Business Daily #1259 March 22, 2017

Mild investment income from domestic fiscal reserves Monetary Authority Page 2

Wednesday, March 22 2017 Year V Nr. 1259 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Alleged fraud

Indonesia asks Interpol to find three Sinopec executives Page 10

Gaming

VIP demand drives healthy performance Page 7

www.macaubusinessdaily.com

Forbes List

Urban life

Asia’s richest leave footprint in MSAR Page 6

Singapore and HK top costliest cities ranking Page 12

Manpower

A report from Macau University of Science and Technology.

Indicating dealers in the city are feeling blue about their jobs.

Compared to last year both confidence and satisfaction figures have declined. Although there’s more optimism regarding general employment. Page 3

Hotel, sweet hotel

Hospitality Occupancy up as prices come down. Macau Hotel Association data published by Macao Government Tourism Office reveals a generalised drop in room rates, particularly for 4-star accommodation. Page 5

Done deal

Level pegging

AL No debate. Legislators have rejected raking over the transportation scheme. Despite it being one of the most controversial topics in the territory. A majority of policymakers dismissed the option of debate. Page 2

Food and housing were the major factors slowing inflation. Official data suggests the strong American dollar and visitor spending played an essential role in stabilising prices.

Outside perspective

Inflation Page 4

HK Hang Seng Index March 21, 2017

24,573.43 +71.44 (+0.29%) Worst Performers

Sino Land Co Ltd

2.65%

CITIC Ltd

1.59%

Hengan International Group

Ping An Insurance Group Co

1.84%

Cathay Pacific Airways Ltd

1.43%

China Shenhua Energy Co

Hong Kong Exchanges &

-0.35%

Swire Pacific Ltd

-0.26%

China Resources Land Ltd

1.82%

Henderson Land Develop-

1.28%

Sands China Ltd

-0.98%

Power Assets Holdings Ltd

-0.22%

China Petroleum & Chemical

1.66%

China Overseas Land &

1.22%

Geely Automobile Holdings

1.62%

Bank of China Ltd

0.50%

Cheung Kong Infrastructure

-0.48%

Link REIT

Galaxy Entertainment Group

-0.36%

Belle International Holdings

-6.66% -1.25%

-0.19% +0.00%

20° 21° 20° 23° 20° 22° 16° 22° 15° 17° Today

Source: Bloomberg

Best Performers

THU

FRI

I SSN 2226-8294

SAT

SUN

Source: AccuWeather

China’s GDP The Organisation for Economic Co-operation and Development has presented its perspective on China’s economy. Forecasting 6.5 pct growth for the year. With risks and challenges highlighted in its report. Page 9

2 Business Daily Wednesday, March 22 2017

Macau E-commerce

Macau Pass issued 2.6 mln cards in 2016

consumption of Macau Pass Card reached 18 million times during the year, of which some 1.8 million A total of 2.6 million Macau Pass cards had been issued as at the end times were for non-public transport industries such as convenience of 2016, an increase of 260,000 stores, supermarkets and vending cards or 11.1 per cent compared to machines. The company added some 2.34 million cards as at the end of 2015, the latest information that its mobile payment app - M+ Pay, launched last year - was of the card issuer reveals.

According to the company, monthly downloaded some 90,000 times. C.U.

AL

The dice is cast The request made by lawmaker Leong Veng Chai to debate increased transportation fees in the AL was rejected by majority vote Cecilia U cecilia.u@macaubusinessdaily.com

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n the Legislative Assembly (AL) yesterday 14 lawmakers voted down a plenary debate on whether the recent adjustment of the city’s transportation fees is reasonable, in particular fees related to the administration and towing of vehicles.

On the first day of this year, the MSAR Government implemented the new transport fees adjustment at extremely short notice.

The increased fees cover parking, vehicle inspection and ‘illegal parking’ fines.

Over 1,000 residents marched in the streets demanding the rescinding of the new regulations.

The request for the debate was made by lawmaker Leong Veng Chai and supported by 10 other legislators.

Legislator Ma Chi Seng, by contrast, remarked that the new scheme is well-intentioned, saying that it would be reasonable to review the scheme after it has been operational for some time.

Legislator Vong Hin Fai also disagreed with the request for a debate, saying the procedure of requesting the debate was superfluous since legislator Leong had already received a detailed reply from the government after he had submitted an interpellation on the matter earlier this year.

“The number of vehicles being towed in the first month of this year and the same month in 2016 has decreased by 21 per cent for cars and 78 per cent for motor vehicles,” said Vong, adding that the new adjustment

reflected a good impact on local residents.

Meanwhile, pan-democratic lawmaker Au Kam San, who voted in favour of a debate, pointed out that many people parked their vehicles illegally because of the very limited

parking space in the city, and he perceived that a debate on this matter would produce positive opinions for society as well as the government to take reference.

Many other lawmakers, such as Ella Lei Cheng I, Kwan Tsui Hang, Song Pek Kei, Ho Ion Sang and Leong On Kei, expressed their hope that the government would listen to society’s needs prior to deciding upon any important plans.

For legislator Ng Kuok Cheong, the

current issue is the government’s incapability of launching the Light Rail Transit (LRT) on time in 2014 and, more importantly, the large number of vehicles on the road.

“In order to soothe the matter [over its LRT delay and other general transport issues] the government [should] roll out schemes to get the matters over with,” said legislator Ng. Yesterday’s plenary session also approved the AL’s financial report for 2016 as well as the financial budget for 2017.

In 2016, the AL spent MOP159.1 million (US$19.9 million) and received an income of MOP160 million, making a surplus of MOP737,960.

Yesterday's session at AL

Monetary Local fiscal reserves expand by 27 pct y-o-y in 2016

Annual fiscal reserves investment return mildly up Investment income from the MSAR’s fiscal reserves totalled MOP3.31 billion (US$413.8 million) for 2016, representing an annual return of 0.8 per cent, a slight increase of 0.1 percentage point from 2015, revealed a release from the Monetary Authority of Macau (AMCM) yesterday.

According to AMCM, total assets of the city’s fiscal reserves reached MOP438.7 billion as at the end of 2016, expanding 27 per cent year-on-year.

The reserve’s investment in equity and the foreign exchange markets both recorded losses for the year, amounting to MOP500 million and MOP2.07 billion, respectively.

AMCM explained that the currency revaluation loss on the foreign exchange market is due to ‘a weaker year-end level of some major currencies,’ specifically Renminbi’s accumulated depreciation.

Meanwhile, investment income from the bond market amounted to MOP3.16 billion, remaining the largest income source of the reserves, while investment in money

market placements contributed some MOP2.73 billion in income for the reserves.

Of the total foreign reserves assets as at the end of last year, some 60.3 per cent were denominated in U.S.

dollars, 22.5 per cent in Hong Kong dollars and 13.4 per cent in Renminbi, including both offshore and onshore ones.

Assets denominated in the local currency of the Macau Pataca and

Monetary Authority of Macau headquarters

Australian dollar, meanwhile, accounted for 2.9 per cent and 0.7 per cent of the total, respectively.

For this year, the local monetary authority believes the global bond market may go through difficult times. ‘The U.S. Federal Reserve is widely expected to hike its benchmark official rate in a gradual manner. Major economies around the world have come to an important crossroads with their quantitative easing measures coming to an end,’ the Authority notes.

‘In response to these expectations, the Fiscal Reserve would seize market opportunities to divert more resources into equity markets for a more diversified asset mix,’ AMCM wrote in the release, indicating it may look into opportunities for investment co-operation via different platforms, including the Silk Road Fund, China-LAC Industrial Co-operation Investment Fund Co. Ltd. and China-Africa Fund for Industrial Co-operation Co. Ltd. ‘All of these are aimed at achieving a better diversification benefit from a global portfolio, while minimizing risks assumed,’ the Authority pronounced. K.L.

Business Daily Wednesday, March 22 2017 3

Macau Manpower

Report: Dealer confidence and satisfaction drops The latest survey from Macau University of Science and Technology finds that the city’s dealers feel less happy about their job compared to other workers in the gaming industry Kam Leong kamleong@macaubusinessdaily.com

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ocal dealers’ confidence and satisfaction both decreased from 2016 although they are now more pleased with the city’s general employment market as the gaming industry stabilises from a slump, according to the Macao Employee Confidence and Satisfaction Index 2017 conducted by Macau University of Science and Technology (MUST).

The overall confidence of the interviewed dealers dropped by 3.7 per cent to 2.74 points from 2016. In particular, their confidence in their employers fell 7.8 per cent yearon-year to 2.78 points, while that in themselves fell 3.3 per cent to 2.81 points.

According to the survey, workers’ confidence in their companies includes their recognition of the company’s management, prospects and whether they feel proud of working in the company. Meanwhile, their confidence in themselves is measured based upon opportunities for promotion and salary increases, recognition by superiors, work pressure, and relationship with colleagues.

The average satisfaction index of local dealers fell by 1.6 per cent yearon-year to 3.14 points. Among the sub indexes, remuneration and benefits dropped 2 per cent year-on-year to

3.27 points; job quality fell 2.1 per cent year-on-year to 2.86 points; and personal development fell 5.2 per cent to 2.9 points.

Despite the decreases, local dealers’ confidence in the employment market rose by 0.4 per cent year-on-year to 2.72 points, while their satisfaction about the stability of their work also grew compared to one year ago.

‘This suggests the city’s economic situation has stabilised following two years of slump, allowing [workers] to become more confident in the manpower market and [gain] more satisfaction [regarding] the stability of their work,’ the survey concludes.

Gaming workers happier

In fact, dealers are feeling less confident and satisfied compared to other workers in the gaming industry.

The survey shows that the general confidence index of gaming workers only posted a slight decrease of 0.2 per cent from one year ago to 2.92 points, while their satisfaction index remained unchanged at 3.27 points.

While gaming workers’ general satisfaction about remuneration and benefits dropped by 0.9 per cent and 1.4 per cent year-on-year, that related to working environment, health, support from management on new suggestions, and relationship with superiors all recorded an increase from one year ago.

Nevertheless, in general they were still less confident in their companies and themselves from 2016, of which the related sub-indexes dipped 0.5 per cent and 0.6 per cent to 3.05 points and 2.89 points, respectively.

‘Since 2017, gaming operators have started to respond to workers’ demands from the past years, on working environment and health issues, as compared to 2016. They are more significantly improving their working environment, employee relationship management and their support for workers,’ the surveyor claimed.

General employees even happier

Meanwhile, general employee confidence of the city rose slightly by 0.1 per cent year-on-year to 3.05 points

while their satisfaction jumped 0.03 per cent year-on-year to 3.36 points.

The survey notes that the results is contracted to that for 2016, when the city saw both employee confidence and satisfaction significantly decline from 2015.

Local employees were least confident in their promotional opportunities, seeking better job opportunities and salary raises whilst most confident in their relationship with colleagues, not being employed in one year and the employment in future five years.

They are more satisfied about employment and their relationship with management, and least satisfied with their job’s impact on health, bonuses and training opportunities, the survey found.

