Tencent takes 5 pct stake in Tesla Auto industry Page 9
Thursday, March 30 2017 Year V Nr. 1265 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong M&A
European watchdog blocks Frankfurt and London bourses merger Page 14
Corporation
Melco Crown changes name to Melco Resorts & Entertainment Page 5
www.macaubusinessdaily.com
Finance
Utility
Ng Lap Seng’s assistant in plea talks in U.N. bribery case Page 6
CEM generates MOP746 mln in profit last year Page 4
Galaxy makes first move for Japan bid Gaming
Local gaming operator Galaxy Entertainment Group Ltd has joined up with Societe des Bains de Mer, a casino operator in Monte Carlo of Monaco, to collaborate on casino projects in Japan and in the Asia-Pacific region, according to a joint announcement yesterday. The latter, meanwhile, hopes the partnership with Galaxy will help it grow in Asia. Page 5
Witness: “Polytex offers discounts to defendants” The trial of the bribery case of the city’s former top prosecutor Ho Chio Meng resumed yesterday. The top court heard three witnesses from Polytex Corporation Ltd – developer of local residence Villa De Mer. They confirmed that their boss had offered a 25 per cent discount for a co-defendant of the case, Mak Yim Tai, to buy a home unit of the residential project, as the relationship of the two was “close”.
Macau Legend’s annual loss expands Results Macau Legend Development Ltd posted a net loss of HK$277.5 million for the year of 2015, which is an increase of 3.35 pct y-o-y. The increment in loss was due to decrease in its profit generated from the gaming business, in addition to losses recorded in its non-gaming sector. Page 5
Construction against the world
Ho Chio Meng trial Page 3
HK Hang Seng Index March 29, 2017
24,392.05 +46.18 (+0.19%) Worst Performers
Lenovo Group Ltd
+1.18%
Want Want China Holdings
+0.76%
AAC Technologies Holdings
-2.41%
Kunlun Energy Co Ltd
-0.84%
China Petroleum & Chemical
+1.11%
Hang Lung Properties Ltd
+0.73%
Geely Automobile Holdings
-2.41%
CK Hutchison Holdings Ltd
-0.57%
China Merchants Port Hold-
+0.68%
China Resources Land Ltd
-1.60%
China Mobile Ltd
-0.46%
AIA Group Ltd
+1.01%
Cathay Pacific Airways Ltd
+0.89%
Wharf Holdings Ltd/The
+0.52%
Cheung Kong Property
-1.31%
Swire Pacific Ltd
-0.45%
Tencent Holdings Ltd
+0.88%
Bank of China Ltd
+0.51%
China Mengniu Dairy Co Ltd
-1.17%
China Overseas Land &
-0.44%
20° 23° 15° 23° 16° 22° 17° 21° 17° 21° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
China’s PMI Despite a proliferation of measures to curb a bubble in the construction sector, a private survey forecasts that the PMI index to be unveiled on Friday will show good performance thanks to the influence of the literally-speaking bricks and mortar companies. Page 8
2 Business Daily Thursday, March 30 2017
Macau In Brief Justice
Legal Aid Commission adds new members The Chief Executive has appointed two new members to the Legal Aid Commission while renewing the terms of three current members, according to a dispatch published in the Official Gazette yesterday. Leong Kam Chun and Chiang Chong Sek are the newly appointed members to the Commission. Meanwhile, current President of the group, Sam Chan Io, members Kou Peng Kuan and Chong Seng Sam all have their tenures extended for another two-year period. The dispatch will come into effect on April 7. The Commission, set up in 2011, is the authority to approve legal aid and make decisions on other related matters in accordance with the provisions of Law no. 13/2012 “Legal Aid System”. Companies
Registered capital in Hengqin reaches RMB579.5 bln A total of 4,143 financial enterprises are registered in Hengqin as at the end of February this year, with total registered capital amounting to RMB579.5 billion (US$84.1 billion), shows latest official data from the Management Council of the Hengqin New Zone. Among all the firms, the majority are companies engaged in emerging finance, which amounted to 4,084, including 2,996 investment companies, 690 asset management companies, 149 financial leasing companies and 106 financial service companies. Other companies registered in the Mainland free trade zone primarily engaged in the areas of banking and payment, securities and futures finance, as well as insurance, of which the numbers total 23, 11 and 25, respectively. C.U. Infrastructure
HK part of delta bridge expects completion on schedule The Highways Department of Hong Kong expects the SAR’s section of the Hong Kong – Zhuhai – Macau Bridge, as well as its boundary-crossing facility on an artificial island, would be completed on schedule by the end of this year, South China Morning Post reported yesterday. The authorities claimed the matter concerning two sections of seawall for the bridge – which was reported and confirmed having moved outwards by up to 10 metres – has been controlled, the news outlet said. In 2015, the Hong Kong government said its part of construction for the super bridge would be delayed for one year from the initial completion date of the end of 2016. The 50-km connections between Macau and Hong Kong, via Zhuhai, started in December 2009. However, in Hong Kong, construction was delayed to December 2011 because of a legal challenge regarding the environmental impact of the bridge. The project features three cable-stayed bridges, two artificial islands and a 6.7kmlong immersed tube tunnel.
Finance
Taking into account Local banking sector awaits new measures on bank account information sharing with foreign authorities Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com
I
n the wake of the Executive Council concluding its discussion on the enhanced exchange of fiscal information, local banks are awaiting the specifics of what will be implemented, as the law is being prepared to send to the Legislative Assembly. In response to Business Daily enquiries as to whether the local banking institutions had been consulted on the law beforehand, representatives from local currency issuer Banco Nacional Ultramarino noted that they ‘understood that the Macau authorities are preparing the related guideline that will be under consultation among the financial institutions’ but that ‘currently neither the law nor the guideline is published’. The proposed amendments to the current law would add the possibility for ‘automatic’ and ‘spontaneous’ exchanges of information about bank accounts of residents
from other countries with the countries in question, such as the United States or Portugal, aside from the current information by request, which mandates the signature of the Chief Executive. In an interview with agency Lusa, the director of the Financial Services Bureau (DSF) pointed out that the information exchange includes “the account of a foreign citizen, name,
address or even the amount in their account”. The director, Iong Kong Leong, points out that the automatic exchanges would be “in regular, pre-established intervals”, while the spontaneous exchanges would be non-systematic but could occur at any time and without a official request. “This exists to know whether a company is declaring something falsely,” but is “not a coercive recovery procedure” and transfers would “have to be subject to encoding, ensuring their confidentiality”. ‘Any policies and procedures that the Bank will implement will be in accordance with the law and guideline issued by the Macau authorities, and will be applicable to all the banks in Macau,’ noted the BNU representative. Representatives from the local branch of Bank of China noted that they had ‘no information at this time’, while responses to enquiries had yet to be received from Industrial and Commercial Bank of China (Macau) Limited, Luso International Banking, China Construction Bank and HSBC by the time this went to print.
