resort town of Sanya for the past eight years. “Here we can breathe, and that warmth is better for our health,” said Qi Ningxia, a 60-year-old asthma-sufferer from Heilongjiang, who joined Wang in waving brightly coloured fans in a group exercise-dance near the shore of the South China Sea. “And we find so many people here from our province! We are sure we will not be bored,” Qi said. Between 600,000 and 700,000 elderly descend on Sanya every winter, almost doubling its population, said Huang Cheng, a sociologist at Sanya University. Nearly half of these “migratory birds”, as they are called, come from the north-eastern provinces of Heilongjiang, Jilin and Liaoning. The trend began in 2000 as residents of those provinces began buying Sanya apartments, opening businesses and luring friends and family to join
them, creating a “snowball effect,” Huang said. Recreational centres with features aimed at the elderly, such as mahjong tables, have mushroomed. “Ping-pong, billiards, chess, calligraphy, painting or computer science” are among the offerings on display, said the director of one such centre who only gave her surname Zhang.
Pressure on locals
Hainan island itself was once a remote outpost, a place of exile for criminals and disgraced scholars, and Sanya merely a secluded, backward fishing village. Today, Sanya is home to a Club Med resort, yacht marinas, golf courses and luxury residential complexes as local authorities aim to attract both foreign and domestic tourist dollars.
The retirees from north-eastern China do not fit this profile: the overwhelming majority shop in local markets rather than in shiny new malls, and prefer to play cards instead of golf. One-third of the pensioners who winter in Sanya -- many retired steel, petroleum and mine workers -- rely on limited monthly income of RMB2,000-3,000 (US$290-US$435), while one-quarter receive even less, according to sociologist Huang. The influx has put pressure on local residents, who have to contend with surging food prices when the population doubles in winter. Real-estate costs also have soared as some wealthier pensioners buy apartments. More than 70 per cent of apartment-buyers in Hainan in 2015 did not live on the island, according to official figures. Hospitals are also struggling to cope with an explosion in demand from
the ageing “migratory birds.” “The situation has evolved so suddenly that we have to allow time for local infrastructure to adapt,” said An Honglian, director of the Yihe service centre. Th e Sa n y a-ba s e d B u d d h i st non-profit helps retirees with practical problems from plumbing issues to health concerns. An said the flood of pensioners to warmer destinations will only intensify as China’s population ages.
“The situation has evolved so suddenly that we have to allow time for local infrastructure to adapt” An Honglian, director of the Yihe service centre
China has more than 212 million people over the age of 60, who will represent 25 per cent of the population by 2030, according to the National Bureau of Statistics. Other southern provinces like Yunnan and Guangxi also are witnessing an increase in the number of elderly migrants. Wang, the Heilongjiang pensioner, is so convinced of the benefits of her winter sojourn that she persuaded her son and grandchildren to join her in Hainan for the Lunar New Year holiday in late January, overturning a Chinese tradition of spending it in one’s hometown. “But here, there is bracing sea air. It’s good for the health of the whole family,” she explained. AFP
Business Daily Tuesday, March 14 2017 9
Greater China Technology
In Brief
Mainland mobile app economy growing on fast track Mobile payment users grew by 31.2 per cent year on year in 2016 China’s booming mobile app market will continue to expand with rising smart device penetration and mobilization of more traditional businesses, according to a leading industry observer. “China’s app economy is accelerating in growth, putting it within striking distance of Japan and the United States,” Bertrand Schmitt, CEO and co-founder of App Annie, told Xinhua.
“Gaming apps are the biggest market winners in terms of revenue, followed by social networking and entertainment apps, including those offering video streaming and photo editing services” Bertrand Schmitt, CEO and co-founder of App Annie Research from App Annie, an app market data provider, showed that China surpassed the United States in iOS App Store downloads in 2015 and claimed the top spot for iOS App Store revenue. Chinese companies took eleven spots in the global top 52 publishers list, with Tencent and NetEase ranking first and third respectively for iOS and Google Play overall revenue, according to the latest report from the company. China was home to about 700
million mobile Internet users by the end of last year, posting double-digit growth for three consecutive years, according to a report released by the China Internet Network Information Centre (CNNIC). “Though smart phone penetration growth might slow down in the future, the market volume is continuously expanding and people tend to spend more for app services,” Schmitt said. “Gaming apps are the biggest market winners in terms of revenue, followed by social networking and entertainment apps, including those offering video streaming and photo editing services.” Schmitt said that apps were transforming many sectors, especially in the retail and banking sectors, evidenced by China’s booming mobile e-commerce and mobile payment industries. Mobile payment users grew by 31.2 per cent year on year in 2016, with about two-thirds of smart phone users enjoying the service, the CNNIC report showed. “Traditional sectors must continue to invest in their app strategies to stay competitive in an increasingly mobile world,” he added. He said that another major reason
for optimism on China’s app economy was the country’s entrepreneurship. The French IT veteran chose to start the company in Beijing in 2010, as he found out that in addition to its huge mobile app market potential, China was rich in talented engineering personnel, a crucial resource for tech start-ups. “Back in 2010, and more so now, I often met people who would give me three business cards at one time. This is rare in other markets. Chinese people are very entrepreneurial,” Schmitt said. “A decade ago it was about foreign companies grabbing the Chinese market, but now Chinese companies are actively expanding overseas.” He believes that the diverse nature of the market in China and the ability to localize are all factors that give China a boost in the industry. “Chinese companies have an edge in going global thanks to their rich experience in developing both labour-intensive and technology-driven products in China,” he said. “They can start overseas expansion from nearby markets first, and most importantly, focus on localizing the product with cultural adaptation.” Xinhua
Summit
Beijing says Chile Pacific trade meeting not about TPP China said yesterday that a meeting in Chile to discuss a possible regional Pacific trade deal is not strictly about the languishing Trans-Pacific Partnership (TPP), as China tries to distance itself from onetime U.S.-led trade pact. Representatives from 12 countries that formed TPP, plus China and South Korea, will meet today and Wednesday for the first time since U.S. President Donald Trump pulled the United States out of the TPP in January, effectively killing the accord. China’s special envoy for Latin America, Yin Hengmin, will attend to discuss “Asia-Pacific integration and the next step for cooperation in the Asia Pacific region, and to exchange broad ideas”, foreign ministry spokeswoman Hua Chunying said. Mainland plant
Boeing plant to deliver 100 737s a year Boeing Co’s new 737 completion plant in China will aim to deliver 100 planes a year, with the first expected to take place in 2018, China’s official Xinhua news agency said. Construction on the factory, which Boeing will operate with Commercial Aircraft Corp of China Ltd (COMAC), will begin at the end of March, Xinhua reported citing the industrial aviation park in the coastal city of Zhoushan where the plant will be located. The plant, which will install interiors and paint liveries, will create 2,000 jobs, Xinhua added. It will be Boeing’s first 737 completion factory outside the United States.