4 Business Daily Wednesday, March 22 2017

Macau Opinion

Prices

Housing and food stabilising growth of inflation José I. Duarte* Society Anyone following the international trends on social matters will be aware of the debates concerning the effects of technological change, actual or expected, on the way we live our lives.

Developments and trends in artificial intelligence, robotics, biotechnology, and genetic engineering – to mention the most obvious – suggest significant changes in the way societies and economies are structured are on the way. They will impact (and are already doing so) how we go about our daily routines, interact with each other, or produce and deliver goods and services. Some people go as far as stating that we are on the cusp of a fourth industrial revolution. These are, inevitably, disruptive times.

The changes will have significant effects upon the labour market. How will we deal here with them? Thinking about the answers to these questions is (or should be) a current, not future, subject for policy consideration. Unfortunately, those issues seem to receive little attention.

Let us take as a starting point what many believe will be the main skills required for people to move forward (and upward) in this ‘new world.’ We mean the skills that will be in demand for large segments of the working population and that, as a consequence, should be nurtured among the younger generations. For those willing to pursue this line of enquiry, several studies and strategy documents are easily accessible.

For example, an often quoted report, discussed at the recent meeting of the World Economic Forum, included a ranking of skills that will be in demand in the (short term) future. The top five skills identified were: complex problem solving; critical thinking; creativity; people management; and co-ordinating with others. This list alone should provide fodder for thought.

If we assume that the report conclusions are plausible what consequences do we extract from them in the matters of our labour markets and education systems? Do labour policies and practices stimulate our workers to learn and develop new skills and, in particular, those that are likely to be more valued?

Does our education system, at all levels, foster those qualities and the appropriate mindset in our students? Are those skills rewarded in both the labour market and the schools? For all the talk about developing local talent, that hardly seems to be the case.

Shouldn’t we be paying more attention to these issues, at the price of failing our community and our youth if we do not do so? *economist and permanent contributor to this newspaper.

The inflation rate in February grew by 0.37 per cent, the lowest rate of growth since January 2010 Nelson Moura nelson.moura@macaubusinessdaily.com

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he Macau inflation rate in February of this year grew by only 0.37 per cent yearon-year reaching 1.91 per cent, the lowest inflation rate since January 2010, according to data provided by the Statistics and Census Services (DSEC).

Last month, the composite Consumer Price Index (CPI) rose to 108.79 from 108.39 one year ago. The results come after a 1.76 per cent yearly jump in January, with the DSEC justifying the 0.42 per cent month-to-month decrease on the Chinese New Year

falling at the end of January.

Economist José I. Duarte told Business Daily that the results are “not very significant” and normal as habitation and food prices - which represent more than half of the Composite CPI index - stabilise.

“The index takes into account a group of products that includes habitation and food expenses, with the former representing more than half of the index. Therefore, with a tendency for stabilisation in those two sectors it is normal to see a tendency for a decrease in the price index growth.

Not that habitation and eating prices are low, they’re just not growing as much,” said Mr. Duarte.

According to the report, the price index for food and non-alcoholic beverages increased by 0.14 per cent year-on-year in February, with housing and fuel costs decreasing yearly by 1.86 per cent.

“Macau products mainly come from abroad and with the MOP indexed to the U.S. dollar, which increased its value when compared to the RMB, it means most imports from Mainland China are now cheaper. At the same time there was reduction of pressure on prices coming from overseas demand, namely tourists. If visitor influxes increase again then we might register increases in the inflation rate again,” the economist told Business Daily.

Education up, recreation down

According to the report, inflation growth was mainly driven by dearer charges for eating out, higher rentals for parking spaces, the rising price of gasoline and motor cars, as well as increases in tuition fees and out-patient service charges.

The largest yearly decrease in average price index was registered in the recreation and culture sector, which fell by 8.29 per cent year-on-year and 8.74 month-to-month, something the report justified by the decrease of package tours after the Lunar New Year.

The largest increases in yearly average price growth were registered in education costs, which rose by 7.36 per cent year-on-year in February, followed by hikes in the price index of education and transportation, increasing yearly by 7.17 per cent and 6.97 per cent, respectively.

Real estate

Stamp duty paid increases over year The amount paid for the Special Stamp Duty (SSD) in February of this year amounted to 113.3 per cent of that paid in the same month last year, according to the most recent data from the Financial Services Bureau (DSF).

A total of MOP884,770 was paid out during the month for the SSD, all falling under the category of residences. This brings the total amount paid for the SSD this year to MOP2.15 million, relating to a total of six SSD payments, all regarding residential properties.

The SSD was imposed in June 2011 on property or property rights transactions, collected within two years after the stamp tax and implemented to control speculation in the housing

market. If a property is sold within the first year of purchase a 20 per cent SSD is applicable; if sold between one and two years of purchase, a 10 per cent SSD is applicable.

Additionally, in a continuation of

last month’s first provision of data on the additional stamp duty, which came into effect in November 2016, the month of February saw a near 38-fold increase in the amount paid, year-on-year, hitting MOP6.49 million during the period, relating to 19 property transactions. The amount, however, represents a 39.8 per cent reduction month-on-month. So far this year MOP17.26 million has been paid in additional stamp duty.

The measure represents a 10 per cent levy on property transactions if the purchaser is a non-resident of the MSAR or an entity.

Last year, a total of 208 home transactions were subject to the additional stamp duty, amounting to some MOP129.2 million. K.W.

Politics

Boosting co-operation with Guangdong The Chinese province of Guangdong will strive to increase co-operation with the MSAR for the development of e-commerce, entrepreneurship, investment and the MICE [Meetings, Incentives, Conventions and Exhibitions] industry, as well as tourism, announced the Mayor of Guangzhou, Wen Guohui, following a meeting with MSAR Chief Executive Fernando Chui Sai On on Monday.

In order to pursue such development Mr. Wen pledged the reinforcement of inter-regional initiatives such as the Guangdong-Hong Kong-Macau Greater Bay Area plan proposed by Chinese Premier Li Keqiang at this year’s National People’s Congress.

After the meeting, the MSAR Secretary for Economy and Finance, Lionel Leong Vai Tac, said he believes youth entrepreneurship in both regions

could be improved by increasing exploration of the Nansha area of the Guangdong Free Trade Zone.

Together with Hengqin and the Qianhai and Shekou Industrial Zone in Shenzhen, Nansha comprises the

116.2 square kilometre Guangdong Free Trade Zone created in 2015.

The Secretary also suggested the MSAR serve as a financing platform for the exploration of e-commerce for markets in Portuguese-speaking and European Union countries and the creation of a joint regional brand for the MICE industry. N.M.

Business Daily Wednesday, March 22 2017 5

Macau

Hotels

Hotel occupancy jumps amid lower prices Last month, local hotel occupancy increased as the cost of staying overnight in a hotel room was cut by double digits Kam Leong kamleong@macaubusinessdaily.com

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he average occupancy rate in the city’s 3 to 5-star hotels registered an increase of 6.7 percentage points to 88 per cent for the month of February from one year ago, as general room rate dropped 15.3 per cent year-on-year to MOP1,280.5 (US$160) per night.

The latest data from the Macau Hotel Association published by the Macao Government Tourism Office

(MGTO) shows that the room rate of 4-star hotels posted the biggest drop, down 19.1 per cent year-on-year to MOP761.8 per night, while recording the highest year-on-year growth in occupancy, up 10.1 percentage points to 88.4 per cent.

In addition, 5-star hotels and 3-star hotels saw their average occupancy increase during the month, up 5.3 per cent and 5 per cent year-on-year, to 87.3 per cent and 91.1 per cent, respectively.

Average room rates of the two types of hotels, meanwhile, fell by

13.1 per cent and 18.6 per cent yearon-year, to MOP1,620.4 per night and MOP836.3 per night, respectively.

On a month-on-month comparison, average hotel occupancy rose 5.4 percentage points from 82.6 per cent for January, with room prices declining 13.9 per cent from MOP1,4452.6 per night.

The trend

For the first two months of the year, hotel occupancy rates jumped 5.9 percentage points year-on-year to 85.3 per cent on average, with average room rates dipping 2.6 per cent year-on-year to some MOP1,366.6 per night.

The biggest decrease in room rate was again apparent in 4-star hotels, down 8.8 per cent year-on-year to

MOP792.9 per night. However, this type of hotel also recorded the highest year-on-year growth in occupancy, up by 7 percentage points to 85 per cent.

Even though average room rates in local 5-star hotels only posted a slight decrease of 0.5 per cent yearon-year in the two-month period, amounting to MOP1,744.9, their average occupancy rate reached 84.7 per cent, a year-on-year increase of 5.5 percentage points.

Meanwhile, 3-star hotels reached the highest occupancy at 90.1 per cent, up 5.2 percentage points from the same period of last year. The hotels’ room rate dropped 6.4 per cent year-on-year, to MOP850.5 per night.

According to MGTO, the Association’s data is based upon its 44 member hotels. Latest official data from the Statistics and Census Service (DSEC) shows that there were a total of 64 3 to 5-star hotels operating in the MSAR as at the end of January, providing some 35,000 rooms and 94,000 beds.

6 Business Daily Wednesday, March 22 2017

Macau

China and Asia’s richest man is real estate and theme park entrepreneur Wang Jainlin - placed 18th in the ranking

Billionaires

The super-rich of the super-rich Forbes ‘The World’s Billionaires’ reveals fortunes made both near and far Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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n a list led by Microsoft’s Bill Gates, with a worth estimated at US$86 billion, local businessmen and gaming operators with projects in the territory did not miss out on this year’s Forbes ‘The World’s Billionaires’ listing, released yesterday.

The highest ranked of those with businesses in the MSAR was jewellery giant Chow Tai Fook’s Li Ka Shing, Hong Kong’s richest individual, with a total worth of US$31.2 billion. The billionaire, placed 19th on the list, was preceded by Asia’s currently richest man, Chinese real estate and theme park entrepreneur Wang Jainlin - placed 18th in the ranking. Wang’s Dalian Wanda Commercial Property, China’s biggest company, notes Forbes, was listed on the Hong Kong Stock Exchange up until September of last year, and could be looking to list on the Mainland.

Ranked directly after Li Ka Shing is United States casino magnate Sheldon Adelson, who’s first entry into Macau with the Sands Casino and subsequent The Venetian, Sands Cotai and The Parisian properties kept the group’s United States operations afloat, and currently dominate the Cotai Strip in terms of size and interconnectivity. Adelson’s worth is estimated at US$30.4 billion as at the time of the listing.

Money, money, money

Ranked just three places behind Adelson is world renowned entrepreneur Jack Ma, founder of e-commerce giant Alibaba, with an estimated worth of US$28.3 billion.

Sitting at number 69 on the list is Chinese Estate Holdings’ Joseph Lau who, despite his ill health, still occupies that ranking on the billionaires list, tied at an estimated worth of US$15 billion with Hong

Kong real estate duo Thomas and Raymond Kwok.