Legislative Election
Electoral Commission plans to set up more polling stations With more voters registered this year, the Electoral Affairs Commission disclosed that more polling stations will be set up to meet the increased demand Cecilia U cecilia.u@macaubusinessdaily.com
The Chairman of the Electoral Commission, Tong Hio Fong said yesterday that more polling stations will be set up for the year’s Legislative Assembly Election, in order to meet the increased number of voters. Speaking to reporters yesterday, Mr. Tong disclosed the schools that were used as the polling venues in the previous elections were unable to be used again for this year’s due to conflicts of schedules. But he guarantees that the Commission will look for other venues that are easily accessible and able to provide barrier-free facilities. The exact number of polling stations for the election is not yet confirmed, the chairman said. “We would try to distribute voters equally to different polling stations,” Mr. Tong noted. “It will affect the flow of the election as well as adding weight to the workload of the staff if some stations are overcrowded.”
Meanwhile, the Commission yesterday had a meeting with the Environmental Protection Bureau to discuss the limitation over the noise that would be possibly generated during the campaign period. Mr. Tong indicated it is necessary to mandate limitation or control of the volume of campaigning activities. Meanwhile, member of the Commission, Victor Chan Chi Victor, also the Director of the Government Information Bureau, reiterated that regulations related to freedom of press of the Electoral Law are not being altered, despite the fact that some contents of the law have been revised. In response to a reporter’s enquiry about the regulations of media reporting during the campaign period, Mr. Chan said that the Commission will meet the Portuguese and English- language press who are in doubt. But he added that meeting will not take place in the short term as the current workload is heavy for the Commission.
Meeting local media outlet representatives earlier this month on the year’s election guidelines, Mr. Tong told reporters (then) local media are advised to avoid reports that could create promotion of certain candidates. He also said at that time local press is responsible for erasing or shutting down illegal comments or discussions on their social platforms during the course of the election. According to the current Electoral Law, journalists and social communication firms will not be penalized for their behaviour performed during the campaign period but it would not affect the involved journalists or firms to be held accountable after the campaign.
Transportation
Radio Taxi wants more parking points Cecilia U cecilia.u@macaubusinessdaily.com
The city’s special taxi operator, Radio Taxi Macau Taxi Service Ltd., hopes the government would increase the number of parking points for its radio taxis to around 50 when the company rolls out all its 100 taxis in the future, said its general manager, Kevin U. Launching the first batch of 50 taxis this coming Saturday, the company has been granted 14 parking points for the fleet all over the territory, including locations such as Hospital Conde S. Januário. The remarks of Mr. U were made during his attendance at a radio show
of broadcaster TDM, Macao Forum yesterday. Earlier this month, the concessionaire started to offer free-of- charge trial, while Mr. U claimed the company has managed to pick up 90 per cent of the orders on time during the period. According to the general manager, the company received 8,000 hailing orders via mobile application for the trial run so far. But he added that it will only be able to handle 200 orders per day during official operation. However, Cheng Chung Fai, chairman of the Macau Association of Consumers of Public Utility Companies, pointed out in the same radio show that the successful pick-up rate of
Radio Taxi may not be a reliable reference as the trial is confined to certain objectives while different circumstances may arise during the company’s official operation. Meanwhile, he suggested that the special taxis should share these 14 parking points with ordinary “black taxis” to lessen occupancy of parking areas, adding CCTV should also be set up in local taxis. The general manager of Radio Taxi believes the Global Positioning System equipped in the company’s cabs will help it better monitor the operation, given the system will restrict taxi drivers to only pick up passengers per orders. Local laws mandate special taxis can only be hailed by telephone, online order or mobile phone application.
Business Daily Thursday, March 30 2017 3
Macau Politics
CE to attend Legislative Assembly on April 21
the legislature every year: one for delivering the Policy Address for Chief Executive Fernando Chui Sai the following year while the other two are for answering legislators’ On will attend a plenary session enquiries. The coming session will of the Legislative Assembly and start at 3pm; local broadcaster answer legislators’ questions on government policy and social issues TDM will broadcast the Q&A session live on both its television on April 21. The city’s top official and radio channels. attends three plenary sessions of
Ho Chio Meng Trial
A friend’s price The President of Polytec Asset Holdings Ltd had allegedly indirectly sold a HK$7.9 million property for a cheaper price to former Prosecutorgeneral, Ho Chio Meng, via another defendant of the bribery case and his wife. Nelson Moura nelson.moura@macaubusinessdaily.com
T
hree staff from property developer Polytex Corporation Ltd., including two real estate agents and an accountant, said yesterday at the Court of Final Appeal that the company had sold a HK$7.9 million (US$1 million) home unit in Villa De Mer to Mak Im Tai, a co-defendant of the bribery case of former top prosecutor Ho Chio Meng, for a much cheaper price, due to Mak’s “close” relationship with Polytex boss Or Wai Sheun. As the trial of the case resumed yesterday, the three witnesses testified that Or Wai Sheun, the president of Polytec Asset Holdings Ltd –parent company of Polyex – had offered a
25 per cent discount for Mr. Mak to purchase a housing unit at the residential building located in Areia Preta on the Peninsula in 2009 due to their “close relationship”. The co-defendant then allegedly requested the contract and payments be made under the name of Mr. Ho’s wife, Chao Siu Fu, which was accepted by the Polytec boss. While the prosecutors accused the Polytec president of indirectly offering the discount to the former prosecutor in exchange for benefits, none of the three witnesses could provide any information on what benefits could have been offered to the businessman.
Long-term friends
According to the accountant surnamed Ip, the initial contract was to
be signed by the co-defendant, who later requested to use the name of Ho’s spouse for the document. Since the discount offered was made via a “verbal agreement” and Polytec - which owned the majority of the Villa de Mer property in Areia Preta - is a Hong Kong-listed company, the witness said Mr. Or had requested that the contract be handled “with care”. The company thus issued in 2009 the receipt of a payment of nearly HK$2 million – which is the amount of discount that the company boss offered to the co-defendant. The receipt reads that Ms. Chao would make the payment in four installments. Although the witnesses refused the accusations that the receipt was “fake,” the three witnesses admitted they all knew no payment had been provided by Ms. Chao.