Auto industry
Lincoln plans to produce luxury SUV in Mainland by late 2019 The Changan-Ford joint venture is in the process of getting approval to produce Lincoln vehicles locally in China Ford Motor Co’s luxury unit Lincoln plans to produce luxury SUVs in China by late 2019, as it steps up its move into the world’s largest auto market and aims to catch up with German and U.S. rivals who already manufacture in the Asian nation. The plan is to build an all-new sports utility vehicle (SUV) to suit Chinese tastes, Lincoln China said
in a statement. Ford plans to use an existing assembly plant it jointly operates with Chongqing Changan Automobile Co Ltd to produce the Lincoln vehicles, a Ford spokesman in Shanghai said. Lincoln vehicles are currently imported into China, and their sales have jumped nearly 180 per cent in 2016, the statement said.
“The move to local production is a key next step in Lincoln’s evolution in China and will complement continued imports from North America,” it said. The statement gave no other details about the plans. The Ford spokesman declined to give the model’s anticipated production volume or describe the model other than to say it is an SUV. The Changan-Ford joint venture is in the process of getting approval for this move to produce Lincoln vehicles locally in China, said the spokesman.
Key Points Lincoln vehicles currently imported into China Their sales jumped nearly 180 pct in 2016, says company Lincoln China President Amy Marentic told Reuters in October that the brand was studying whether to produce cars locally in China. Lincoln was accelerating its entry into China with plans to have 65 Lincoln stores by the end of 2016, instead of previous plans of 60, with 80 planned for year-end 2017, she said. Marentic said the company would also open five to 10 smaller sales branches to tap into fast-growing auto sales in lower-tier Chinese cities. Reuters
NPC
National lawmakers mull provision on reputation of heroes A new provision has been added to China’s draft general provisions of the civil law to hold people accountable for damaging the reputation and honour of heroes and martyrs, according to the presidium for the on-going annual parliamentary session. People who harm the name, portrait, reputation and honour of heroes and martyrs, thus hurting the public interest, shall bear civil liability, said the provision, which was added upon suggestions by lawmakers at the annual session of the National People’s Congress.
10 Business Daily Tuesday, March 14 2017
Greater China Currency
No “bottom line” for yuan or fx reserves PBOC official said reserves had been sold during the past two years to prevent the yuan overshooting on the downside
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hina’s central bank does not have a “bottom line” for either the yuan exchange rate against the dollar or foreign exchange reserves, a senior official told Reuters in an interview. A fall in reserves below US$3 trillion earlier this year raised questions in markets over the central bank’s pain threshold for bolstering the yuan.
But, Zhou Xuedong, director of the business management department in the People’s Bank of China, denied this was a concern. “As far as I know, China has never set a bottom line for the yuan exchange rate or the size of foreign reserves. The markets will guess about which level the yuan will reach, which then creates expectations,” Zhou told Reuters in an interview
conducted on Friday. “In fact, we aren’t concerned about the foreign reserves or the yuan reaching any specific level.” Financial markets are closely watching to see if China will allow the yuan to weaken below the 7-to-the dollar level as expected U.S. interest rate hikes buoy the dollar. State banks stepped in aggressively to defend that level in December. Zhou said reserves had been sold during the past two years to prevent the yuan overshooting on the downside. But he said that while guiding market expectations was important there was no intent to set
the direction for the yuan. “We do not deliberately pursue the appreciation or depreciation of the yuan, because that is not sustainable,” he said. China’s foreign exchange reserves unexpectedly rose for the first time in eight months in February, rebounding above US$3 trillion as a regulatory crackdown and a steadying yuan helped staunch capital outflows.
“In fact, we aren’t concerned about the foreign reserves or the yuan reaching any specific level” Zhou Xuedong, director of the business management department in the People’s Bank of China Zhou added that China’s closer scrutiny of outbound investment is necessary to prevent fraudulent deals, but no new limits have been implemented on capital outflows. “It is necessary to strengthen reviews of the authenticity and compliance of investment and trade,” said Zhou. “Some preferential policies supporting outbound investment may be cancelled...but in fact, the basic policy framework has not changed.” Reuters
Tag
Schwarzman sees Trump reducing criticisms of China on yuan Devin Banerjee
President Donald Trump will likely temper his criticisms of China, including his campaign claim that the country manipulates its currency, one of his top economic advisers said. “I don’t think that there’s going to be issues regarding China as a currency manipulator and some of the other things,” Steve Schwarzman, the chairman of Trump’s strategic and policy forum, said Sunday on CNN. While Trump said on the campaign trail that he would label the U.S.’s biggest trading partner a currency cheater and seek to fix large trade imbalances, some administration officials and advisers are softening their rhetoric. Treasury Secretary Steven Mnuchin said last month he wants to undertake a regular review of foreign-exchange markets to determine if China is cheating, adding that no announcement on currency manipulation would come before the Treasury’s April report. While the U.S. has long accused China of undervaluing its currency to boost exports, Beijing recently burned through foreign reserves to support the yuan amid an economic slowdown and capital outflows. Data last week showed China’s foreign-currency reserves rose in February for the first time in eight months amid tighter capital controls and gains in the yuan. The International Monetary Fund doesn’t classify China as a currency manipulator. Schwarzman, the chief executive officer of alternative-investment manager Blackstone Group LP, has close ties to China. The billionaire has led investments in the country for a decade, and one of China’s sovereign
wealth funds owns about 5 per cent of New York-based Blackstone. In 2013 he started Schwarzman Scholars, a Rhodes Scholarship-like program at Beijing’s Tsinghua University for students from around the world.