Ranking just before the real estate trio is Samsung’s founder and Chairman Lee Kun Hee, placing 171 places ahead of his son and vice-chairman of the company Jay Y. Lee who has been charged with bribery and embezzlement in a case linked to the impeachment of South Korea’s former President Park Geun-hye.

The founder’s worth is estimated at US$15.1 billion, while his son’s is put at HK$6 billion.

The next casino-related placement on the list comes in at number 109 for Galaxy Entertainment Group’s Lui Che Woo, with an estimated worth of US$12.1 billion after a near 50 per cent jump last year in wealth as the casino market improved. The gaming mogul is preceded by both media giant Rupert Murdoch, at 90th with an estimated wealth of US$13.1 billion, and Tesla’s Elon Musk, with an estimated US$13.9 billion fortune.

Three more Hong Kong billionaires make it into the top 200 ranking, with Peter Woo and Walter Kwok taking 126th and 190th, with fortunes of US$10.5 billion and US$7.3 billion, respectively. Kwok is preceded by Zhou Qunfei, the smartphone screen billionaire with an estimated worth of US$7.4 billion. Two places after Qunfei sits Italy’s Silvio Berlusconi, with an estimated wealth of US$7 billion.

Made in Macau

Scrolling further down the list reveals more Macau-linked names, starting with 414th-placed Pansy Ho, whose US$4.2 billion fortune was boosted by nearly 20 per cent last year on the back of her MGM China stake and Shun Tak Holdings position. Ho places 13 places ahead of SJM executive director and local legislator Angela Leong, with an estimated worth of US$4.1 billion.

In between the legislator and the

This year’s top ten billionaires 1.

2.

3.

4.

5.

6.

7.

8.

10.

Bill Gates Warren Buffet Jeff Bezos Amancio Ortega Mark Zuckerburg Carlos Slim Helu Larry Elison Charles Koch and David Koch Michael Bloomberg

(Microsoft) (Berkshire Hatahway) (Amazon) (Zara) (Facebook) (telecom) (software) (diversified) (Bloomberg LP)

US$86 billion US$75.6 billion US$72.8 billion US$71.3 billion US$56 billion US$54.5 billion US$52.2 billion US48.3 billion (each) US$47.5 billion

next-ranked casino-linked presence on the list sits newcomer Evan Spiegel of Snapchat, with an estimated worth of US$4 billion, despite the lukewarm response to the social media app’s initial public offering, putting him in 441st place.

Recently passed former chairman and chief executive of the Chase Manhattan Corporation, banker David Rockefeller, placed at 581 on the list, with an estimated worth of US$3.3 billion.

Casino and hotel entrepreneur Steve Wynn came in at 814 on the list, with an estimated worth of US$2.5 billion in this year’s ranking, following the opening of the group’s latest Macau property in August of last year, the US$4.2 billion Wynn Palace.

Coming in with a net worth of US$1.6 billion, ranked at number 1,290 on Forbes ‘The World’s Billionaires’ listing is Melco Crown chairman and CEO Lawrence Ho.

Business Daily Wednesday, March 22 2017 7

Macau Transportation

Zhuhai Railway Station to launch three more destinations

reported. These routes will connect the neighbouring Mainland Chinese city to Zhengzhou, Kunming and Nanning. According to the report, Guangzhou Railway (Group) the Zhuhai-Zhengzhou, with a Corporation is to expand three travel duration of over 7 hours, will cross-province routes from Guangzhou’s South Railway Station offer one trip per day, while trips to Kunming and Nanning will take to Zhuhai Railway Station from around 10 hours and five hours, April 16 this year, local Chinese language news outlet Macao Daily respectively. C.U.

Gaming

VIP demand ‘accelerating’ with 20 pct y-o-y growth

D

emand for the city’s gaming industry has been healthy so far in the month, with accelerating growth especially seen in the VIP sector, according to analysts at J.P. Morgan Securities (Asia Pacific) Ltd. ‘Based on channel checks, we estimate that VIP demand growth is accelerating to about 20 per cent [year-on-year],’ wrote the brokerage in its latest note, adding a yearon-year increase of 30 per cent or above was even registered in the top three junkets, which refers to SunCity Group, Tak Chun Group and Neptune/ Guangdong Group.

‘Junkets seem to be enjoying an end demand recovery from a favourable China macro backdrop in 2016 (e.g.) property market rally, eased liquidity, commodity price hikes, fuelled by the improved liquidity and “confidence” at junkets,’ wrote the firm’s analysts led

by DS Kim. They also expect the mass market has posted a high single-digits growth to 10 per cent so far.

According to the brokerage, the

city’s gross gaming revenue for the first 19 days of March is estimated to have reached some MOP12.5 billion (US$1.56 billion) suggesting daily run rate amounting to some MOP660 million month-to-date.

‘This appears solid for a “shoulder

season” like March, as it is comparable to that of seasonally strong [fourth quarter of 2016] (MOP657 million per day) and meaningfully above non-holiday prints of low-MOP600million per day in recent months,’ the analysts wrote.

The firm retains its forecast for the month’s gaming revenue growth at between 10 per cent and 15 per cent year-on-year. ‘But [it] is likely to come in at the high end of the range, given [month-to-date] trends,’ it added. K.L.

“MCE cares about our employees; the best-in-class loyalty programme we offer is a great example to demonstrate our appreciation for their hard work and dedication,” said chairman and CEO of Melco Crown, Lawrence Ho Yau Lung.

In the group’s loyalty programme employees can choose between a one-month additional salary bonus come Summer or a ‘Golden Nest Egg’ of six months pay after three years continuous service. A remuneration increase is expected to be forthcoming in the next few months for the group’s City of Dreams Manila property, notes the release.

“While the market is steadily ramping up, it has yet to recover completely,” remarked Ho. “Despite that, we still want to offer a competitive pay increment to our employees to express our gratitude for their support.”

The CEO is ranked 1,290 on Forbes’ ‘The World’s Billionaires 2017’ list, released yesterday. K.W

Melco

Who wants a raise?

Local gaming operator Melco Crown Entertainment (MCE) has announced a pay increase for its non-management personnel effective April 1 this year, according to a press release.

The increase ranges from 2.5 per cent to 7 per cent for all non-management employees, while ‘eligible’ full-time non-management employees with monthly salaries of up to MOP16,000 will see a 3 per cent to 7 per cent increase in salary, in the amount of MOP500 per month.

Full-time ‘eligible’ employees currently earning over MOP16,000 per

month will receive a 2.5 per cent increase in salary, monthly, according to the gaming group.

Corporate

Property

Zhuhai ‘Time Square’ delivery this year Buyers of the unfinished residential and commercial project ‘Time Square’ in Zhuhai will be able to take possession of their property between October and November of this year, according to newspaper Tribuna de Macau.

The announcement was made following a meeting held by the Zhuhai Government, which expects the units to be delivered on October 1, yet noting the possibility that there may be a one-month delay due to personnel reshuffling.

With 436 units sold off-plan in 2013, including 40 to buyers form the MSAR, the property was originally slated for delivery to purchasers in 2015. However, the property was

sealed by a Mainland China court following the bankruptcy of the property developer.

According to the report, the costs of the project development were evaluated at RMB4.5 billion (MOP5.2 billion/US$652.8 million) of which more than half was owed by the developer.

Zhuhai authorities said a public company would be set up to complete the project and deliver the units to the buyers. This public company will be financed with RMB90 million by two fund management companies and RMB20 million by the authorities.

The funds are expected to be regained once the delivery of the units are delivered, the report said. N.M.

Intellectually Disabled People in Asia conference starts April 17

Strengthening communication and promoting inclusion - not only with those living with intellectual disabilities, but also with those connected to them - is the focus of this year’s Intellectually Disabled People in Asia conference. Taking place from April 17 to 21 in Macau, the event kicks off at MGM Macau on its first day, followed by the International School of Macau (TIS) the next day. The conference will also be streamed live on its official Facebook page @ inclusionconferencemacau starting from 9:00 a.m. on Monday, April 17.

Paulo A. Azevedo, co-founder of organising association the Charity Association of Macau Business Readers, notes how he looks forward to this year’s event following last year’s success – which brought together attendees and participants from 22 countries,

with eight speakers and keynote speaker Wilfried Lemke, United Nations Special Advisor.

“We are looking forward to hosting the 2017 Conference with another high profile and international speaker panel as well as an audience bringing together local society and people with intellectual disabilities from all over the world,” commented the co-founder.

“It’s time to share experiences, to know how challenges can be overcome and - most importantly - to strive for better integration practices,” said the philanthropist.

8 Business Daily Wednesday, March 22 2017

Gaming Gaming

Typhoon delays Gaming investor Imperial Pacific will ‘likely’ receive an extension for the construction deadline of its permanent casino in Saipan Nelson Moura nelson.moura@macaubusinessdaily.com

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asino investor Imperial Pacific International Holdings Ltd. will likely be granted an extension to its deadline for the completion of its Imperial Pacific Resorts project in Saipan, according to statements made by the Governor of the Commonwealth of the Northern Mariana Islands (CNMI) to newspaper Saipan Tribune.

Imperial Pacific announced previously that it was planning to initiate the soft opening of its temporary casino on the island under U.S. jurisdiction in the first quarter of 2017, with the property expected to provide 200 new gaming tables and 400 new slot machines.

However, a report from the newspaper Marianas Variety in February stated that company chairman Mark Brown had requested the government of the CNMI f6r several extensions this year.

The extension requests also involved those relating to their currently

operating temporary casino on the island - extending from an April 30 cut-off date to October 31, 2017 and an extension t6 the deadline to complete the construction and initiate

operations of the gaming facility of the new property from August 11 this year to February 11, 2018.

The request was made by the group’s subsidiary Imperial Pacific International (CNMI), LLC, citing nine reasons - such as lack of readily available skilled labour and construction materials.

Of the reasons cited, the most significant was the serious damage caused

to the company’s construction project

by Typhoon Soudelor - which hit the island in 2015 - with a large amount of heavy equipment destroyed and flooding of construction sites.

In his statements to the newspaper, the Governor of the CNMI, Ralph Torres, said the reasons announced

by Imperial Pacific are ‘justifiable’ and that he had requested the region’s Lottery Commission to meet and discuss the issue with the company.

The group has operated a temporary casino on the island since 2015 through its unit Best Sunshine International Ltd.

New property

Results

MGM Resorts and Bellagio in Dubai

Landing International raises stakes

The development will be the company’s first property in the Middle East

The firm posted a hike in revenue for 2016 mainly due to its excellent performance in its gaming business segment

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

The parent company of local gaming and hospitality operator MGM Macau has been selected as advisor and developer of a destination resort in Dubai, the company’s first property to be established in the Middle East.

The development, announced in a company press release, explains that MGM Resorts will be developing and operating upon completion an MGM Hotel and MGM Residences, as well as a Bellagio Hotel on a 26-acre beachfront property.

The property is owned by a subsidiary of one of the largest real estate development companies in the Emirate of Dubai, Wasl Asset Management Group, which selected MGM Hospitality, a subsidiary of MGM Resorts International, to develop and operate the properties.