From his own pocket
The accountant added that Mr. Or had requested her to use his other company - Hongs Trading Ltd.- to pay the difference of the payment; she believes this money “comes from Mr. Or’s own pocket”. When Presiding Judge Justice Sam Hou Fai questioned the accountant if the company’s employees were
aware that “these kind of procedures could have serious legal consequences”, the witness said: “at the time they hadn’t thought of it”. Questioned by Assistant prosecutor-general, Chan Tsz King, if similar discounts were common in the company, the three Polytex employees said that the situations would occur although they were rare. The witnesses added they were unaware Ms. Chao was the wife of the former Prosecutor-general, saying that they knew Ms. Chao as a client.
No knowledge of the discount
The Prosecution also presented yesterday the mortgage contract for the property, on which Mr. Ho’s signature was evident. But the former official claimed he and his wife had never visited the office of Polytex personally. “I had no knowledge Mak Im Tai had been offered a discount for the property. There was no document stating that… My wife had no knowledge of the contract. I just used her name because of my public notoriety,” the ex-official claimed. Mr. Ho insisted that the property was bought for his father by the money provided by his family and managed by him.
4 Business Daily Thursday, March 30 2017
Macau Opinion
José I. Duarte*
News or else There is much talk nowadays about fake news. Some would argue that fake news and similar notions – rumors, half-truths, misconstructions and the like – are as old as the world and our times are not as singular as many seem to believe. That discussion could take us very far; we will not proceed down that path. However, we should recognize that the complexity of relations in today’s highly connected societies, as compared to smaller, more secluded communities in earlier times, gives to social interactions an intensity and immediacy that are in many ways unprecedented. The access to the news and the ability to respond to it, as well as the speed and impact of that response have changed accordingly. One thing, however, has not changed and will possibly never change. The media influence us, and we will always try to influence the media. The diversity of interests and visions in society and their inevitable conflicts will guarantee it will be so. In these circumstances, the responsibility of the media to inform and safeguard the reliability and accuracy of the information has only increased. No doubt, firm facts may be time-consuming to ascertain, the resources required may not always be available, and access to the sources of accurate information may be hard. But recognizing the difficulties does not diminish or lighten the responsibility. That’s why one should be especially careful when reporting on the results, real or apparent, of all kinds of inquiries, surveys, polls and similar news ‘sources’ that populate the media nowadays. We may take the reported results as indicators of social opinions or trends, provided they obey suitable technical procedures and the analysis remains objective. But they are indicators or pointers, at best, not facts. They can be presented as research and, presumably, involve some technical skills; they may purport to be ‘scientific.’ As such, they can be used (and abused) as tools to influence people’s opinions and behavior. But that does not guarantee that they are true, unbiased or unquestionable – or are not being used to misinform or mislead deliberately. The reporting of that kind of information should, therefore, be exceptionally alert and cautious. In particular, we should be wary of studies or polls that do not make explicit the methods and assumptions underpinning them. Also, we must not take the interpretations of results conveyed by those with a stake in them, no matter how respectable or reasonable they appear, as if they were unquestionable. *Economist and permanent contributor to this newspaper.
MICE
G2E Asia to introduce non-gaming offerings
T
his year’s G2E Asia, which will be kick started on May 16 this year at the Venetian Macao, will add a feature of non-gaming offerings – an Integrated Resort Experience (IRE) in this year’s event, as to meet the MSAR government’s goal to diversify the city’s heavily weighted gaming economy. The casino and gaming conference and trade show has its first introduction of IRE, which will be centralizing sourcing of new products, technologies and services that drive revenue and value from non-gaming sources from entertainment, clubs, bars, IR technology and business solutions. The three-day event will also feature digital display integrated systems, security solutions, augmented reality, big data analytics and Customer Relationship Management, as well as a broad array of solutions that can improve interested parties’ experience and boost operational
efficiency. Complementary events and talks will be held during the show to aid involved parties to connect and to share insights. This will include the newly added networking event
“Future Technology Leaders Get-Together”. The networking event will allow 120 future technology leaders from integrated resorts, suppliers and governments to exchange ideas and information.
Electricity
CEM makes MOP746 mln in 2016 Local electricity supplier Companhia de Electricidade de Macau (CEM) ‘performed well’, achieving a final net profit of MOP746 million (US$93.3 million) for 2016, according to a release by the company yesterday. Over the course of the year the group carried out work on infrastructure projects ‘with the aim to support the development pace of Macau SAR and meet the ever-increasing demand for power,’ investing MOP660 million in
‘critical infrastructure facilities and important assets’ in the city. Overall consumption of power during the year ‘hit another record high’ notes the group, with a 5.8 per cent year-on-year increase, hitting 5,255 GWh and peak demand also increased 5.6 per cent year-on-year, to 932 MW. ‘Local power generation increased by 4.6 per cent to 787 GWh,’ notes the group in its release, noting that it supplied ‘15 per cent of the total power consumption
of Macau’. Imported energy from Mainland China ‘also went up 6.2 per cent to 4,306 GWh compared to 2015, taking up 81.9 per cent of the total power consumption, notes the release. The resumption of the natural gas supply at Coloane Power Station B this month ‘will lead to an expected rise in the proportion of local power generation’ notes CEM. The information was approved at the Annual General Meeting of the company, held yesterday. K.W.
Construction
Hsin Chong jumping into the red Hong Kong-listed construction group Hsin Chong Group Holdings Ltd is turning profit to loss for the year of 2016, it warned in a filing with the Hong Kong Stock Exchange yesterday. According to the company announcement, the expected annual loss is due to the recognition of a fair value loss attributable to the change in fair value of the
investment properties for the year, as compared to a gain for 2015. It added that an impairment loss on properties under development and the provision for impairment on certain receivables were also reasons causing the anticipated loss. For 2015, the construction group saw its net profit five fold to HK$2.45 billion (US$305 million)
from 2014, with total revenue increasing by 7 per cent year-on-year to HK$15 billion, of which some HK$4.75 billion were derived from the MSAR. The company provides work or construction management services to the city’s major gaming operators, such as Sands China Ltd, SJM Holdings Ltd and Galaxy Macau. For the first half of 2016, the company posted HK$378 million in net profit, which slumped by 82 per cent year-on-year from HK$2.07 billion one year ago. K.L.