Learning curve
President Xi Jinping and other Chinese officials have a calm outlook on their relationship with the U.S. under Trump, Schwarzman said Sunday. Discussions in China regarding Trump’s foreign policy are “measured and not quite as hyperbolic” as in the U.S., he said. “They have a certain equanimity
that these are early days and there’s a learning curve” for Trump, said Schwarzman. “As President Xi referred to himself, and said after three years of doing my job I know much, much more than I did my first day. He said that’s the nature of being president of any country.” Schwarzman was named as chairman of the strategic and policy forum in December, saying Trump asked him to assemble a group of business leaders to advise the president on job creation and economic growth. The forum held its first meeting with Trump at the White House last month. Schwarzman on Sunday said Trump
initially offered him a full-time role in the administration, which the 70-year-old Blackstone co-founder declined. Blackstone managed US$366.6 billion in private equity holdings, real estate, credit assets and hedge funds as of Dec. 31. Companies in which it’s invested employ more than half a million people. Asked by CNN’s Fareed Zakaria what effects Trump’s executive order on immigration would have on the U.S. economy, Schwarzman said the issue is “not just over my pay grade, but outside of my pay grade.” Bloomberg News
Business Daily Tuesday, March 14 2017 11
Asia Industry
Surprise fall in Japan machinery orders raises doubts about recovery Compared with a year earlier, core orders fell 8.2 per cent in January Minami Funakoshi
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apan’s core machinery orders unexpectedly fell in January from the previous month and dipped the most in five months, adding to worries about whether recent signs of economic recovery will be sustainable. Japanese policymakers hope a recovery in capital spending will help drive growth in the world’s third-largest economy and pull it out of deflation and stagnation. Core machinery orders fell 3.2 per cent in January, sharply undershooting the economists’ median estimate of a 0.5 per cent increase, Cabinet Office data showed yesterday. That followed a rebound in December, when core orders rose 2.1 per cent. While the data series can fluctuate widely, it is regarded as a leading indicator of capital spending in the coming six to nine months. “The results were weak. I am somewhat worried, but machinery orders are volatile so it’s necessary to watch for a while longer,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. Compared with a year earlier, core orders, which exclude those of ships and electrical equipment, fell 8.2 per cent in January - the biggest fall in eight months and larger than the analyst estimate for a 3.3 per cent
decrease. The Cabinet Office maintained its assessment of machinery orders, saying the pick-up was stalling. Manufacturers surveyed by the Cabinet Office forecast core orders to rise 1.5 per cent in January-March from the previous quarter. The figure was seasonally adjusted from the previously estimated 3.3 per cent increase. While recent Japanese data has been largely upbeat, the readings were still subdued and growth is still not solid enough to generate the
sustained inflation that the Bank of Japan needs to meet its 2 per cent price target. Capital expenditure grew at the fastest pace in almost three years in the fourth quarter, but private consumption has remained stubbornly sluggish. Exports have crept back into expansionary territory but are facing the risk of a rise in U.S. trade protectionism. With the outlook still murky, the BOJ is expected to keep its policy settings unchanged at a board meeting later this week. Economists polled by Reuters expect the central bank will keep the short-term policy interest rate at minus 0.1 per cent and the 10-year
government bond yield target at around zero per cent. While overseas protectionist policies do dampen capital spending, the global economy is recovering, said Mizuho’s Tokuda. “The two factors will pull against each other so capital spending won’t keep rising a lot,” he said. U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe agreed last month to launch a bilateral economic dialogue to discuss issues such as macroeconomic policies, trade and infrastructure investment. By sector, core orders from manufacturers fell 10.8 per cent in January from the previous month, following a 0.8 per cent rise in December. Reuters
Forecast
New Zealand’s robust growth likely softened in fourth quarter Economy has raced along for the past few years courtesy of an influx of migrants and tourists Charlotte Greenfield and Tom Westbrook
New Zealand’s economy, which surged in 2016’s third quarter, likely cooled in the final three months, as heavy spring rain cut dairy production and a deadly earthquake struck. Economists polled by Reuters expect gross domestic product (GDP) grew 0.7 per cent in the fourth quarter from the third, when output jumped 1.1 per cent.
Key Points Q4 GDP forecast +0.7 pct Q/Q – Reuters poll Low dairy production, earthquake hurt growth Data due at 2145 GMT on Wed, March 15 Annual growth in the economy is seen around 3.1 per cent, down from 3.5 per cent the previous quarter but rapid by rich world standards. The Reserve Bank of New Zealand (RBNZ) has been looking for a increase of around 1 per cent from
the previous quarter, so it might be slightly disappointed by the figure to be reported on Wednesday. Softer-than-expected data for manufacturing and sales, published last week, is partly responsible. The net effect of the 7.8 magnitude quake centred around Kaikoura, a popular tourist area, also remains a question mark. “Recent developments signal a little less momentum in the economy than we had previous been expecting,” Westpac bank economists said in a research note, though adding that the headwinds are seen as temporary. Still, the central bank is unlikely to waver on its determination to keep rates at a record low of 1.75 per cent when it meets next week.