The three landmarks will be located on Jumeirah Beach, away from the main city of Dubai, and marks the debut there of the MGM and Bellagio brands.

“This marks the first time we will offer multiple MGM luxury brands at a prime beachfront location,” said MGM Resorts President Bill Hornbuckle.

The property is part of a two million

square-foot development, which will feature a theatre, dining, retail, museums, a beach club and ‘thrilling adventure zones for both adults and children.’ In total the new property will have 1,000 rooms, 10 villas and ‘will occupy the longest stretch of waterfront ever developed in Dubai,’ notes the release.

Speaking at the presentation of the project, Hesham Al Qassim, CEO of Wasl Asset Management, said that the group was “proud to be working in partnership” with MGM,” noting it was a major milestone.

‘The collaboration also fulfils Wasl’s mandate to attract global hospitality players to Dubai, where we are constantly striving to raise the bar in the city by offering tourists, residents and visitors ever more sensational hospitality and entertainment experiences.’

Wasl currently manages a portfolio of over 5,500 rooms and hotel-apartments in Dubai hotels.

In MGM Resorts’ most recently announced results, for the fourth quarter of last year the group saw net revenue of US$1.8 billion (MOP14.4 billion) from its domestic (U.S.) operations, with net income amounting to US$25 million. Full year results saw net income amounting to US$1.1 billion.

Sheyla Zandonai sheyla.zandonai@macaubusiness.com

Landing International Development Limited has posted HK$1.72 billion in consolidated turnover for the whole year of 2016, a six-fold increase from the income it reported a year earlier, at HK$246.50 million, according to a filing of the company with the Hong Kong Stock Exchange.

The company noted that the significant increase ‘was primarily due to the business volume from acquisition of gaming business in the fourth quarter of 2015 and the second quarter of 2016.’

In 2015, the company completed the buyback of 50 per cent of the shares of Magical Gains Holdings Limited.

On 11 November 2016, Landing Singapore, a wholly owned subsidiary of the company, acquired 50 per cent of the issued capital of Autumnglow SPA in an agreement with Genting International Resorts Management Limited. On 3 January 2017, Landing also acquired the entire issue capital of Callisto, an investment holding company which indirectly owns Landing Jeju.

Through its subsidiary, Landing Jeju, the company also started investments in Jeju Shinhwa World in

Jeju, South Korea, in late 2013. The ‘Jeju project’ entered the construction and development phase of hotels and theme park in the first and second quarters of 2016.

Of Landing’s total revenue, gaming revenue amounted to HK$1.49 billion while revenue from the sale of goods reached HK$229.65 million. The 2016 results marked a reverse trend in the revenue of the company by business segment. In 2015, the sales of goods accounted for the largest share of Landing’s revenue, amounting to HK$229.10 million while revenue from gaming reached only HK$17.39 million.

By country of destination, the United Kingdom was the main source of revenue for Landing in 2016, with sales to that country amounting to HK$1.12 billion.

Loss attributable to the owners of the company reached HK$1.06 billion vis-a-vis the HK$987.97 reported the previous year.

In addition to Integrated Resort development, and gaming and entertainment facilities, Landing’s business portfolio includes property development, and design, manufacturing, and sales of light-emitting diode (LED) and semiconductor lighting related products.

Business Daily Wednesday, March 22 2017 9

Greater China Economic outlook

In Brief

OECD sees Mainland growth slowing to 6.5 per cent in 2017 The world’s second-largest economy needs more innovation, entrepreneurship, effective corporate governance and reform of its state-owned sector, the OECD said

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hina’s economic growth is likely to slow to 6.5 per cent this year and cool further to 6.3 per cent in 2018, the OECD said, though exports are set to pick up as global demand strengthens.

The Organisation for Economic Co-operation and Development also warned of China’s ballooning corporate debt in its bi-annual economic outlook report released yesterday.

“In terms of risk, we believe that internally the biggest risk is the accumulated and fast pace of growth of credit both in terms of shadow banking and the banking system,” Alvaro Santos Pereira, director of the country studies branch of the OECD’s Economics Department, told reporters.

“I think it’s important to intensify efforts to tackle this issue.”

China’s corporate debt is about 175 per cent of GDP, one of the highest in emerging market economies, he said, with state-owned enterprises (SOEs) accounting for around 75 per cent of that.

“One of our top recommendations is to remove implicit guarantees to SOEs and other government and public entities,” said Margit Molnar, head of the China desk at the OECD’s Economics Department.

Such guarantees have enabled SOEs and local government investment vehicles to continue accumulating debt, she said.

Financial risks in China are mounting because of indebted enterprises, growing non-bank activities and enormous overcapacity, the report said.

The OECD’s forecast for 2017 is in line with the Chinese government’s growth target of around 6.5 per cent this year, versus last year’s 6.5-7 per cent range. The economy grew 6.7 per cent in 2016, the slowest pace in 26 years.

Some analysts believe the more modest target will give policymakers more room to tackle debt risks and push through painful reforms, though authorities are expected to proceed cautiously to avoid hurting growth.

Economic growth remains high “but is gradually and appropriately moderating as the population ages and the economy rebalances from investment to consumption,” the report said.

Export volumes are expected to grow 3.4 per cent this year and 3.3 per cent next year, up from 2.3 per cent in 2016, due to increasing global demand.

Import volumes are set to grow 7.7 per cent this year and 6.0 per cent in 2018, down from 8.6 per cent growth in 2016, as imports used to process exports fall.

The world’s second-largest economy needs more innovation, entrepreneurship, effective corporate governance and reform of its stateowned sector, the OECD added.

The report did not single out the threat of rising protectionism from the United States but noted that protectionism by some trading partners would hurt Chinese exports.

However, it said China could mitigate this by signing free trade deals with other partners.

“Rising protectionism to the level that some people are talking about - or reversing some of the gains of the last ten, fifteen years - is going to be extremely costly to everyone,” Pereira said.

China’s rapid economic growth has been accompanied by rising inequality which could be combated by reforming the tax system and the household registration system which limits labour movement, the OECD said. Reuters

China this year may publish rules on outbound investment

by Chinese firms that would spell out the sectors in which investing is encouraged and those where it is restricted, state media reported yesterday. In recent months, Chinese regulators have clamped down on outbound deals as part of efforts to stem rising capital outflows that have contributed to a weakening yuan. Chinese Commerce Minister Zhong Shan said on March 11 that a small number of Chinese companies had invested overseas “blindly and irrationally” in investments China does not encourage.

Globalization

Premier Li to further open services, industries Chinese Premier Li Keqiang said the country will further open its services, manufacturing and mining sectors to the outside world, the official Xinhua news agency reported yesterday, even as foreign enterprises struggle with protectionist policies. The premier’s comments come as President Xi Jinping seeks to project China as the world’s leading free trade advocate and despite recent observations from some foreign firms that they are less welcome in China now than they were in the past. Li said China will streamline administrative procedures for foreign investments and ensure a level playing field for companies registered in the country.

Virgin Australia unveils Australia-Hong Kong flights

Meitu’s wild stock trading has investors blaming Mainland links Swings raise questions about how Hong Kong will cope with an influx of investors who often buy and sell on a whim

Hong Kong’s latest stock-market drama is putting a spotlight on the volatile trading patterns of Chinese investors who use the city’s cross-border exchange links.

The links’ most-active stock on Monday was a beauty-enhancing selfie app developer called Meitu Inc. After the shares surged as much as 28 per cent over the course of the day, they tumbled as much as 33 per cent in the final 90 minutes of trading. Hong Kong’s Securities and Futures Commission has requested trading records of Meitu shares from brokers at least three times since January, the Hong Kong Economic Journal reported yesterday, citing unidentified people.

The moves were triggered by heavy trading from mainland investors, according to Mirabaud Asia Ltd., and reflect a pattern that’s becoming more prevalent amid increased Chinese money flowing into the former British colony. Meitu’s swings in the two weeks since it was added to Hong Kong’s stock-trading links with exchanges in Shanghai and Shenzhen raise questions about how the city will cope with an influx of investors who often buy and sell on a whim.

“With southbound connect, certain elements of the Hong Kong market

Beijing may publish rules on outbound investment this year

Airlines

Markets

Kana Nishizawa and Benjamin Robertson

Legislation

have become like China,” said Andrew Clarke, Hong Kong-based director of trading at Mirabaud. “As a trader, you wouldn’t go near them.

The more we see trading patterns in stocks like we did in Meitu, the more likely the SFC and the exchange will push for stricter surveillance.”

Meitu said it hasn’t been contacted by regulators in relation to any such investigation and wasn’t in a position to provide further comment. Spokesmen for both Hong Kong Exchanges & Clearing Ltd. and the SFC declined to comment. The stock was down another 10 per cent as of midday in Hong Kong.

Meitu is set to announce its 2016

earnings on March 24, and said it expects further losses this year. The shares soared 78 per cent through Friday from March 6, when it was added to the mainland links. Meitu’s 30-day volatility on Monday rose to the highest since its December debut.

The company, which has reported losses since 2013, hasn’t filed any announcements to Hong Kong’s stock exchange regarding Monday’s stock moves.

Meitu was the most traded southbound stock on Monday, with mainland investors accounting for about 30 per cent of the HK$3.8 billion (US$489 million) volume, according to data compiled by Bloomberg.

That helped push it to become the third most traded company by value in Hong Kong that day, just behind blue-chip names Tencent Holdings Ltd. and China Mobile Ltd. The December start of second stock link, this time with Shenzhen, opened direct access for mainland investors to Hong Kong-listed mid-cap stocks.

The flows are affecting trading in the city by increasing volatility and intraday volume patterns in popular names, Instinet Pacific Services Ltd. said in November.

Mainland investors bought a net RMB13 billion (US$1.9 billion) of Hong Kong stocks last week through exchange links, the most this year.

Their net purchases totalled RMB3.73 billion on Monday.

IGG Inc. and Zhou Hei Ya International Holdings Co., which were also added to the stock links this month, have seen higher price swings in recent weeks. IGG shares jumped 29 per cent from March 6 through Monday, while Zhou Hei Ya’s gauge of 30-day volatility has risen to the highest this year. Bloomberg News

Virgin Australia Holdings said it would run five return flights a week between the city of Melbourne and Hong Kong, making good on previously disclosed plans to tap the lucrative Chinese travel market.

The airline, 10 per cent-owned

by British entrepreneur Richard Branson, identified China as a target growth market in mid2016 when it took on China’s HNA Innovation Ventures and China’s Nanshan Capital Holdings as major shareholders. The announcement of the new flights, the first for Virgin to greater China, came a day after Virgin said it obtained Australian preliminary regulatory clearance to operate those routes.