Retail
Chow Sang Sang yearly profit slumps Jewellery retailer Chow Sang Sang Holdings International Ltd posted HK$742.2 million (US$92.4 million) in net profit for the year of 2016, which slashed by 34 per cent year-on-year as turnover in its major markets all recorded decreases. According to a company filing with the Hong Kong Stock Exchange earlier this week, the retailer raked in HK$16.1 billion in turnover for the year, which dropped by 16 per cent year-on-year. In particular, that generated from jewellery retail business also fell by 16 per cent to HK$14 billion, as compared to HK$16.7 billion one year ago. The filing shows that the retailer’s revenue derived from the Hong Kong and Macau market totalled HK$8.65 billion, which represents a decrease of 23 per cent year-on-year. According to the company, same
store sales in the two cities recorded a decline of 25 per cent year-on-year, while total weight of gold sales also slumped by 34 per cent due to increased gold prices in the year. ‘Sales of gem-set jewellery had not
reversed its downward trend since 2015,’ the retailer wrote. ‘Macau was still suffering from a dearth of visitors. Shops located in the shopping arcades performed worse than main street shop.’ Meanwhile, the company’s turnover from Mainland China fell by 4.6 per cent year-on-year to HK$7.34 billion, whereas that from Taiwan dropped by 15 per cent year-on-year to HK$99.2 million. For this year, the company noted in the filing that it will close a few shops in the tourist area in Hong Kong as ‘the recovery is yet to be seen’. ‘Shop-lease renewal will only be made if it makes strategic and economic sense. Overall, we expect to reduce the amount of floor space with no significant changes in number of shops,’ it added. The retailer has proposed a final dividend of HK35 cents for the fiscal year. K.L.
Business Daily Thursday, March 30 2017 5
Macau Gaming
Galaxy teams up with Monte Carlo operator for Japan casino The two parties will jointly develop and run entertainment businesses including casinos and hotels in the Asia-Pacific region, including Japan Thomas Wilson and Emi Emoto
L
ocal casino operator Galaxy Entertainment Group Ltd on Wednesday said it has partnered with Societe des Bains de Mer (SBM), hoping the Monaco peer will help it trump rivals to win a license in Japan’s nascent gambling market. Galaxy and SBM will jointly develop and run entertainment businesses including casinos and hotels in Japan and the Asia-Pacific region, the companies said in a statement. “We intend to capitalise on the Monte-Carlo brand,” President Michael Mecca told Reuters in an interview. “All of the entities of Monaco and the principality ... are very enthusiastic about joining us and doing business in Japan.”
SBM is majority-owned by the Mediterranean principality, and since 2015, 5 per cent owned by Galaxy. The Monaco firm said it hopes the partnership will help it grow in Asia. Still, Galaxy faces strong competition to win rights to run a resort in Japan, which legalised casinos late last year. A host of international operators including U.S.-based Las Vegas Sands Corp and MGM Resorts International also aim to enter the market. The government is drafting a law, due by December, on how to regulate the industry, and people familiar with the matter have told Reuters that Japan will likely pick locations and operators in 2019 and open casino resorts by 2023. Before the selection process begins, resort operators including MGM and Hard Rock Cafe International
Inc. have been forming consortia with prospective hosts and domestic companies. Galaxy is also wooing national and local governments, as well as real estate, construction and transportation firms, but will not insist on a stake of over 50 per cent in any consortium, Mecca said. “We are not coming with a preconceived notion or demand to be a majority shareholder,” he said.
Other operators have taken such positions, with Hard Rock saying it would seek a stake of 40 per cent to 60 per cent in any consortium. Galaxy declined to detail the size of any investment in Japan, but said its net cash of US$2.1 billion (MOP8.4 billion) would allow it to begin a project without waiting for financing. Sands and MGM have said a casino resort would need an investment of up to US$10 billion. Just two casinos in major Japanese cities could generate over US$10 billion in annual gaming revenue, rising to US$25 billion if 10 further casinos outside metropolitan areas are approved, brokerage CLSA has said. Reuters
Casino de Monte-Carlo operated by Societe des Bains de Mer in Monaco
Results
Continuing to build Macau Legend group’s revenue hit HK$1.47 billion in 2016, a 2.5 per cent year-on-year increase aided by the first contributions from the operations of Savan Vegas Casino in Laos Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
Gaming and hospitality operator Macau Legend Development Limited saw a slight year-on-year increase in its revenue for 2016, but drops in its gaming business’ profit and increases in losses for the non-gaming sector contributed to a HK$277.49 million (US$34.6 million) loss for the group last year, according to the group’s filing with the Hong Kong Stock Exchange. The loss amounted to a 3.35 per cent year-on-year increase for 2016. Overall the group pulled in revenue amounting to HK$1.47 billion during the year, a 2.5 per cent yearon-year increase aided by the first contributions from the operations of Savan Vegas Casino in Laos, which contributed HK$90.98 million in revenue since its acquisition by Macau Legend. The new property contributes the largest number of gaming tables and slot machines of the group – with 466 slot machines and 84 gaming tables, of which 45 are mass market and 39 are VIP. For the year, the group’s gaming revenue increased approximately 6.1 per cent year-on-year, according
to the filing, reaching HK$952.4 million, while the group’s non-gaming revenue decreased by approximately 3.7 per cent year-on-year to HK$519 million. However, a large increase was seen in the group’s non-gaming loss, which increased 129.7 per cent yearon-year, hitting HK$171.45 million for the year, as compared to a HK$74.64 million loss registered in 2015. Gaming profit for the year increased 25.8 per cent year-on-year, reaching HK$152.06 million, as compared to HK$205.13 million registered in the previous year.
Results
The group notes that its non-gaming loss was ‘offset by contribution of revenue from Savan Legend of approximately HK$7.2 million’, whereas aside from the Savan Vegas Casino contribution, a total of HK$33.3 million was contributed by the group’s self-run VIP operation, New Legend. A decrease in revenue from the group’s Pharaoh’s Palace Casino and Babylon Casino amounting to HK$59.4 million as well as a HK$10.4 million decrease in revenue from outsourced VIP tables weighed on the group’s yearly results.