plus robust house construction activity. “The wild card for the quarter will be the impact of the Kaikoura earthquake and associated disruption throughout the top of the South Island and bottom of the North Island,” said ASB senior economist Jane Turner. A major drag on growth was reduced production of milk, the largest goods export earner, as wet spring
weather curbed collection. Data released last week showed falling volumes in dairy processing had contributed to a 1.8 per cent drop in manufacturing activity in the fourth quarter. But those factors are seen as temporary, with the migration boom expected to drive more spending on everything from education to health and rising demand for housing likely to fuel growth. Reuters
Racing along
The RBNZ had previously signalled it could hold the official cash rate steady for this year and next to try to increase the inflation rate and cope with increasing offshore risks from global protectionism. New Zealand’s economy has raced along for the past few years courtesy of an influx of migrants and tourists
The Reserve Bank of New Zealand headquarters
12 Business Daily Tuesday, March 14 2017
Asia In Brief Industry
Malaysia factory output up Malaysia’s industrial production in January rose 3.5 per cent from a year earlier, slowing in pace for the second month in a row, government data showed yesterday. Factory output was below the 5.7 per cent rise forecast in a Reuters poll, and down from the 4.7 per cent increase in December. The expansion was supported by strength in the manufacturing, mining, and electricity sectors, data from the Statistics Department showed. Manufacturing output rose 4.6 per cent year-on-year, helped by strong growth in the food and electronic products sub-sectors. Wholesale
Japan wholesale prices rise Japanese wholesale prices rose 1.0 per cent in the year to February, the Bank of Japan data showed yesterday. The rise in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services follows a 0.5 per cent annual increase in January. Overall final goods prices -- the prices of finished products charged to businesses -- fell 0.6 per cent from a year earlier. Domestic final goods prices, which loosely track the consumer price index, rose 0.3 per cent from a year earlier. Election
S.Korea looking into share trading of 13 companies South Korea is looking into share trading of 13 companies which are believed to be linked to possible presidential candidates ahead of an election in two months, the country’s financial watchdog said yesterday. The Financial Supervisory Service (FSS) said it is investigating whether there may have been speculation in shares in eight firms which are thought to be linked to possible candidates and is looking into five others ahead of an official inquiry. There could be more as the election date approaches, a senior FSS official said, declining to be identified as he was not authorised to speak to media. Monetary stance
Thai c.bank chief says not worried if Fed raises U.S. rates Thailand’s central bank is not worried if the Federal Reserve raises U.S. interest rates this week and it expects no impact on Thai financial markets, the governor said yesterday. The central bank has not found any unusual capital movements and will keep monitoring the market, Bank of Thailand Governor Veerathai Santiprabhob told reporters. “There is nothing to worry about. A weaker baht is a normal response to expectations that the Fed may raise rates this time,” he said. “If the Fed really raises rates, it may not affect the financial market as it has already signalled that. There should not be any surprise.”
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Infrastructure
Thailand says optimistic transport spending will resume Total government investment spending reached a record US$10.4 billion in the last fiscal year ending September 30 Orathai Sriring
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early two years after Thailand’s junta approved US$40 billion for big transport projects to spur economic revival, it has spent barely two per cent of that, official figures show. The first of the 20 projects in the junta’s big transport spending plan was approved in May 2015. By late January only 26.6 billion baht (US$760 million) had been spent on them, documents from ministries showed. Projects are being held up by unforeseen delays for feasibility studies, bidding, procurement and changes to key officials, officials say. Most projects exist only on paper, the documents seen by Reuters show. “The only problem is government regulations, which make people afraid of doing anything as they have to be careful and make everything right,” Finance Minister Apisak Tantivorawong told reporters last week. “But much of the problem has been fixed, with several projects now in the process. So delayed projects from last year will be on time this year,” he said. The slow start reflects the government’s broader challenge in meeting investment promises to lift Southeast Asia’s second- largest economy, for which tourism has been the only bright spot since a 2014 military coup. Thailand’s growth - 3.2 per cent last year - has lagged Southeast Asian counterparts since the coup and growth was again below forecast in the last quarter.
Total government investment spending reached a record 365 billion baht (US$10.4 billion) in the last fiscal year ending Sept. 30. But as a proportion of the government’s target, it fell further short than in any year for a decade except for the 2014 crisis year.
Off the rails
For an example of what can go wrong, look at the railways. After months of delays to vet contenders to bid for five double-track railway projects worth over 100 billion baht (US$2.9 billion), the governor and board of the state railway company were replaced by military decree last month. The change, following complaints of a lack of transparency, should speed up the work, said government spokesman Lieutenant General Sansern Kaewkamnerd. “This will enable government projects to go ahead,” he said. But it meant that bidding on the projects was immediately suspended. Trying to kick-start investment, the junta has now set up a new committee to oversee all projects worth over 5 billion baht. “We want large projects to get going as quickly as possible,” Deputy Prime Minister Somkid Jatusripitak told reporters at Government House. Finance Minister Apisak said disbursement for all infrastructure projects would triple this year to 240 billion baht, with two-thirds of that for the big transport projects. Doing that could help growth outpace the ministry’s 3.6 per cent growth target, he said.
Bank of Thailand Governor Veerathai Santiprabhob told Reuters he was optimistic of swift progress. “There’s a high degree of assurance that these projects will be executed. That’s another push to the economy,” he said.
Construction stocks boom again
The stock market seems to believe that. Companies in the construction materials index, those with the most to gain, outperformed the broader stock exchange index by more than 22 per centage points in 2015, the year the transport infrastructure plan was announced. But last year they lagged by more than 18 points, when little happened. Reflecting some of the optimism that the projects will now get started, the index is up over 7 per cent year to date. Construction firm CH Karnchang said it expected to secure public work of over 50 billion baht in the first half of 2017, while it had a current backlog of public construction work worth about 89 billion baht. “The company is confident that the government will push ahead useful projects,” Executive Board Chairman Plew Trivisvavet said. Tipco Asphalt Pcl forecast sales would rise at least 14 per cent. Top producer Siam Cement has, however, predicted demand would rise only 1-3 per cent this year after a 2 per cent fall in 2016, with infrastructure projects only kicking in towards the end of the year. With little investment over the past decade, Thailand’s ranking for transport infrastructure on the World Economic Forum’s Global Competitiveness Index fell to 37th place in 2016-17 from 23rd place in 2010. Indonesia climbed to 36th from 63rd. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Tuesday, March 14 2017 13
Asia Monetary policy
Bank of Japan seen standing pat Analysts expect the bank to keep intact a loose pledge to maintain the pace of its annual increase in Japanese government bond Leika Kihara
The Bank of Japan (BOJ) is expected to keep monetary policy steady on Thursday and stress that inflation is nowhere near levels that justify talk of withdrawing massive stimulus, as weak consumer spending casts a cloud over an otherwise healthy pick-up in the economy. Many BOJ officials say they are more confident about prospects of economic recovery as exports and factory output benefit from improving global demand. But they see more to fret about on consumer prices, as budding growth in some sectors is not generating inflation. In a sign that companies remain wary of raising the prices of their goods due to weak consumer spending, prices apart from fuel and food have shown scant signs of life. “The trickle-down effect isn’t there yet, which would be key for inflation to accelerate sustainably,” said a source familiar with the BOJ’s thinking. “It would be wrong for markets to start factoring in an early BOJ rate
hike,” another source said. At the two-day rate review that ends on Thursday, the BOJ is expected to maintain its short-term interest rate target at minus 0.1 per cent and a pledge to guide the 10-year government bond yield around zero per cent via aggressive asset purchases. Analysts also expect the BOJ to keep intact a loose pledge to maintain the pace of its annual increase in Japanese
government bond (JGBs), which is 80 trillion yen (US$696.62 billion). At his post-meeting news conference, BOJ Governor Haruhiko Kuroda is likely to stress that the central bank has no plan to raise its yield targets any time soon with inflation distant from its 2 per cent target. Core consumer prices rose for the first time in over a year in January and many analysts expect inflation to accelerate toward 1 per cent later this year, due largely to a rebound in energy costs and rising import prices from a weak yen. That has diminished market expectations of additional monetary easing, with roughly half of analysts polled by Reuters predicting the BOJ’s next move would be to pull back from its ultra-easy policy.