Development

Mainland official agrees to deepen cooperation with Sri Lanka China and Sri Lanka will continue to join hands in promoting development in each other’s country and deepen cooperation in all fields, President Maithripala Sirisena and visiting Chinese State Councillor, Defence Minister Chang Wanquan have agreed. Chang, who arrived in Colombo Sunday, met with President Sirisena and his Sri Lankan counterpart respectively on Monday. The president expressed his appreciation for China’s consistent assistance for his country in economy, agriculture, science and technology, education, defence and other areas. He noted that he had met with Chinese President Xi Jinping on several occasions and they had reached broad consensus on ways to further promote bilateral relations.

10 Business Daily Wednesday, March 22 2017

Greater China Fraud suspects

Indonesian police say Interpol has issued red notices for Sinopec execs Authorities filed a request for Interpol assistance on February in alleged embezzlement of an undisclosed sum of money from the West Point Terminal project Fergus Jensen and Cindy Silviana

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ndonesian police said yesterday Interpol has issued red notices, the closest to an international arrest warrant, for three Chinese executives suspected of fraud linked to a more than US$800 million Sinopec oil terminal development in Indonesia.

China Petroleum and Chemical Corp, or Sinopec, is the second major Chinese state oil firm in less than three years to find staff facing allegations of corruption in Indonesia, where the resources sector is riddled with graft and legal and contractual uncertainty.

“The three red notices have been published for those wanted people,” said National Police spokesman Boy Rafli Amar.

Indonesian authorities filed a request for Interpol assistance on Feb. 21 regarding the three executives, suspects in the alleged embezzlement of an undisclosed sum of money from the West Point Terminal project, Amar said. He identified the three as West Point Terminal finance director Zhang Jun, chief executive Feng Zhigang and chairman Ye Zhijun.

A Sinopec spokesman declined to comment. Reuters has not yet been able to find telephone numbers or

email addresses for the three executives, so has been unable to contact them for comment.

Interpol’s General Secretariat press office said in an emailed response to questions on the matter that it did not “comment on specific cases or individuals except in special circumstances”.

A red notice is Interpol’s highest alert and is a request to locate and provisionally arrest an individual pending extradition. It is not an international arrest warrant as Interpol cannot compel any member country to arrest an individual who is the subject of a red notice.

Indonesia, an archipelago of some 250 million people rich in resources, is routinely ranked by watchdog Transparency International as one of the world’s most corrupt countries.

Former Indonesian energy minister Jero Wacik is serving an eight-year

prison term for involvement in extortion and kickbacks worth about US$840,000.

Series of setbacks

Defrizal Djamaris, a lawyer representing West Point Terminal’s 5-per cent stakeholder, PT Mas Capital Trust (MCT), said MCT reported suspicions of fraud on the project to local police in 2015.

The red notices were issued because the three executives had left the country and “not cooperated” with local police investigations, Djamaris said. The police’s Amar did not confirm this.

The West Point Terminal was touted to be Southeast Asia’s largest and was initially expected to be operational by mid-2016, but has faced a series of setbacks including a lawsuit filed by Indonesian shareholders in November.

The project in Indonesia’s Batam free trade zone to the south of Singapore is 95-per cent owned by Sinopec Kantons Holdings, a subsidiary of Sinopec .

Sinopec Kantons bought into the project in January 2012, aiming to develop a 2.6 million-tonne storage facility worth more than US$800 million.

The project was delayed by several years due to slow demand for tank space, Reuters reported. An official at Indonesia’s energy ministry said the downstream operations permit for the West Point Terminal expired in late 2014.

Sinopec’s only other Indonesian asset is an 18-per cent stake in Chevron’s deep water project, bought in 2010.

Sinopec Kantons, which is one of Sinopec’s smallest subsidiaries, was not immediately available for comment. Reuters

Results

China Telcom books 10 per cent profit fall The company is among state-owned telcos bracing for revenue pressure after Premier Li called on them to “raise speed, drop prices” Sijia Jiang

Chinese state-owned telecommunications network operator China Telecom Corp Ltd yesterday reported net profit that fell 10.2 per cent last year due to a higher base of comparison, and said subscribers to its 4G mobile network doubled.

Profit fell to RMB18 billion (US$2.61 billion), in line with the RMB18.1 billion average of 21 analyst estimates from Thomson Reuters SmartEstimate. It grew 11.7 per cent when excluding a one-off gain in 2015 from disposing of tower assets.

Operating revenue rose 6.4

per cent to RMB352.3 billion.

China Telecom is among China’s state-owned telcos bracing for revenue pressure after Chinese Premier Li Keqiang called on them to “raise speed, drop prices” by evening out local and long-distance domestic call charges and removing domestic roaming charges.

Jefferies analyst Edison Lee said China Telecom will suffer more from the reform than bigger rival China Mobile Ltd due to its narrower net margins. Lee lowered his 2017 earnings-per-share forecast for China Telecom by 16.8 per cent as a result of Li’s call.

China Telecom, which derives almost half of its revenue from its mobile business, said it doubled the number of users of its fourth-generation (4G) mobile network last year to 122 million, making up a 16 per cent market share.

T h e t e l c o , C h i n a’ s

second-largest by market value, also declared a dividend of HK$0.105 per share, up from HK$0.095 a year earlier.

It said capital expenditure in 2016 fell 11.3 per cent to RMB96.8 billion.

“Year 2017 is a crucial year

for the company to implement the strategy of comprehensive transformation and upgrades as well as the construction of comprehensive competitive advantages,” Chairman and Chief Executive Yang Jie said in a statement. Reuters

Business Daily Wednesday, March 22 2017 11

Asia Real estate bubble

Australia’s central bank warns of growing risks in housing Data from the Bureau of Statistics yesterday showed home prices rose 4.1 per cent in the December quarter Swati Pandey

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ustralia’s central bank saw growing risks in the nation’s hot housing market when it left rates steady earlier this month, underlining the case against further easing in policy.

Housing affordability, or the lack of it, has become a hot-button issue for the conservative government of Prime Minister Malcolm Turnbull, which has promised measures to ease the problem in its May budget.

Key Points

housing market as borrowing for investment fuelled brisk price rises in Sydney and Melbourne.

“The Australian housing market continues to cause much angst around poor affordability and high household debt,” said Shane Oliver, chief economist at AMP Capital.

“Recent RBA commentary strongly hints that more macroprudential measures to tighten lending standards are on the way. This is in part about reducing the risks to financial stability when it’s too early to consider raising rates.”

Data from the Australian Bureau of Statistics (ABS) yesterday showed home prices rose 4.1 per cent in the

December quarter, from the previous quarter, with Sydney up a red-hot 5.2 per cent.

The pace has quickened even further this year. Figures from property consultant CoreLogic showed prices were currently growing at an annual 19 per cent in Sydney, while gains across the five capital cities amounted to 12.7 per cent.

Much of that fever has been fuelled by borrowing for investment properties, driving household debt up to a record 180 per cent of disposable income.

RBA Governor Philip Lowe has argued there was little economic benefit in lowering rates from an already low 1.5 per cent if all it does is lift debt to levels that would impact consumer spending power.

Data out recently showed retail sales in January grew at a tepid pace for a third straight month, while the

outlook for capital expenditure remained uninspiring.

The RBA did note that tighter supervision had contributed to “some” strengthening in lending standard by the banks, which had also raised rates on some mortgage products recently.

With Lowe repeatedly arguing against cutting rates further, financial markets have all but priced out the chance of another cut this year.

Some investors are even toying with the idea of hike in early 2018.

“In our view, it would take a sustained loss of momentum in job creation or a fall in dwelling prices for Lowe to entertain the idea of taking the policy rate lower,” said Gareth Aird, senior economist at Commonwealth Bank.

“Neither outcome is in our central scenario and as such, we see the RBA on hold over 2017 and well into 2018.” Reuters

RBA sees ‘build-up of risks’ in housing market Futures market sees no chance of rate cut this year RBA would need major jobs, housing losses to cut - CBA economist Minutes of its March 7 meeting released yesterday showed the Reserve Bank of Australia (RBA) were generally optimistic about the A$1.7 trillion (US$1.31 trillion) economy, which is transitioning away from a decade-long boom in mining investment.

However, board members felt there had been a “build-up of risks” in the

Bonds

Japan ponders closing gap between JGB auctions and issuance Sources say the Ministry of Finance plans to float the idea in an upcoming meeting with market players this week Japan’s Ministry of Finance (MOF) is considering shortening the period between the auction and the issuance of some Japanese Government Bonds, sources with knowledge of the matter said, a move that is expected to reduce risk for bond brokers.

JGB brokers have long wanted such a step because the Bank of Japan (BOJ), by far the largest buyer of JGBs because of its massive bond purchase scheme, does not accept the bonds that have been auctioned but are yet to be issued, compelling brokers to hold a large number of bonds over the interim period.

The BOJ buys bonds in the secondary market and not at auction to avoid directly monetising Japanese government debt.

The proposed shortening of issue times would come as market players grow more wary of the growing risks of holding bonds.

Global bond prices have come under pressure partly because the U.S.

Federal Reserve is raising interest rates and also because the European Central Bank is on course to scale back its bond-buying stimulus

campaign.

The MOF plans to bring forward the issue date of all the JGBs that are currently issued more than two business days after auction.

That includes the JGBs that are issued in March, June, September and December as well as all twoyear bonds. Some of them are issued weeks after auction.

That means brokers are burdened with considerable risk, given that in many cases there are few buyers except the BOJ -- because BOJ policy has kept yields too low.

‘The proposed shortening of issue times would come as market players grow more wary of the growing risks of holding bonds’ Since the BOJ started massive easing in 2013, many bond traders have been engaged in the so-called BOJ trade, in which they buy JGBs at the MOF auction and flip them to the BOJ very quickly.

The Ministry plans to float the idea in an upcoming meeting with market players this week, the sources said. Reuters

12 Business Daily Wednesday, March 22 2017

Asia EIU list

Singapore and Hong Kong ranked as two costliest cities in the world Tokyo returns to world’s 10 priciest cities in Asian domination Melissa Cheok

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okyo returned to the ranks of the world’s 10 costliest cities in 2017 as Asia’s representation expanded, reflecting the region’s rising clout in the global economy.

Japan’s capital, the world’s costliest city until 2012, jumped seven places to No. 4 this year and Osaka climbed nine notches to No. 5, both bolstered by a resurgent yen, the Economist Intelligence Unit’s Worldwide Cost of Living Survey showed yesterday.

Singapore and Hong Kong retained the top two spots and Seoul came in sixth. Zurich, the third most expensive, was the only impediment to Asia holding all top five slots.

Asia accounts for 40 per cent of the global economy and in the four years to 2020 is predicted by the International Monetary Fund to contribute two-thirds of worldwide growth. At the same time, cities in China, the region’s economic powerhouse, slipped by between five and 16 places due to weakening consumption and a depreciation in the renminbi, the report showed.

Europe had four cities in the top 10, with Geneva, Paris and Copenhagen joining Zurich. The French capital was the only euro zone city among the top 10, remaining “structurally extremely expensive to live in, with only alcohol and tobacco offering value for money compared with other European cities,” the EIU said.

New York was the only

representative from North America, slipping to ninth from seventh due to a slight weakening of the dollar.