Non-gaming revenue decrease was mainly attributed to a HK$15 million drop in revenue from The Landmark, Macau and a HK$11.9 million fall in revenue from its Macau Fisherman’s Wharf property – ‘which in turn was mainly due to decreases in income from hotel rooms and building management services of the hotel,’ notes the filing. Overall VIP table revenue amounted to approximately HK$217.1 million, a 22.4 per cent increase yearon-year, according to the filing, while HK$177.3 million was derived from the group’s New Legend operations. The group’s highest earners in terms of revenue was the Pharaoh’s Palace Casino mass market, which reached HK$539.95 million during 2016, a 9.1 per cent decrease year-on-year. The group’s Babylon casino contributed HK$112.14 million in mass market revenue and HK$40.87 million in self-run VIP, while the group’s Savan Vegas property made nearly as much from slots, at HK$35.55 million, as it did from mass market, at HK$38.59 million, whereas its selfrun VIP tables pulled in HK16.83 million since Macau Legend acquired the property. Slot machines at Babylon Casino underwent a 475.4 per cent increase year-on-year for 2016, with revenue hitting HK$700,000, according to the filing. The group’s Landmark Macau operations contributed approximately 40.3 per cent of the group’s overall non-gaming revenue, at HK$208.9 million, while its Macau Fisherman’s Wharf contributed 58.3 per cent, and Savan Vegas approximately 1.4 per
Corporation
Melco Crown now Melco Resorts & Entertainment Gaming operator Melco Crown Entertainment Limited officially announced yesterday the English name of the company will be changed to “Melco Resorts & Entertainment Limited”, while its Chinese name will remain unchanged. The company said in the same statement that it also intends to change is ticker symbol on the NASDAQ Stock Market to “MLCO” from the current “MPEL”. ‘The effective date of the name change and the ticker symbol change
will be further announced,’ the company noted in a press release. The name change of the corporation followed Australian-based casino operator Crown Resorts reducing its stake in the company last year. Last May, the boss of Crown Resorts, James Packer, announced his resignation as co- chairman of Melco Crown. The Australian firm and joint venture partner Melco International Development Ltd., chaired by Lawrence Ho Yau Lung, had each held 34.3 per cent stake in the local casino
corporation at the beginning of that month. In mid-December last year, the Australian firm announced the sale of its 13.4 per cent stake in Melco Crown, while its stake in the joint venture was further decreased to 11.2 per cent as at the end of last year. Meanwhile, a filing of Crown Resorts to Australia Securities Exchange yesterday announced the firm had agreed an equity swap agreement which will act as a hedge on any future sale of its stake in Melco Crown. K.L.
cent. The Laos property only registered a 52.2 per cent occupancy rate, as compared to a 78.1 per cent occupancy rate at The Landmark Macau, 78.4 per cent at the Rocks Hotel, and 77.9 per cent at the Harbourview Hotel.
What’s next?
Upcoming projects for the group include a dinosaur park and a new ‘multi-purpose entertainment and performance theatre’ with over 1,000 seats, slated for completion in the fourth quarter of this year. In addition, the yacht club and public pier is scheduled to be completed in the second quarter of next year. ‘Construction for the integrated resort has commenced’ for the group’s Cape Verde project, for which the group invested approximately 250 million euros, whereas the group doesn’t provide updates on its Setubal riverfront area interest. The filing notes that the group plans to construct an ‘opera house’ and ‘intelligent exhibition centre’ in Macau, while working on its Laos property to ‘build it into a regional entertainment hub in Southeast Asia’, noting that it has ‘already begun to create an operation and marketing hub’ in the country. ‘The Group will continue to focus on Southeast Asian destinations where the ‘‘One Road, One Belt’’ policy from China is supporting new investment in tourism and tourism related infrastructure and will also focus on Portuguese-speaking countries, like Cape Verde, to make good use of the Sino- Portuguese platform for the Group’s business diversification overseas,’ notes the filing.
6 Business Daily Thursday, March 30 2017
Macau Property
Lawrence Ho reportedly buys US$65 mln unit in NYC
Local gaming mogul Lawrence Ho Yau Lung has purportedly bought a US$65-million (MOP520 million) unit on a top floor of residential skyscraper 432 Park Avenue in New York City, according to the Mansion Global. The report quoted public records indicating the
buyer listed in the records is Valor Dragon Limited, which shares an address with Mr. Ho, CEO of Melco Crown Entertainment Ltd. The outlet adds there is no listing or details available publicly, estimating the amount for the purchase is the third most expensive closing for the residential building in Manhattan of that American city.
Courts
Ng Lap Seng’s aide in plea talks in U.N. bribe case Nate Raymond
T
he assistant to a billionaire real estate developer from Macau accused of engaging in a scheme to pay bribes to a former United Nations General Assembly president is in plea talks, his lawyer said on Tuesday. The negotiations involving Jeff Yin, who was arrested along with billionaire Ng Lap Seng in 2015, were disclosed in a letter filed in Manhattan federal court by his attorney, who said prosecutors had extended him a plea offer. The lawyer, Sabrina Shroff, sought to extend court deadlines so that Yin, 31, could consider the plea offer, which “is complex and involves civil tax assessments and liabilities,” according to her letter. The plea talks come ahead of a jury trial scheduled for May 15, in which Yin and his boss could face substantial prison time if convicted. It was unclear what charges Yin would have to plead guilty to if he accepted the offer. He had faced bribery, money laundering and tax-related charges, and was also accused of violating the U.S. Foreign Corrupt Practices Act. Shroff declined comment. The U.S. Attorney’s Office in Manhattan, which is pursuing the case, also declined comment. Ng, who was once linked to a
campaign fundraising investigation during former U.S. President Bill Clinton’s administration, is one of seven individuals charged since October 2015 in the U.N.-related probe. Prosecutors accuse Ng and Yin of paying more than US$500,000 (MOP4 million) in bribes to John Ashe, a former U.N. ambassador from Antigua and Barbuda who served as General Assembly president from 2013 to 2014. Ashe died in June awaiting trial.
The indictment said Ng and Yin also paid bribes to Francis Lorenzo, a then-deputy U.N. ambassador from the Dominican Republic who pleaded guilty in March 2016 to bribery and money laundering charges as part of a deal to cooperate in the probe. The main goal of the bribes, according to the indictment, was to have both ambassadors take steps to help obtain United Nations’ support for a multibillion-dollar U.N.-backed
conference center in Macau that Sun Kian Ip Group would develop. Yin, a U.S. citizen who currently lives in California, also faces charges for taking steps to evade paying income taxes and helping Lorenzo conceal portions of his income from U.S. tax authorities. Ng, the founder of Macau-based real estate developer Sun Kian Ip Group, has denied wrongdoing. A lawyer for Ng declined to comment. Reuters
Ng Lap Seng, the founder of local real estate developer Sun Kian Ip Group, is accused of bribing a former U.N. ambassador from Antigua and Barbuda, Josh Ashe, who died last June.
Tourism
All cards on the table Casino hub Macau shows all its cards, from egg tarts to fireworks, to draw tourists Farah Master
Overseas visitors are an increasingly common sight in China’s gambling territory of Macau which is trying to diversify an economic model that has depended on mainland high rollers for more than a decade. The economy in the city has been pounded over the last two years by a drop in Chinese gamblers due to President Xi Jinping’s anti-corruption campaign and a slowing economy. Now the government has hearkened calls to reposition Macau as a tourism destination, with the number of international visitors growing 8 per cent last year from 2015, compared with those from greater China edging up only 0.1 per cent. Once a sleepy backwater, with its colonial-era hotels, waterside banyan trees, slightly sleazy night life and occasional gangland killings, Macau has tidied up and diversified its act since its return to China in 1999 with huge new resorts, music festivals and even an international fireworks display competition. Gamblers from mainland China, Hong Kong and Taiwan account for more than 90 per cent of total visitors, but a shift away from the tables is slowly emerging
Foreigners stuck out through the crowds of mainlanders in shops skirting U.S. billionaire Sheldon Adelson’s Venetian, owned by Sands China Ltd. Indian families tucked into naan and curry in the restaurant while tourists of other nationalities took photos against the backdrop of the facade of St Paul’s, a Jesuit church that burnt down in 1835. “We just want to see the old town. We are more interested in the tourist attractions,” said Rachel Mumberson, 33, a teacher from Singapore.