Some analysts say the BOJ may be forced to raise its yield targets to avoid ramping up bond purchases if Japanese long-term interest rates track global bond yield rises, which are being driven by expectations of higher U.S. interest rates.
Key Points 2-day meeting ends Mar 16, decision expected 0330-0530 GMT BOJ seen keeping interest rate targets unchanged BOJ upbeat on economy, gloomy on inflation - sources Gov Kuroda to brief media 0630 GMT The BOJ hopes to dispel such speculation and stress it won’t raise its yield targets unless the economy strengthens enough to accelerate inflation stably toward 2 per cent, the sources said. Marcel Thieliant, senior Japan economist at Capital Economics, said the BOJ won’t lift the yield targets any time soon with the boost to consumer prices from rising import costs unlikely to last. “What’s more, the main reason why Japan has suffered from a prolonged period of falling prices is deeply entrenched deflationary expectations, and the Bank has had little success in turning expectations around.” Reuters
Bank of Japan headquarters
Trade impact
S.Korea finmin says no firm evidence of China retaliation Seoul has offered cheap loans and deadline extensions for debt repayments to small to medium-sized South Korean businesses hit by a decline in Chinese tourism Shin-hyung Lee and Christine Kim
South Korea does not have firm evidence that China has retaliated for Seoul’s deployment of a U.S. missile defence system, so no action has been taken against Beijing, South Korea’s finance minister said yesterday. China has increased pressure on companies doing business with and in South Korea, largely perceived as retaliation over the deployment of the Terminal High Altitude Area Defence (THAAD) missile system. While China has publicly opposed last week’s THAAD deployment, Beijing has not directly said it was targeting South Korean firms in retaliation.
“If we want to take this into court, we have to have evidence. But we don’t have that yet, so we cannot take action,” Finance Minister Yoo Il-ho told reporters at his ministry. “It’s not as if we are standing still with the evidence in hand.” When asked what would be determined as hard evidence, Yoo declined to answer the question, only saying a ruling cannot be made on conviction alone. “Without a definitive link between these actions (and THAAD), filing a lawsuit or any of that could be difficult,” the minister said. Yoo said the government was aware of the “emotional troubles” at the moment, and Seoul was trying to help companies affected by the
situation. Seoul has offered cheap loans and deadline extensions for debt repayments to small to mediumsized South Korean businesses hit by a decline in Chinese tourism, a joint statement from South Korean financial authorities said on Sunday.
Key Points Conviction alone cannot make for a lawsuit against China -finmin Seoul seeking talks with China at G20 finance ministers’ meeting Fed rate hike could affect S.Korea household debt -finmin Yoo said the government was trying to arrange a meeting with his Chinese counterpart at this weekend’s Group of 20 finance
ministers’ meeting in Germany, but nothing has been fixed yet. He added Seoul would “confidently” take action against China if need be. Ch i n a o p p o s e s t h e T HAA D deployment because it is worried the system’s powerful radar could penetrate its territory. M e a n w h i l e, S o u t h K o r e a’ s financial markets were maintaining steady trade flows after Friday’s ouster of President Park Geun-hye, although economic uncertainties unrelated to the political scandal remain, Yoo added. One of those risks is the U.S. Federal Reserve policy meeting this week, where interest rates are strongly expected to be raised, the minister said. Y o o sa i d a c h a n g e i n U . S . monetary policy could directly affect household debt in South Korea, which the government will try to continue managing. Reuters
14 Business Daily Tuesday, March 14 2017
International In Brief EU
Brexit set to begin as bill enters final stages British Prime Minister Theresa May is expected to trigger Brexit this week by formally notifying the European Union of Britain’s intention to leave the bloc, sending her country into uncharted waters. The legislation empowering May to put Britain on a course that no EU member state has ever taken returned to parliament for its final stages yesterday as European capitals prepare for mammoth negotiations. The bill could be signed into law by the head of state Queen Elizabeth II as early as today, leaving May’s path clear to begin Brexit whenever she wants. Competition
EU says Gazprom offer allays worries Gazprom is ready to comply with EU rules to end a five-year antitrust case and avoid fines, Europe’s competition commissioner said yesterday, signalling a thaw in business ties between Moscow and Brussels despite tensions over Ukraine. “They address our competition concerns and provide a forward looking solution in line with EU rules,” EU Competition Commissioner Margrethe Vestager said in a statement. “We believe that Gazprom’s commitments will enable the free flow of gas in Central and Eastern Europe at competitive prices.” Aviation
Union extends strikes that shuts Berlin airports Workers at two airports in Berlin yesterday said they would extend a walkout over pay that has grounded almost all flights out of the German capital. Service workers’ union Verdi on Sunday said it would call ground personnel out on strike just two days after their last walkout on Friday. The stoppage was slated to begin at 0300 GMT yesterday and last until 0400 GMT today, affecting some 660 flights. But the union said in a statement Monday that it now plans to extend the walkout until early Wednesday morning. Some 195 flights were cancelled at Schoenefeld, while 465 were affected at Tegel, airport operator FBB told AFP.
Summit
Merkel meets Trump in clash of style and substance German officials say the detail-oriented Merkel has been preparing assiduously for her trip to Washington Noah Barkin
S
he is controlled and cautious, a physicist from East Germany who takes her time making decisions and has never relished the attention that comes from being Europe’s most powerful leader. He is a wealthy real estate magnate from New York who shoots from the hip and enjoys the spotlight. It is hard to imagine two leaders more different, in style or substance, than Angela Merkel, the German chancellor, and Donald Trump, the new president of the United States. For months, they have been engaged in an uneasy long-distance skirmish over policy and values.