The greenback’s moderation and the euro remaining relatively steady meant the currencies of Canada, Australia and New Zealand appreciated.

As a result, Sydney climbed to 14th spot and Melbourne to 15th, meaning they’re more expensive than Shanghai. Auckland and Wellington jumped 22 and 26 places respectively to be inside the top 20.

Singapore’s ranking as the world’s priciest city for the fourth consecutive year is largely due to the cost of owning a car there being the highest in the world. It is also the second-priciest for clothing. ”Singapore’s position is skewed slightly by the complex system for buying and registering cars as well as relatively high incomes, which means that it remains relatively

Singapore skyline

affordable for many residents,” said Jon Copestake, editor of the survey.

The report, which compared prices of over 150 items across 133 cities, showed London and Manchester slid in response to uncertainty surrounding Brexit and the ensuing depreciation of the pound.

‘Singapore’s ranking as the world’s priciest city for the fourth consecutive year is largely due to the cost of owning a car’ Rebounding prices continued to impact the cost of living in commodity-reliant countries, with the Brazilian cities of Sao Paulo and Rio de Janeiro the fastest-rising in terms of cost of living, moving up 29 and 27 places respectively.

While Asia is home to some of the world’s most expensive metropolises, it is also site of some of the cheapest, too. South Asian cities like Bangalore, Chennai, Karachi, Mumbai and New Delhi represent excellent value for money, according to the survey. This year, Almaty, Kazakhstan’s business centre, and Lagos in Nigeria were ranked the world’s cheapest. Bloomberg News

Political scandal

S.Korea’s Park apologises, promises cooperation in graft probe Park declined to have her questioning recorded by video camera, prosecutors said Christine Kim and Ju-min Park

Ousted South Korean president Park Geun-hye apologised to the country yesterday as she arrived at prosecutors’ offices for questioning as a criminal suspect in a corruption scandal that has gripped the country for months.

Park, 65, became South Korea’s first democratically elected president to be removed from office when the Constitutional Court this month upheld her impeachment by parliament in December.

She has been accused of colluding with a friend, Choi Soon-sil, to pressure big businesses to donate to two foundations that backed her policy initiatives. Park and Choi have both denied wrongdoing.

“I am sorry to the people. I will faithfully cooperate with questioning,” Park said in front of media at the steps of the prosecutors’ office building, her first comments directly to the public since she was dismissed.

Park has not been charged but could face more than 10 years in jail if convicted of receiving bribes from bosses of big conglomerates, including Samsung Group chief Jay Y. Lee, in return for favours.

After about five hours of questioning, an official from the prosecutors’ office told reporters Park had been forthcoming but he declined to elaborate on what she had been asked,

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on her responses or on what charges she might face.

Park’s fate and the widening corruption investigation have gripped the country at a time of rising tension with North Korea and China.

Hundreds of Park’s flag-waving supporters gathered outside her home in Seoul’s upmarket Gangnam district to see her off, and later gathered outside the prosecution office.

Television cameras followed her as she was driven in a black sedan to the office, a few minutes away from her home, escorted by police who cleared the road. Earlier, media saw Park’s hairdresser arriving at her home.

Park was dressed in a dark navy coat and trouser suit with grey shoes, and looked sombre as she stood to deliver her brief remarks.

one of her lawyers said.

The questioning is expected to last late into the night and another of her lawyers, Sohn Bum-kyu, told a television channel Park would choose whether it would go beyond midnight.

Prosecutors could detain her but the official from the prosecutors’ office, who briefed reporters on the condition he not be identified, said Park would go home after this session.

He declined to say if she would be summoned again or whether a warrant for her arrest would be filed.

Sohn said Park’s health was not at its best and she had been getting medical checks between questioning sessions. The prosecution official said his office had not received any medical note regarding her health.

The scandal has undermined support for Park’s conservative ruling party. A liberal opposition politician, Moon Jae-in, is leading in opinion

polls and is expected to win a snap presidential election on May 9.

Park’s supporters and opponents have held protests in Seoul for months but police have managed to keep them apart and no serious violence has broken out between them.

A spokesman for Moon said uncovering the truth would help heal divisions.

“We want former president Park to tell the truth and ask for forgiveness.

All are equal before the law,” said the spokesman, Park Kwang-on.

“Finding the truth is a first step for the unity of the people.”

A top official from Park’s party urged prosecutors not to be swayed by public opinion but to find the truth and give Park the cordial treatment a former president deserved.

“Everyone, not only me, is feeling miserable and distressed,” the party official, Chung Woo-taik, told a meeting. Reuters

‘Equal before the law’

Park, who was accompanied by two of her lawyers, was given tea before her first session of questioning by two prosecutors and an investigation official, prosecutors said in a statement.

One of her lawyers, Yoo Yeong-ha, is known as her “Bulletproof Vest” and has been her legal voice since the beginning of the scandal in October.

Park declined to have her questioning recorded by video camera, prosecutors said.

She later had a lunch break of some seaweed rice rolls and a sandwich,

Impeached South Korean former President Park Geun-hye arrives at Seoul Central District Prosecution Office for questioning in Seoul yesterday. Lusa

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Business Daily Wednesday, March 22 2017 13

Asia Markets

In Brief

Modi-backed ETF may fuel India sales after US$1.4 billion haul Indian households are putting more money into financial assets as slowing inflation reduces the value of gold Viren Vaghela

The success of an exchange-traded fund backed by Prime Minister Narendra Modi’s government may help boost the acceptance of such products in the world’s second-fastest growing ETF market.

Investors poured 92 billion rupees (US$1.4 billion), or 3.7 times the targeted amount, into a fund of the top 10 state-run companies, according to Reliance Mutual Fund, which manages the pool. It was the third time in three years the government used the Central Public Sector Enterprises ETF, or CPSE, to raise assets. A first sale in March 2014 generated 43 billion rupees and a second tranche in January raised at least 45 billion rupees.

Proceeds will be used to maintain public spending without increasing the fiscal deficit.

“India’s ETF market is expected to witness robust growth in the coming years due to the structural shift in asset-class preference from fixed income to equities,” Rajendra Prasad, an analyst at Karvy Stock Broking Ltd., said in an interview. CPSE is a “catalyst for the broader development of ETFs in India.”

Indian households are putting more money into financial assets as slowing inflation reduces the value of gold and Modi’s cash ban shock damps demand for real estate.

Money managed by local ETFs have almost tripled to US$6 billion in the past three years, the fastest pace after Japan, data from the Association of Mutual Funds in India show. The investments still make up just 2 per cent of the industry’s total 18-trillion rupee assets, the data show.

While the under-performance of portfolio managers have made ETFs into a US$4 trillion industry globally, products linked to indexes are an emerging trend in India where money managers have produced market-beating returns by picking individual stocks. Local actively-managed equity funds have risen an average 20 per cent annually over the past three years, versus a 13 per cent gain in the benchmark S&P BSE Sensex, data compiled by Bloomberg show.

“Flows into Indian ETFs are less than those into mutual funds due to lower returns,” said Prasad. “This is partly due to information asymmetry

in the Indian stock market that gives active managers an advantage.”

In the case of CPSE, retail investors put bids of more than 35 billion rupees, swayed by its performance.

The fund has climbed 43 per cent in the past year, more than double the gain in the Sensex, data compiled

by Bloomberg show. The outperformance will help stoke interest for such products, according to Outlook Asia Capital Pvt. “As the size of ETF assets grow, fund managers are now seeing a viable business model,” said Manoj Nagpal, chief executive officer at the Mumbai-based investor advisory firm.

“More niche ETFs are getting filed with the market regulator. That’s a positive trend.”

Modi is using CPSE ETF to pare the government’s extensive ownership in companies including Oil & Natural Gas Corp., the largest explorer, and Coal India Ltd., the world’s top producer of the fuel. Separately, the state-run Employees Provident Fund Organization has put 181 billion rupees into shares via index-linked funds since it was allowed in 2015 to buy stocks, Labour Minister Bandaru Dattatreya told the Press Trust of India on the weekend.

“India’s ETF market is expected to witness robust growth in the coming years due to the structural shift in assetclass preference from fixed income to equities” Rajendra Prasad, an analyst at Karvy Stock Broking

Property

Japan land prices edge up in 2016 on tourism boom Demand for land to build hotels and shopping outlets stemming from a boom in tourism helped Japan’s nationwide land prices edge up for two consecutive years, a government survey showed.

The overall land prices rose 0.4 per cent in 2016 after rising 0.1 per cent in 2015, according to the Ministry of Land, Infrastructure, Transport and Tourism. Commercial land prices rose 1.4 per cent last year, up from 0.9 per cent the previous year, the ministry said. Residential land prices stayed at flat, after falling for the previous eight years.

Budget

Malaysian govt asks parliament to approve extra spending The Malaysian government yesterday sought parliamentary approval to increase its expenditure under the 2016 budget, saying it had spent some 3.08 billion ringgit (US$695.73 million) more than planned. The government tabled a supplementary bill in parliament yesterday, saying 2.25 billion ringgit of the additional spending was a contribution to statutory funds. The ministries of education, foreign affairs, health, transport and women, family and community development also spent more than initially planned. The election commission spent an additional 62.8 million ringgit last year, according to the spending bill.

Health

S.Korea lifts sales ban on chicken from Brazil’s BRF Seoul will lift a temporary ban on sales of chicken meat from Brazil’s BRF SA after the South American nation said shipments to South Korea did not contain tainted products.

A scandal over contaminated meat has prompted some countries to suspend imports of meat products from the world’s biggest beef and poultry exporter. South Korea’s agriculture ministry said in a statement yesterday that the Brazilian government notified it the day before that tainted meat from around 20 meat processing units was not exported to South Korea, although it went to other places such as the European Union and Hong Kong.

Official data

The pension fund may invest up to 15 per cent of its 1.4-trillion rupee (US$21 billion) surplus into equities in the year starting April 1, PTI cited the minister as saying. That would mean an inflow of US$3 billion, said Nagpal.

“Institutional investors will grow the ETF market for the next one to two years, followed by retail once they see size and liquidity,” he said. “In the meantime, the industry is getting ready by creating more products.”

In Japan, where ETF assets have more than doubled in three years to US$193 billion, buying is driven by a central bank initiative. After exhausting more traditional forms of asset purchases, the Bank of Japan in 2011 began buying ETFs to stoke the economy. The BOJ owns about 66 per cent of ETFs, making the country home to most of the 10 largest ETFs outside of the U.S., according to Bloomberg Intelligence. Bloomberg News

Immigration to NZ continues at record levels Immigration into New Zealand continued at record levels last month, prompting opposition lawmakers to claim the numbers are unsustainable. In the year ending February, a net 71,300 migrants arrived in the country, the government statistics agency said yesterday. This equalled the previous annual record set in January, according to Statistics New Zealand.

Migrant arrivals numbered 128,800 in the February 2017 year, a new annual record, while migrant departures were 57,500. “About a third of all migrant arrivals for the year were people coming to New Zealand on work visas,” population statistics senior manager Peter Dolan said.