“We definitely didn’t come here for gambling.” Hotel rooms are set to increase by 40 per cent and two new mega resorts are due to open in the next two years at a time when revenues have started to rebound due to a return of VIP spenders.
“Too much Reliance on Mainland”
While income generated from the big spenders is unlikely to be replaced anytime soon, per capita spending from non-Chinese has accelerated, with tourists from Singapore, Japan and Malaysia nearly matching those from Mainland China, government statistics from the fourth quarter show. “In the past decade, we relied too much on mainland tourists,” said
Agnes Lam, head of Macau Civic Power, an organisation which focuses on political and social issues. “I think the increase of foreign tourists is very important to Macau and will actually make the tourist industry here become more healthy,” said Lam, who is also an assistant professor at the University of Macau. Both Macau and the former British colony of Hong Kong are designated “special administrative regions” and allowed certain freedoms not enjoyed on the Communist Party-ruled mainland. As in Hong Kong, Macau’s retailers and local businesses had geared themselves towards mainland tourists selling cosmetics, jewellery and even milk powder - after a health scare in China - forcing the closure of home-style stores and small businesses. Industry experts have called for Macau to differentiate itself as rival casino hubs mushroom around Asia, from the Philippines and Singapore to Japan which recently legalised casino gambling. Officials have responded by touting Macau’s history, culture and Portuguese-influenced gastronomy rather than its casinos, with the tourism body targeting a range of high profile marketing campaigns. “Macau is unknown in Europe,” said Kurt Ornstein, 68, visiting from Switzerland with his wife and a big fan of Macau Portuguese egg tarts. “Nobody knows about Macau.” Reuters
Business Daily Thursday, March 30 2017 7
Macau Online
Regulating the irregular Online gaming regulator CEZA faces difficulties not only from operators, but from the country’s own rules Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
A
side from facing uncertainties over the shifting regulatory framework, in the wake of an executive order by Philippine President Rodrigo Duterte which has left many operators unsure of which regulator to choose, the Cagayan Economic Zone Authority must combat “many issues and challenges” in overseeing online gaming operators in the territory, according to the CEO of the Cagayan Economic Zone Authority (CEZA), Jose Mari Ponce. “First is the reluctance of some operators to be regulated,” said Mr. Ponce in his speech ‘New Government Initiatives to Reduce Underground Betting’ at the iGaming Asia Congress
held at the Grand Hyatt, which finished yesterday. The CEZA administrator earlier this year denied that an online operation, run by Jack Lam of the Jimei Group, had been issued a license to operate. “There are still more unregulated than regulated online gaming operators,” he said. “Some don’t want to undergo probity checking and choose to remain operating under the radar”. Additionally, some operators “have difficulty or inability in complying with licensing and registration guidelines,” points out Mr. Ponce, noting that “hence, they operate illegally”. Illegal online operations such as Jack Lam’s, that “continue to tap the international market as well as the local market for bets” but “don’t want to pay taxes or fees to the government”, have led to an executive
order by Philippine President Rodrigo Duterte, signed on February 2 of this year, aiming to clarify territorial jurisdiction between the three regulators which can issue online gaming licenses: PAGCOR, CEZA and APECO (Aururo Pacific Economic Zone Authority). For CEZA and APECO, the regulators are confined to their special economic zone in which “operators will be able to enjoy fiscal and economic incentives while they operate from within”, notes Ponce. However, given additional limited
operations outside the zones, in Philippine Economic Zone Authority (PEZA) IT buildings – allowing CEZA to set up in metro Manila – and within the next couple weeks PAGCOR being allowed to “operate all over the Philippines for land based and, if allowed by law, online gaming operations,” gaming operators are unsure who to register with, and regulators are unsure how strictly to enforce regulation until exact jurisdictions are clarified. This has led to main operators seeking projects elsewhere in Southeast Asia, notes Ponce, pointing out that for now, CEZA can only improve its infrastructure and telecom connectivity, lowering latency and hope for clarification soon.
of liability on Chanos’ part as Chanos was not stating fact but asserting his opinion.’ The California Court also maintained Wynn’s liability for Chanos’ fees. According to Law 360, the Federal Judge in charge of the case awarded James Chanos US$422,000 (MOP3.37 million) in attorneys’ fees and costs associated with defending himself in the gaming mogul’s defamation suit.
The judge said, however, that the US$590,000 (MOP4.72 million) Chanos requested was ‘excessive and not supported by billing records.’ James Chanos is the founder of Kynikos Associates, a New Yorkbased hedge fund established in 1985. He became a well-known figure in the world of finance after pointing out accounting fraud at Enron before the energy trading company went bankrupt, the news outlet reported. S.Z.
Litigation
Steve Wynn loses slander appeal Casino tycoon Steve Wynn lost an appeal against a court decision which favoured James Chanos, a short seller, in the suit Wynn first brought against the latter on claims of slander in 2014, Business Insider reported. The Ninth Circuit District Court in California has reinstated its initial
decision from March 2015, when the first case had been dismissed. Wynn sued Chanos in September 2014 for comments the latter made in a closed talk about the casino industry in Macau. According to Business Insider, the latest decision sustains that ‘Wynn had failed to make “plausible” claim
Gaming
PokerStars Championship Macau kicks off today The PokerStars Global Championship kicks off today in Macau for its first Asian edition. The tournament, gathering hundreds of poker players from the region and beyond, will be held at the City of Dreams in Cotai until April 9. According to PokerStars, the Macau leg will have
its own event, the PokerStars Asia Open, which commences on April 2 for two days and features a buy-in of HK$5,000 (US$622.5) and ‘a HK$1 million prize pool guarantee.’ Five tournaments will also feature a buyin of HK$80,000 or above, according to PokerStars. S.Z.
Gaming
Tiger Palace not to open casino floor by Q4 Silver Heritage needs to raise US$14.8 million (MOP118.4 million) to complete its Tiger Palace casino-resort in the city of Bhairahawa, in Nepal, while delaying the project’s opening to the third quarter of 2017, Forbes reported. The project, initially planned to cost US$40 million, will now cost nearly US$55 million. Silver Heritage had previously raised US$19 million – in August 2016 – through a public offering with the Australian Stock Exchange (ASX) to complete the original US$40 million cost target.