Key Points Merkel meets Trump for first time on Tuesday in Washington Trade, defence spending and Europe are contentious issues Trump called Merkel’s refugee policies “catastrophic mistake” German camp girds for surprises after Abe, May visits
Today, they meet for the first time - a high-stakes encounter that will be watched by governments around the world for clues about the future of the transatlantic alliance, a partnership that has helped shape the global order since World War Two but which Trump is threatening to upend. “Do I think they are going to become good friends? Probably not. They are very different personalities,” said Charles Kupchan, who advised Trump’s predecessor Barack Obama on European policy as a member of the National Security Council. “But I do think they have a strong interest, both politically and strategically, in learning how to work together. It is arguably the most important meeting with a foreign leader of Trump’s presidency.” German officials say the detailoriented Merkel, 62, has been preparing assiduously for her trip to Washington. She has watched Trump’s speeches and poured over his interviews, including a lengthy Q&A with Playboy magazine from 1990 in which he floats many of the controversial ideas he is now trying to implement
as president, they say. Members of her entourage have also analysed Trump’s encounters with other leaders - including Britain’s Theresa May, Japan’s Shinzo Abe and Canada’s Justin Trudeau - and have had exchanges with some of their counterparts on how to handle the unpredictable former reality-TV star, the officials added. “We have to be prepared for the fact that he does not like to listen for long, that he prefers clear positions and does not want to delve into details,” said one senior German official.
‘Catastrophic mistake’
On both economic and foreign policy, the divide between the two leaders appears vast. Trump, 70, has called Merkel’s decision to allow hundreds of thousands of refugees into Germany a “catastrophic mistake”. He has threatened to impose tariffs on German carmakers that import into the U.S. market. And he has criticised Berlin for not spending more on defence, a longstanding U.S. complaint that Merkel has promised to address. Another source of tension is Germany’s 50 billion euro trade surplus with the United States. Trump adviser Peter Navarro has accused Germany of gaining unfair trade advantages through a weak euro. Merkel and her ministers have pointed out that the European Central Bank - and not Berlin - controls the fate of Europe’s single currency. Russia will also be on the agenda. White House officials have said Trump will seek advice from Merkel on how to deal with Russian President Vladimir Putin. For her part, Merkel has been critical of Trump’s travel ban targeting the citizens of several mainly Muslim countries. In a phone call in January, she explained to Trump that the Geneva Convention obliges signatories, including the United States, to take in war refugees on humanitarian grounds. Merkel is also concerned that Trump, who has repeatedly praised Britain’s decision to leave the European Union, might continue to undermine the bloc with his rhetoric at a time of deep crisis triggered by the rise of anti-EU populist parties. “Europe is in a very fragile, precarious state and Germany is trying to ensure that the European
Commodities price
Goldman calls for patience Goldman Sachs Group Inc. isn’t letting the biggest commodities rout in eight months shake its confidence in raw materials. The bank is sticking to its view that tightening supplies will lead to higher prices later this year, maintaining its positive outlook on the sector, according to a report dated March 12. Investors should go or stay long on West Texas Intermediate oil and copper, analysts including Jeffrey Currie wrote. Barclays Plc said in its own note yesterday that the bank remains “bullish” on crude through to 2020.
Angela Merkel, the German chancellor
integration project holds together. I suspect the chancellor will want to make this clear to the president,” said Anthony Gardner, who served as U.S. ambassador to the European Union until January. “This is an opportunity to sketch out areas of common interest, to define a positive agenda,” he added. “But one meeting won’t change the atmosphere on its own.”
Potential for surprises
Trump is the third U.S. president that Merkel, Europe’s longest-serving leader, has worked with. She established a good rapport with George W. Bush, who was keen to repair ties with Germany after his clash with Merkel’s predecessor Gerhard Schroeder over the Iraq war. And although relations with Obama got off to an awkward start when Merkel rebuffed his request to speak at the Brandenburg Gate during the 2008 presidential campaign, the two grew close over time, cooperating on sanctions against Russia and launching negotiations on a transatlantic free-trade deal. “The parting is hard for me,” Merkel acknowledged when Obama visited Berlin in November, a week after Trump’s victory. The German leader will be walking a fine line in Washington. With an election looming at home in September, she must avoid offering her political opponents ammunition by cozying up to Trump. Neither can she afford an open confrontation that might damage German interests. One of the biggest concerns in the chancellor’s camp before the visit is the potential for surprises. Japan’s Abe had an awkward 19-second handshake with Trump, while May was criticised in some sections of the British media for holding hands with Trump during a stroll at the White House, apparently after he reached out to steady himself. When Israeli Prime Minister Benjamin Netanyahu met Trump last month, he and his team spent the day before running through endless scenarios, lines of questioning and role-plays to ensure they were prepared for any scenario. But in the end, they were still taken aback when Trump spoke off the cuff at their news conference on the sensitive issues of settlements and a future Palestinian state. Merkel has admitted to being so uncomfortable with surprises as a child that she drew up her Christmas wish-list months in advance to avoid being caught off-guard by an unexpected gift. With Trump, she might have to expect the unexpected. Reuters
Business Daily Tuesday, March 14 2017 15
Opinion
Chinese banks are great, if you forget the fundamentals Nisha Gopalan a Bloomberg Gadfly
A strange thing is happening in Hong Hong’s publicly traded Chinese stocks. Chinese banks, roundly shunned by global investors, are winning the popularity contest among Mainland investors buying through the Shenzhen-Hong Kong and ShanghaiHong Kong stock connects. According to Goldman Sachs Group Inc., daily purchases of Hong Kong shares via the two links are up 41 per cent this year, with Mainland investors pouring a net US$7 billion into the city. That’s helped offset US$1 billion of outflows from active investors, and is well above the US$1.6 billion of ETF inflows Hong Kong has witnessed since January. Since the inception of the first stock connect in November 2014, a total of US$57 billion of southbound net buying has been recorded, compared with US$30 billion for northbound. Star recipients have been high-dividendpaying lenders including China Construction Bank Corp., Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and even the Hong Kong-listed stock of HSBC Holdings Plc. China Construction Bank, ICBC and HSBC alone have soaked up almost US$16 billion of Mainland money. That flood of funds into Chinese financial institutions isn’t entirely rational. Banks on the Mainland remain dogged by bad debt worries and haven’t benefited from the billion U.S. dollars Mainland connect flows improved sentiment into Hong Kong, YTD that’s buoyed their U.S. counterparts as President Donald Trump boosts consumer confidence and awakens animal spirits. China Construction Bank’s Hong Kongtraded stock has 22 buy ratings, four holds and zero sells, according to data compiled by Bloomberg. But many of those rosy calls are based on expectations of further momentum-driven gains. Outside of China Merchants Bank Co. and Postal Savings Bank of China Co., the nation’s largest lenders trade at a discount to book value, implying a degree of investor scepticism about the value of their assets and specifically their high levels of nonperforming loans. If the logic is to buy cheap and arbitrage the difference between Shanghai A shares and Hong Kong H shares, then something’s amiss. PetroChina Co., for example, trades at a much higher premium in Shanghai than in Hong Kong, and yet interest from Mainland investors is much lower. To be fair, some of those discounts have narrowed as buying of banks’ H shares heats up. And HSBC is less exposed to China, so it could be argued that here at least is a diversification play for yuan-focused investors, despite the lender’s weak growth outlook. With an increasing number of mutual funds and insurers getting approval to invest in offshore stock markets and fewer investment avenues available after Beijing clamped down on capital outflows, the love affair with Chinese bank shares in Hong Kong is unlikely to end soon. If you’re willing to gloss over the fundamentals, it’s not a bad place to be. Bloomberg Gadfly