14 Business Daily Wednesday, March 22 2017

International In Brief Trade position

EU finance ministers worried about “surreal” G20 European Union finance ministers expressed concern yesterday over the future of free trade after what one of them called a “surreal” meeting of finance chiefs of the world’s 20 biggest economies at the weekend.

Breaking a decade-long tradition of endorsing open trade, G20 finance ministers and central bankers made only a token reference to trade in their communiqué, acquiescing to an increasingly protectionist United States after a two-day meeting in Germany failed to yield a compromise.

Bosnia-Herzegovina

Russia to pay off Soviet debt Russia will pay off an outstanding foreign debt of the Soviet Union in full by transferring US$125.2 million to Bosnia and Herzegovina, Deputy Finance Minister Sergei Storchak said yesterday. “Bosnia and Herzegovina remained the only country among the former Soviet Union’s creditors before whom (Russia) had an unpaid debt,” Storchak said in an emailed statement.

Storchak said that Russia and Bosnia and Herzegovina signed an inter-government agreement under which Sarajevo will receive Moscow’s payment within 45 days. After the Soviet Union collapsed in 1991, Russia took the responsibility to redeem outstanding debt to USSR’s creditors.

Funding

Egypt aims to sell off stakes in state firms Egypt aims to raise 6 billion pounds (US$329 million) from the sale of stakes in state companies in the 2017/18 financial year, Finance Minister Amr El Garhy told Reuters, part of government efforts to generate revenue and attract investors. He did not specify which companies would be involved, or the size of the stakes which would be offered to investors. Egypt plans to offer shares in several public companies, mainly in the petroleum and financial sectors, on the stock exchange this year. The offerings will be its first since 2005, when the state sold shares in Telecom Egypt, AMOC and Sidi Kerir.

Angola

Power bills to be reduced during restrictions The company responsible for supplying electricity in Angola said on Monday it would reduce power bills during the phase of restrictions that are going to affect Luanda until July. The restrictions came into force on 11 March, the power company spokesman, Pedro Bila, said when the Laúca hydroelectric scheme reservoir began to be filled. Pedro Bila said many consumers had complained about the 12-hour power cuts, but he said the recent rains in Malange and Bié provinces would swell the river flow and speed up the filling of the Laúca reservoir.

Protectionism

New World Bank CEO defends globalisation She said economies should encourage competition which boosts innovation and raises productivity Matthew Miller

T

he World Bank’s newly appointed chief executive gave a spirited defence of globalisation during her first official visit to China, saying it had helped richer and poorer countries, and economic integration made it hard for any nation to walk away.

Kristalina Georgieva, a Bulgarian who took up her post at the multilateral development lender at the start of this year, also praised China for its commitment to economic reforms and open markets.

“Open markets, trade, division of labour has worked extremely well for the poorer countries”

protectionist U.S. administration.

Georgieva called for an “intelligent, calm conversation” about sharing the benefits of globalisation more broadly.

Warning against protectionist policies, she said every country would be hurt if decades of integration and interdependence were unravelled.

“It’s impossible to say, now we are in this boat, but it is only your end of the boat that is sinking,” said Georgieva.

Rather than erect trade barriers, economies should encourage competition which boosts innovation and raises productivity, she said.

Georgieva called for China’s government to continue opening up the domestic market to competition, and move forward with reforms to create “a more dynamic economy”.

“In 2016, 35 per cent of growth in

the world came from China,” she said. “While this contribution is going to gradually decline somewhat, it is very significant.”

China has said it is targeting economic growth of about 6.5 per cent, after it reported growth of 6.7 per cent last year.

The World Bank, through the International Bank for Reconstruction and Development, is now providing about US$2 billion annually in lending to China, and is involved in projects ranging from pollution controls to urban and rural development. Georgieva said the biggest challenges facing the World Bank remain in those countries torn apart by conflict and facing famine.

“It is horrible to have the shadow of famine in the 21st century,” she said, pointing to situations in South Sudan, Somalia, Yemen and northern Nigeria.

“Our biggest fear is related to that kind of devastation combining the force of nature with the evil of men.”

Reuters

Kristalina Georgieva, World Bank’s CEO “Open markets, trade, division of labour has worked extremely well for the poorer countries,” she told Reuters in an interview late on Monday.

But wealthier countries also have benefited from rising middle classes, which are demanding more exports from advanced economies, said Georgieva, a former vice president of the European Commission.

In Germany over the weekend, finance ministers and central bankers from 20 rich nations dropped a former pledge in their communique to keep global trade free and open, acquiescing to an increasingly

Kristalina Georgieva, World Bank’s CEO

Aviation industry

EU plans to relax rules on airlines’ transatlantic wet leasing deals The Commission is now seeking a mandate from member states to negotiate an unrestricted agreement with the United States Julia Fioretti

T

he European Commission wants to scrap restrictions placed on EU airlines leasing planes and crew from U.S. carriers, to resolve a long-standing dispute between the two sides.

The leasing of crewed planes from another airline - known as wet-leasing - is a common practice in the industry and the 10-year-old EU-U.S. Open Skies aviation services agreement envisaged a liberal regime for wet leasing.

But a dispute arose after the EU separately in 2008 imposed a seven-month duration limit, renewable once, on European airlines wet-leasing from non-EU carriers.

The United States retaliated by imposing similar duration limits on EU carriers wet-leasing from other EU carriers on their routes to and from the United States, making it hard for European airlines to plan routes as they would not know if the wetleased crews and planes would have permission to fly.

The Commission is now seeking a mandate from EU member states to negotiate an unrestricted wet-leasing agreement with the United States the first such agreement the EU would have - to resolve the impasse, but that has raised fears among some critics that airlines could use wet-leasing as a way to operate regular services with cheaper crews.

But supporters say this is unlikely to happen as pay levels are similar on both sides of the Atlantic and while Germany has opposed a liberalised wet-lease regime with the United States, most other member states are in favour.

Pilot fears

In December the Commission proposed introducing an exception to the duration limit on wet-leasing deals if negotiated in an international agreement, to pave the way for a liberalisation with the United States.

The European Cockpit Association (ECA), representing pilots, fears that change could open up the possibility of unrestricted wet-leasing

agreements with other countries with whom the EU is currently negotiating aviation agreements, such as Qatar, Turkey and the countries forming the Association of Southeast Asian Nations.

Low-cost airline Norwegian Air Shuttle has faced criticism for employing crew from Thailand, although it has made an effort recently to employ more Europeans.

In the proposal the Commission said “other third countries may line up in the future to seek similar derogations, but each request would be dealt with on a case-by-case basis and exemptions should be granted only when adequately justified.”

Key Points EU sets time limits on airlines leasing non-EU planes and crew United States retaliated by imposing limits on EU airlines EU Commission wants to negotiate liberalised leasing agreement Germany, pilots fear would lead to lower social standards The ECA cited Akbar Al Baker, chief executive of Qatar Airways, as saying in a negotiating round earlier this month with the EU on an aviation agreement that Qatar would not accept a less favourable regime on wet-leasing than those granted to other countries. Reuters

Business Daily Wednesday, March 22 2017 15

Opinion Jack Ma has a patriotic duty to offer more for MoneyGram

Tim Culpan a Bloomberg Gadfly columnist

M

oneyGram International Inc.’s final sale price isn’t a question of how high Ant Financial is willing to go, but rather the ceiling Euronet Worldwide Inc. has for a bid.

That’s because Jack Ma really must jump back in.

As Bloomberg’s Selina Wang reported, Ant is likely to either counter with a higher offer, or wait until Euronet completes due diligence and then make a formal bid. In January, Ant announced plans to acquire the Dallas-based payment services provider for US$13.25 a share cash, pending regulatory approval.

Euronet came in with a US$15.20 a share tilt last week, and MGI’s board said Monday the offer “could reasonably be expected to result in a ‘company superior proposal’.”

Ma, who controls both Alibaba Group Holding Ltd. and its financial-services affiliate, can blame himself (or his advisers) for Euronet cutting in on his waltz.

While both Ant Financial and MGI’s board thought theirs was a match made in heaven, the low-ball offer made by Zhejiang Ant Small & Micro Financial Services Group Co. -- Ant’s formal name -- at the start of the year virtually begged someone to make a counter bid.

There are only two solid reasons for Ma to ditch the deal and move on, and more than a few for him to continue the fight.

In favour of cut and run are the issues of cost and regulation.

Frankly, price would US$ per share be a poor excuse for Euronet Worldwide Ma to walk away. offer Ant could offer 15 p e rc e n t o v e r Euronet’s bid and still be paying 47 percent more than MoneyGram’s closing share price prior to Ant’s first-round offer. That sounds like a lot, but it merely values the company in line with the average of consumer finance peers on a price-earnings basis.

Then there’s CFIUS. Euronet used the term -- an abbreviation for the Committee on Foreign Investment in the U.S. -- at least seven times in its press release announcing the bid. Beyond offering a higher price (not an insignificant justification), Euronet’s entire strategy seems tied to playing the patriot card of “We’re American, they’re Chinese.”

Even in Trump’s America, a Chinese company purchasing MoneyGram shouldn’t raise the hackles of CFIUS because there’s little argument the deal would be a national security risk.

Given that Ma fronted up to Trump Tower and offered to create 1 million American jobs, it’s just as probable a Trump White House will wave the transaction through.

Which brings us to the reasons to continue the fight. Walking away now would not only be a defeat for a man trying to make his mark in America, but would also be a severe loss of face in the U.S., and back home.

There’s also the issue of commitment. If Ma gives up that easily, it’s going to be hard for other boards to take him seriously the next time he wants to do a deal. U.S. firms are already sceptical of Chinese companies’ M&A ambitions, and such a back down would give those detractors louder voice.

Finally, there’s the issue of precedent, and China’s bigger-picture plans in America. If the mere whiff of CFIUS is enough to scare away a relatively mundane offer, then there’s every chance bolder Chinese acquirers may decide to sit on the sidelines. It may also embolden competitors to wave the CFIUS flag any time a deal threatens their position.

In the end, Ma has to keep fighting for MoneyGram. It’s his patriotic duty. Bloomberg Gadfly

15.20

US Secretary of the Treasury Steven Mnuchin (R) speaks during a joint press conference with German Finance Minister Wolfgang Schaeuble (L) after their meeting in the Finance Ministry in Berlin last week. Lusa

At best G20 protectionism shuffle just a Trump con

L

ike many presumed turning points, the Group of 20 backing away from its commitment to free trade is both more and less than meets the eye.

Economic policymakers of the 20 rich nations, meeting in Germany over the weekend, dropped a former undertaking to “avoid all forms of protectionism” from their final communiqué, substituting only a watered-down phrasing that they are “working to strengthen the contribution of trade to our economies”.

That, of course, reflects the influence of President Donald Trump, whose stated hostility to existing trade arrangements, and seeming willingness to resort to tariffs, taxes or other barriers is part of a plan to, in his reckoning, regain the industry and jobs lost to globalization.