The new opening date is slated to take place in two quarters’ time. But in the coming August, only the non-gaming facilities of the project – the hotel and other hospitality areas – will be opened to the public, while the completion of the casino floor is slated for November this year. Close to the Nepal-India border, Tiger Palace is set to target the Indian market, which is said to be worth US$10 million, according to Forbes. Silver Heritage currently runs casinos in Nepal (Kathmandu), Vietnam, and Laos, according to the company’s official website. S.Z.
8 Business Daily Thursday, March 30 2017
Greater china
Private survey
Solid growth seen for manufacturers as construction booms Profits of Chinese industrial firms surged almost 32 per cent in the first two months of 2017 Yawen Chen and Elias Glenn
A
ctivity in China’s vast manufacturing sector likely grew for an eighth straight month in March as a surprise rebound in the property market added to a construction boom, boosting sales of building materials from steel to cement, a Reuters poll showed. The official manufacturing Purchasing Managers’ Index (PMI) is expected to stay at 51.6 in March, the same as in February which was the second-highest reading since July 2014, according to a median forecast of 31 economists in a Reuters poll.
While that is well above the 50.0 mark which separates expansion from contraction, over a dozen cities have announced fresh property cooling measures in recent weeks to slow home price rises, raising questions over how long the solid pace of growth can be sustained. Home sales rebounded in the first two months of the year with an increase in new starts, defying previous government curbs to contain bubbly prices in big cities such as Beijing. “Many projects started in March as it is usually the peak season,” said Shen Jianguang, analyst at Mizuho Securities in Hong Kong. Profits of Chinese industrial firms
surged almost 32 per cent in the first two months of 2017 -- the fastest pace in nearly 6 years -- as prices of commodities from coal to iron ore raced higher. But iron ore futures prices in China have retreated in the past week, with high inventories adding to fears that supply is threatening to outpace demand. Some China watchers think the wave of property tightening measures announced since late last year will eventually slow home sales and prices. “The market will certainly freeze under the new measures. Sales may drop 90 per cent,” said Yi Xianrong, a former researcher at the Chinese Academy of Social Sciences - a state think tank - and now a professor at Qingdao university. T h e o u t l o o k f o r C h i n a’ s
Moody’s
Beijing facing heightened financial risks from property downturn The rating agency expects China to increase its deficit to 3.3-3.5 percent of GDP over the next few years. Yawen Chen and Elias Glenn
Moody’s Investors Service warned on Wednesday that the financial risks facing China from a potential property downturn have grown as record lending has made banks more risk-prone while the government is less able to combat those risks. China extended a record 12.65 trillion Chinese yuan ($1.84 trillion) of loans in 2016 to support economic growth, half of which was household loans - mostly
mortgages - sending new home prices to five-year highs in the year. Policymakers now face the prospect of a nasty property market crash damaging the economy. More large cities on China’s wealthy east coast - Fuzhou, Xiamen, and Hangzhou - stepped up property curbs again this week, following Beijing’s drastic moves that analysts say could freeze the market. Fuzhou, Xiamen and Hangzhou home prices rose 23.7 percent, 36.5
percent and 25.4 percent yearon-year in February, according to statistics bureau data. Recent weeks have seen the biggest wave of tightening of home purchase and lending rules since October, as China’s red-hot property market picked up pace in February after price gains had slowed in the previous months. “Previously, the banking sector’s exposure to the property market was relatively modest,” says Lillian Li, a Moody’s Vice President and Senior Analyst. “But the rising share of mortgages in new bank credit, the risk from property pledged as collateral on other loans, and the increasing role of shadow banks as providers of finance to the property sector have all raised the financial system’s vulnerability to a property-related shock,” she said. While risks are rising, the scope of the Chinese authorities for mitigating such risks through fiscal and monetary policy has become more limited, as such moves may exacerbate other economic challenges such as capital outflows which have become increasingly pressing, Moody’s said. It noted the central government’s fiscal balance had “deteriorated” and government leverage at 36.7 percent was no longer low. Reuters
manufacturing sector is also clouded by U.S. protectionist rhetoric that could hurt exports to its biggest trading destination, although no major U.S. measures have been announced. Tighter monetary policy may also dent investor confidence in the sector. The central bank has been cautious, bumping up money market and short- and medium-term interest rates several times this year by only modest amounts. But analysts said its tightening bias will eventually pass through to higher borrowing costs for Chinese companies. The official PMI number will be released on March 31, along with the official services PMI. The private Caixin/Markit PMI survey, which focuses more on small and mid-sized firms, will be published on April 1. Reuters
Business Daily Thursday, March 30 2017 9
Greater China Auto industry
In Brief
Tesla deal with Tencent boosts Mainland presence in U.S. auto tech In addition, Tencent has invested in Didi Chuxing, the world’s second-largest ride services company behind Uber Paul Lienert
China’s Tencent Holdings Ltd has bought a 5 per cent stake in U.S. electric car maker Tesla Inc for US$1.78 billion, the latest investment by a Chinese internet company in the potentially lucrative market for self-driving vehicles and related services. Tencent’s investment, revealed in a U.S. regulatory filing, provides Tesla with a deep-pocketed ally as it prepares to launch its mass-market Model 3. Tesla’s shares rose 2.7 per cent to US$277.45 on Tuesday, closing in on Ford Motor Co as the second-most-valuable U.S. auto company behind General Motors Co. Tencent also could help the U.S. company sell - or even build - cars in China, the world’s largest auto market, analysts said. “It certainly is a strong chess move for Tesla,” said Jeff Schuster, senior vice president of forecasting for researcher LMC Automotive, citing the cash infusion and “help in navigating the Chinese market.” Tesla Chief Executive Officer Elon Musk on Tuesday tweeted: “Glad to have Tencent as an investor and adviser to Tesla.” Musk did not say what he meant by “adviser” but in a separate tweet he noted Tesla had “very few” Model 3 orders from China, where the car has not been formally introduced. The midsize Model 3 is due to go on sale later this year in the United States. The deal expands Tencent’s presence in an emerging investment sector that includes self-driving electric cars, which could enable such new modes of transportation as automated ride-sharing and delivery services,