7
China hosted the latest G20 summit
The G-20 is a (slightly dysfunctional) family This week’s meeting of G-20 finance ministers and central bank governors in Germany hasn’t yet begun, but the conflicts have already started. Observers expect a heated debate about trade at the first meeting attended by representatives of the Trump administration: Trump’s trade adviser and the German finance minister have already gotten into a spat, and a draft communiqué obtained by Reuters suggests the G-20 may stop explicitly rejecting competitive currency devaluations and protectionism. Given the way the media presents the G-20 as an arena for conflict, the Trump administration can hardly be blamed for viewing the summit as a venue for competition among countries. But both the press and the administration are wrong. When I served as Treasury spokesperson for international affairs in the Obama administration, I learned that discussions at the G-20 often aren’t zero-sum. G-20 finance ministers all share the same goal: global growth. But domestic economic reform is often extraordinarily painful and unpopular. It would be so much easier for each country if they could instead get other countries to put their own economies in order, and then enjoy the stronger global economy that would result. So, that’s often what they try to do. The conflict that ensues at these meetings isn’t surprising. But the fact that countries often encourage other nations to implement reforms that would leave them stronger over the long run while trying to avoid reform themselves -- in other words, so that they can stay weaker -- really is. Save for maybe satellite states, it’s the opposite of what most mainstream international relations theories would predict. Luckily, however, I grew up in a family -- the perfect model for understanding the G-20. Each ministerial (diplomatic-speak for a meeting of ministers) begins with a family photo, followed by negotiations. The negotiations are like a holiday dinner, sans turkey. Participants are expected to engage in civil discussion. This doesn’t always happen. But, like a biological family, there’s no alternative to dealing with these people. The G-20 has no exit mechanism. A family also tries to socialize behaviour. Just as my mom taught my siblings and me to ask to be excused before leaving the dinner table, the U.S. uses these discussions to try to promote its preferred norms, such as refraining from currency manipulation. Above all, the G-20 is like a family because
“
Kara Alaimo a Bloomberg View columnist
everyone tells each other what they should be doing. While self-interest is invariably involved, the recommendations -- such as reducing debt or strengthening regulation of financial markets -- are also usually motivated by a genuine desire to see other economies grow healthier and stronger. For example, the G-20 has for years been encouraging European members to act more forcefully to address the euro zone’s debt crisis. Given the presence of U.S. rivals like China, who are approached very differently in other forums, this is truly remarkable. H o w ev e r, t h e a b s e n c e o f underlying conflict doesn’t make for a great story. So, reporters covering the summit look for a different angle. When I worked for the Treasury, nothing could strike greater fear into the hearts of my colleagues than the prospect of the U.S. being branded as a loser in international negotiations -- and American weakness abroad headlining the next day’s papers. To avoid this, preparation for each meeting of G-20 finance ministers began with a brainstorming session on what “shiny object” we could come up with for reporters to cover. No idea was too crazy for consideration. When Mexico began hosting the meetings in 2012 and we learned that the Secret Service would be sending a counterassault team with us for extra security, a senior official joked how helpful a kidnapping attempt at the meeting could be -- provided, of course, that no one got hurt. But just as the media often misses the real story at G-20 meetings, the Trump administration would be wrong to create conflicts by pursuing protectionist policies. That’s because the U.S. relies on the strength of major trading partners like China and Europe, which it needs to purchase American goods and buoy the global economy. As Kenneth Rapoza recently noted in Forbes, “For generations, the global influence of the U.S. was captured by the old adage that ‘when America sneezes, the world catches a cold.’ Today, those symptoms now appear when China does the same.” The best way for the Trump administration to view the other members of the G-20 is as family, not foes. Too bad that’s not eye-catching enough for an A1 headline. Bloomberg View
The negotiations are like a holiday dinner, sans turkey
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16 Business Daily Tuesday, March 14 2017
Closing Mining
Duterte links miners to destabilization plot Environment Secretary Regina Lopez to implement Philippine President Rodrigo Duterte (pictured) yesterday accused some miners of funding efforts to destabilise his government as he talked about a possible plan to impose a ban on mining given the environmental damage producers have caused. “I know that some of you are giving funding to the other side to destabilize me,” Duterte told a media briefing, referring to companies in the mining sector he did not name. Duterte, who has previously said the Southeast Asian nation can survive without a mining sector, added yesterday that it may be “worthwhile” for
a ban on mining. Duterte said he’s looking at a total mining ban “and then we’ll talk.” There is currently no ban on mining in the Philippines, the world’s top nickel ore supplier. Duterte said he wants to meet with local miners so they can explain to him what led to the destruction of the environment in areas where they operate. The firebrand leader has said the government can live without an estimated 70 billion Philippine pesos (US$1.39 billion) a year in revenue from the mining sector. Reuters
Markets
Beijing fines repeat offender for stock manipulation In a stock connect case two punished nationals allegedly engaged in practices that included spoofing, manipulating opening and closing prices, and self-trading
C
hinese regulators seem to have run out of patience with Tang Hanbo. The China Securities Regulatory Commission on Friday ordered Tang to pay a total of RMB1.17 billion (US$170 million) in two cases of stock market manipulation, one of which was the first to involve trading through the stock connect between the Mainland and Hong Kong. Tang, 43, has been punished for illegal trading at least twice before. But it appears his previous penalties from the CSRC, which include RMB39 million in 2014 and RMB15 million in 2015, weren’t enough to deter his bad behaviour. On Friday, Tang, a Chinese national based in the city of Shenzhen, was ordered to pay RMB251 million for allegedly using the link between the Shanghai and Hong Kong exchanges to manipulate a Shanghai-listed stock, Zhejiang China Commodities City Group Co. He was also hit with RMB925 million in fines and disgorgement over domestic trades carried out from December 2014 to April 2015. “It seems to be the record fine imposed by CSRC on individuals by amount so far,” said Eric Liu, a partner at Zhao Sheng Law Firm in Shanghai. “This is not the first time Mr. Tang was sanctioned by CSRC for manipulating stock prices and that is one of reasons why the fine amount
is that high.” C.L. Chow & Macksion Chan, a law firm representing Tang in an earlier judicial review, declined to comment.