If the Trump view of trade finds purchase at the top tables of global policy-making it would indeed be big, and very bad news.

It is far too early to say this has happened. The G20 finance ministers don’t have direct responsibility for trade, an area delegated to the so-called sherpas who advise policymakers and who meet separately, a fact pointed out by Adam Tiggs, a former advisor to the Australian G20 Task Force. When Australia served as G20 host in 2014 finance ministers and central bankers did not pledge to fight protectionism.

Because the G20 can only act with complete consensus the n e w a n d m ea l y - m o u th e d words about trade simply tells us what we already know: that the Trump administration has unconventional views about it, and about how “fair” trade can be advanced. The U.S., it seems, refused to accede to the former anti-protectionist pledge and the group came up with a temporizing form of words which could mean many things to many people.

We’ve not yet entered a new age of protectionism, and states like Germany and China are probably, and probably wisely, playing their cards slowly so as to allow the Trump administration to either re-think or re-engineer a set of tactics, such as the border tax, which might otherwise lead to an explosive round robin of trade barriers.

“

James Saft a Reuters columnist

wants to create for their boss the appearance of tweaking the noses of the U.S.’s supposed trade adversaries. Perhaps they will make big noises but pursue only symbolic protectionist policies.

These are people, this line of reasoning goes, who have some grasp of the destructive potential of protectionism but will flirt with it as the price of controlling the levers of policy.

A protectionist and nationalist shadow play would certainly be better than outright protectionism, perhaps in the form of a border tax, which would hurt low-income Americans worst but also slow growth and spur potentially damaging inflation.

That the optimistic view is that the Trump administration is playing its voters for fools tells you much about the state of the world, and the risks investors face in this world.

The very fact that we are discussing protectionism as a possibility is a very bad thing, a very bad thing financial markets are not reacting to, most likely because the nearterm play for most is to bank on rising risk markets on the back of looser regulations and lower taxes.

The world on which current asset valuations are based is one in which a more tightly intertwined global economy gives rise to more trade, and stronger growth in emerging and developed economies, but without overheating because of a steady addition of new labor from poorer countries. If all that gets thrown by the board, the impact could be huge.

“This is a paradigm shift from the shibboleth of the past two decades,” strategist Helen Thomas, of Blonde Money writes.

“Now many of those forces are going into reverse.

Does this mean growth down but inflation up?”

Indeed it would, and an interesting point is that trade growth had already stalled before the advent of Trump, as had that stream of cheap Chinese labour from the countryside.

Markets respond not just to economic forces, but to stories, and if the story of reversing globalization gains traction, a marking up of expected inflation and marking down of growth and asset values is a reasonable expectation.

The G20 meeting has, unfortunately, advanced that story line. Reuters

If the Trump view of trade finds purchase at the top tables of global policy-making it would indeed be big, and very bad news

Big change or big con?

As with everything in Trump world, a move towards protectionism could be a massive turning point for the global economy or just a big con. It may be that the Goldman Sachs wing of the White House, led by Treasury Secretary Steven Mnuchin and chief economic advisor Gary Cohn, simply

”

16 Business Daily Wednesday, March 22 2017

Closing Olympics

Beijing Organizing Committee to hire locals

and construction, venue management, marketing, media, law, finance, and foreign languages.

Residents from Macau, Hong Kong, and Taiwan as well as foreign Chinese Each applicant is allowed to apply for one post only. nationals are eligible to apply for The first stage of the selection process an online video interview for staff positions at the Beijing 2022 Olympic consists of a preliminary screening, after which the committee will conduct and Paralympic Winter Games, the State Council of the People’s Republic an examination and evaluation of the candidates from April to May. of China reported this week.

The Beijing Organizing Committee has This stage will consist of a written exam, second qualification review, launched a call for applications for 22 staff to work in 21 positions in planning background check, and interview. S.Z.

Markets

Mind the gap: Chinese, foreigners piling into Hong Kong H-shares, A-shares lag The juicy discounts seen in Hong Kong have been too good to pass up Nichola Saminather

S

hares of Chinese companies listed in Hong Kong are among the top performers in the world so far this year, easily returning more than the S&P, as Chinese investors pile into a market that was once the near-exclusive playground of foreign fund managers.

Worried by signs that China is tightening monetary policy, mainland investors are loading up on Hong Kong-listed Chinese firms, which are trading at hefty discounts to the shares of the same companies in Shanghai and Shenzhen.

“Eventually, A-shares will come down to meet H-shares, so you wouldn’t want to buy A-shares” Tan Eng Teck, senior portfolio manager at Nikko Asset Management in Singapore

premium commanded by China’s A-shares over H-shares to the lowest since December 2014, but investors say there is still money to be made.

Chinese investors remain wary of local shares after a crash wiped trillions of dollars off its markets in mid-2015, said Nicholas Yeo, head of China/Hong Kong equities at Aberdeen Asset Management in Hong Kong.

“We’ve seen a reduction in participation by retail investors in A-shares.

They have been replaced by institutional investors, who are looking to Hong Kong, where H-shares have been trading at a discount for some time.”

Juicy discounts

Tight capital controls have limited the ability of Chinese to get funds out of the country, prompting them to pour their savings into A-shares and driving those prices and valuations significantly higher than H-shares.

But in the last few years, programs connecting the Shanghai and Shenzhen stock markets to Hong Kong’s have gained traction, giving Chinese a route to invest overseas, with the proviso they repatriate the funds to prevent actual capital outflows.

The juicy discounts seen in Hong Kong have been too good to pass up.

Using the stock market link-ups, Chinese investors pumped $7.19 billion into Hong Kong stocks in January and February, some 40 per cent more than foreigners invested in mainland shares.

The Shanghai Shenzhen CSI 300 index is up only 4.2 per cent so far this year.

Foreigners returning to gateway to China

Adding to the boost for Hong Kong stocks, foreign funds, which reduced exposure to Asia late last year as the U.S. dollar strengthened, are now returning, drawn both by expectations of global reflation and China’s steadier economy.

That has whittled down the A-share premium over H-shares to 14 per cent, compared with about 35 per cent a year ago.

Chinese buyers have been largely focusing on H-shares of China’s banks for their relatively high dividend yields.

International investors, on the other hand, view Chinese banks with scepticism, fearing their bad loans are much higher than the lenders admit.

For instance, after a price gain of 15 per cent in the last three months, Industrial and Commercial Bank of China’s H-shares are now trading at

Chinese are also pouring funds into Hong Kong as a hedge against fears of further depreciation in the yuan currency. Most Hong Kong listings are denominated in the local dollar, which is pegged to the U.S. dollar.

The Hang Seng China Enterprises index, which tracks H-shares, has surged almost 13 per cent this year.

The NASDAQ is up just over 11 per cent and the S&P 6 per cent.

That rally has narrowed the

5.8 times forward earnings, compared with 4.7 times a year ago.

For ICBC’s A-shares, the closely watched metric has seen only a slight change to 6.

“The shrinkage in the premium has been very narrow in focus. Banks are the big movers behind that,” said Tan Eng Teck, senior portfolio manager at Nikko Asset Management in Singapore. “But there’s still a premium in other sectors.”

Overall, the H-share index is trading at 8.3 times earnings, up from 7.4 times at the start of the year.

Shanghai-listed A-shares are at 12.9 times, versus 13.2 times at the beginning of 2017, and Shenzhen-listed A-shares are at 23.6 times compared with 24.5 earlier.

Given that H-shares remain cheaper than A-shares, investors should still focus on the former, Tan said.

“Eventually, A-shares will come down to meet H-shares, so you wouldn’t want to buy A-shares,” he said.

While H-shares still look more attractive, the recent surge is leading international investors to contemplate the day when the arbitrage opportunity closes altogether.

When that happens, some mainland shares will start to look attractive, said Arthur Kwong, head of Asia Pacific equities at BNP Paribas Investment Partners in Hong Kong.

“When it closes, we would be looking for unique stocks listed only in China,” Kwong said. “In Shenzhen, there are many medium-sized companies not listed in Hong Kong, with very good fundamentals. It will be more about stock hunting.”

While most analysts believe Hong Kong’s rally has room to run, a reversal in bearish expectations for the yuan is a risk factor, Tan warned.

If Chinese investors think the yuan has bottomed, “the chances of them taking profits in Hong Kong and going back are higher,” he said. Reuters

Overcapacity

Cybersecurity

Airlines safety

Hebei Steel gets approval for US$6 bln upgrade project

Gang of hackers tries to steal Baidu’s driverless car secrets

US bans laptops, tablets from cabins on flights from Middle East

Hebei Steel Group, China’s biggest steelmaker by output, has won approval for a RMB42.4 billion (US$6.2 billion) project that will reduce its steel capacity by nearly 2 million tonnes and upgrade old technology, Hebei province’s economic planner said.

China, the world’s biggest producer and consumer of steel, is prioritising supply-side reform in its steel and coal sectors, seeking to tackle pollution and cut an output capacity glut that has weighed on both domestic and global prices.

The Development and Reform Commission (DRC) of Hebei, China’s largest steelmaking province, approved the project for four units of the Hebei Steel Group in a March 16 document that was published by China Steel News on March 19.

The four entities, including two units of listed subsidiary Hesteel Co Ltd and Xuansteel Co, have vowed to phase out 9.15 million tonnes of iron capacity and 9.34 million tonnes of steel capacity, according to the document. Reuters

Baidu Inc. has revealed that a gang of “hackers-for-hire” tried to steal its driverless car technology, prompting it to bulk up its cybersecurity team.

The Beijing-based company’s head of cybersecurity, Ma Jie, said it was unclear who was behind the gang.

“It’s very difficult to know who employs them to do that, but we know someone tried to hire someone in the underground market to steal from us,” Ma said, without giving further details.

Baidu’s cybersecurity team works around the clock testing new products and fending off attacks against its systems. The company is supporting Blue Lotus, a team of “white hat” student hackers at Tsinghua University.

“If we can help students find the right way, that means less enemies in the future,” said Ma. Baidu has also teamed up with rival tech firms Tencent and Alibaba to counter the shared cybersecurity threat.

“The underground industry is getting bigger, and getting stronger so we must help each other against the whole underground industry,” said Ma. “We’re not enemies, they are the enemy.” Bloomberg News

The United States warned yesterday that extremists plan to target passenger jets with bombs hidden in electronic devices, and banned carrying them onto flights from 10 Middle East airports.

Senior US officials told reporters that nine airlines from eight countries had been given 96 hours, beginning at 3:00 am (0700 GMT), to ban devices bigger than a cell phone or smartphone from the cabin.

Laptops, tablets and portable game consoles are affected by the ban -- which applies to direct flights to the United States -- but they may still be stowed in the hold in checked baggage.

Passengers on approximately 50 flights per day from some of the busiest hubs in the Middle East, Turkey and North Africa will be obliged to follow the new emergency ruling.

“The restrictions are in place due to evaluated intelligence and we think it’s the right thing to do and the right places to do it to secure the safety of the traveling public,” one US official said. AFP