Larger penalty
The penalties imposed on Tang are smaller than the RMB3.47 billion the CSRC plans to impose on Xian Yan, a former controller at Guangxi Future Technology Co. The regulator will penalize Xian for suspected violations on information disclosure
Hotel
and stock manipulation, spokesman Zhang Xiaojun said at a briefing on Feb. 24. The penalties haven’t been officially announced by the CSRC. Trading Chinese stocks using connect-enabled accounts in Hong Kong has less regulatory oversight because Mainland regulators and exchanges have real-time identification of every investor. Authorities in the former British colony can only get such data by requesting it from brokers. The CSRC’s fine against Tang in the connect case is the highest possible, said Natasha Xie, a Shanghai-based partner with JunHe LLP, and shows the regulator is serious about enforcing cross-border cases. December’s start of a second trading link with a Mainland city,
FILMART
between Hong Kong and Shenzhen, was accompanied by an agreement to strengthen regulatory and enforcement cooperation between China and Hong Kong, including cross-border investigations into market misconduct.
Spoofing activity
In the Hong Kong-related penalties, Tang was fined RMB209 million over trading in Zhejiang China and told to give up illicit gains of RMB42 million. Fellow trader Wang Tao, who couldn’t be reached for comment, was given a RMB600,000 fine over the transactions. Both traders have the right to appeal. In the other case against Tang, the CSRC claimed that he and four of his relatives manipulated Mainland stocks using seven domestic accounts. The regulator issued a penalty against the five accused individuals totalling RMB990 million. The SFC also helped collect evidence for the CSRC in the case. In December, Tang filed a judicial review in the Hong Kong High Court to rule that the SFC’s seizure of trading data from his home was unlawful. The SFC had share the information seized with Mainland officials. The CSRC said that in the stock connect case Tang and Wang allegedly engaged in practices that included spoofing, manipulating opening and closing prices, and self-trading. From Feb. 4 to April 26, 2016, their trading accounted for more than 10 per cent of the stock’s daily volume. In 10 days during that period, their activity was more than 20 per cent of the market in the shares. Bloomberg News
Financial industry
Shangri-La hikes Sri Lankan Hong Kong int’l film, investment TV event kicks off
Singapore bans former Goldman Sachs banker linked to 1MDB
Hong Kong-based Shangri-La Asia has increased its investment in Sri Lankan properties by 60 per cent to US$800 million, in order to meet demand for larger-than-planned apartments in Colombo, an official said yesterday. The international hotel brand had originally planned to invest US$500 million in a 541-room hotel and 390 apartments in Colombo and another 300-room resort in the island nation’s southern district of Hambantota. “Investment has increased because of the project enhancement,” Neluka de Alwis, head of sales and marketing at Shangri-La Hotels Lanka (Private) Limited, told Reuters. The company has changed the design of the apartments due to demand for larger units, de Alwis added. Shangri-La, in 2012, had estimated that the total cost of the project could climb by 10 per cent to US$550 million due to last-minute design changes. De Alwis said the Colombo hotel was expected to be completed by 2017, later than an initial target of 2015, while the apartments, shopping complex and conference facilities would be finished by 2018. Reuters
Singapore yesterday banned a former Goldman Sachs banker from working in the city-state’s financial industry for 10 years after he was linked to a corruption scandal involving Malaysian state fund 1MDB. The Monetary Authority of Singapore (MAS) also said it planned to bar three more people, all exemployees of two Swiss banks alleged to have used the island’s financial system to facilitate illicit money transfers to 1MDB. Allegations that huge sums were misappropriated from 1MDB triggered a scandal which has embroiled Malaysian Prime Minister Najib Razak, though he has denied any wrongdoing. The MAS, which serves as Singapore’s central bank, said Tim Leissner, a former director of Goldman Sachs in the city-state, will be banned from “performing any regulated activity under the Securities and Futures Act”. He will also be barred from “taking part, directly or indirectly, in the management of any capital market services firm” on the island, a regional financial centre. Leissner resigned from the bank in February 2016. AFP
The 21th edition of the Hong Kong International Film and TV Market (FILMART) sprang into action yesterday for a four-day run at Hong Kong Convention and Exhibition Centre. A premier trading platform for the international entertainment industry, this year’s FILMART welcomes more than 800 exhibitors from 35 countries and regions. The Chinese Mainland’s entertainment industry has been developing fast and garnering more international attention. This year, FILMART welcomes more than 220 exhibitors from the Mainland, the largest number in the event’s history. Many cities and provinces, such as Beijing, Shanghai, Shandong, Sichuan, Guangdong, Hangzhou and so on. Three seminars will be held during FILMART to examine topics related to the Mainland market and provide industry participants with the latest market intelligence and analysis. FILMART features an extraordinary line-up of speakers, inviting leading industry representatives from the film, digital entertainment, animation and other sectors to share their views and insights. Speakers include Andrew Hevia, co-producer of Moonlight, the latest Academy Award winner for Best Picture. Xinhua