as well as ancillary services ranging from infotainment to e-commerce. Those new technologies, and their potential to create new business models and revenue streams in the global transportation sector, have attracted billions in investment from China’s three tech giants - Tencent, Alibaba Group Holding Ltd and Baidu Inc. In an investor note, Morgan Stanley auto analyst Adam Jonas said on Tuesday that he “would not be surprised” to see Tencent and Tesla collaborate in the development and deployment of some of those technologies. The White House did not immediately respond to a request for comment on the Chinese investment in Tesla, but President Donald Trump has been critical of U.S. automakers and of China trade policies. Founded in 1998 by entrepreneur Ma Huateng, Tencent is one of Asia’s largest tech companies, best known for its WeChat mobile messaging app. With a market capitalization of about US$275 billion, it is roughly six times the size of 14-year-old Tesla, whose US$45 billion market cap on Tuesday was only US$1 billion shy of 114-yearold Ford. Tencent was an early investor in NextEV, a Shanghai-based electric vehicle start-up that since has rebranded itself as Nio, with U.S. headquarters in San Jose, not far from Tesla’s Palo Alto base. Tencent also has funded at least two other Chinese EV
start-ups, including Future Mobility in Shenzhen. In addition, Tencent has invested in Didi Chuxing, the world’s second-largest ride services company behind Uber, and in Lyft, Uber’s chief U.S. rival. Baidu has invested in Nio, as well as in Uber and Velodyne, a California maker of laser-based lidar sensors for self-driving cars. Alibaba’s mobility investments include Didi and Lyft. As Tesla is doing, many of the startup companies backed by Tencent, Baidu and Alibaba are developing self-driving systems that eventually could be introduced in commercial ride-sharing fleets in the United States and China after 2020. Tencent maintains a U.S. office in Palo Alto, in the heart of California’s Silicon Valley. Beijing-based Baidu and Hangzhou-based Alibaba also maintain offices in Silicon Valley. Tencent owns about 8.2 million shares in Tesla, the carmaker said. It is the fifth-largest shareholder, behind Musk and investment companies Fidelity, Baillie Gifford and T. Rowe Price. To help fund Model 3 production, Tesla raised about US$1.2 billion by selling common shares and convertible debt earlier this month. Tencent said its shares were acquired as part of the early March equity sale and on the open market. Musk had a stake of about 21 per cent as of Dec. 31. Reuters
Commodities
Shandong Gold could have found Mainland’s biggest gold mine Shandong Gold Group Co., China’s No. 2 producer by output, said it discovered deposits in eastern China that could be the nation’s largest discovery as it pushes to add reserves. The Xiling mine in Shandong province told local authorities it had found 382.58 tons of gold reserves and that the volume could reach more than 550 tons once exploration is completed in two years, which would make it China’s largest mine, according to a statement Tuesday that cited the company on sdchina.com, a website supervised by the provincial government. Monetary policy
Central bank skips open market operations China’s central bank yesterday skipped the open market operations of reverse repos, siphoning liquidity from the market. This was the fourth consecutive business day that the People’s Bank of China (PBOC) has halted the open market operations of reverse repos, a process where it purchases securities from banks with an agreement to sell them back in the future. This meant that there was no injection of short-term funds into the banking system, which led to a net cash withdrawal, as previous reverse repos matured Wednesday and drained RMB70 billion (US$10.16 billion) from the market. Trade
Mainland tops list of Vietnam’s exporters China ranked top among Vietnam’s largest exporters in the first quarter (Q1) of 2017, with an export value of US$11.9 billion, up 12.3 per cent year-on-year, reported the Vietnam’s General Statistic Office (GSO) yesterday. The value of China’s exports to Vietnam has risen across sectors in Q1, including phones and devices (up 5.5 per cent), machine and spare parts (23.6 per cent), and electronics, computers and components (25.4 per cent). Other big exporters of Vietnam included South Korea and the Association of Southeast Asian Nations (ASEAN), with US$9.3 billion and US$6.3 billion, respectively. Currency
Xinjiang’s cross-border RMB settlement grows Cross-border RMB settlement grew 44-fold to RMB220 billion (US$32 billion) in northwest China’s Xinjiang Uygur Autonomous Region since the region launched the business in 2010. As of February, Xinjiang has conducted cross-border RMB settlement with 86 countries and regions. Overseas banks and social organizations have opened 358 RMB settlement accounts, according to the Urumqi branch of the People’s Bank of China, the central bank. The total amount of RMB settlement under current accounts is RMB185 billion while the amount under capital accounts was more than RMB42 billion.
10 Business Daily Thursday, March 30 2017
Greater China Iran sanctions
ZTE removed from U.S. trade blacklist U.S. Commerce Department placed export restrictions on ZTE as punishment for violating U.S. sanctions against Iran Joel Schectman
T
he U.S. Department of Commerce will remove Chinese telecommunications equipment maker ZTE Corp from a trade blacklist yesterday after the company pleaded guilty to violating sanctions on Iran and agreed to pay nearly US$900 million, the agency said in a notice. Removal from the list marks the
end of a tense period for ZTE, which faced trade restrictions that could have severed its ties to critical U.S. suppliers. “By acknowledging the mistakes we made, taking responsibility for them ... we are committed to a ZTE that is fully compliant, healthy and trustworthy,” said ZTE Chief Executive Zhao Xianming said in an emailed statement. Last year, the U.S. Commerce
Department placed export restrictions on ZTE as punishment for violating U.S. sanctions against Iran. The restrictions would have prevented restricted suppliers from providing ZTE any U.S.-made equipment, potentially freezing the Chinese handset maker’s supply chain. Over the past 12 months, as ZTE cooperated with U.S. authorities, the U.S. Commerce Department temporarily suspended the trade restrictions with a series of three-month reprieves, allowing the company to maintain ties to U.S. suppliers. Earlier this month, ZTE agreed to pay a total of US$892.4 million and pleaded guilty to violating
U.S. sanctions by sending American-made technology to Iran and lying to investigators. The Commerce Department said on Tuesday it would impose severe restrictions on former ZTE CEO Shi Lirong, whom the agency accused of approving efforts to skirt sanctions and ship equipment to Iran. The Commerce Department said Shi approved a systematic, written business plan to use shell companies to secretly export U.S. technology to Iran. Reuters could not immediately reach Shi for comment.
‘ZTE agreed to pay a total of US$892.4 million and pleaded guilty to violating U.S. sanctions’ The U.S. investigation followed reports by Reuters in 2012 that ZTE had signed contracts with Iran to ship millions of dollars’ worth of hardware and software from some of America’s best-known technology companies. U.S. authorities have said the size of the financial penalty against ZTE also reflects the fact that the company lied to investigators when executives were approached about the allegations. As part of the deal, ZTE will be under probation for three years and agreed to cooperate in the continuing investigation. Reuters
M&A
MoneyGram bidder Euronet ramps up fight to stop Ant’s bid The bidding war comes at a time of rising tensions between China and the United States Diane Bartz
Euronet Worldwide Inc ramped up its fight against China’s Ant Financial Services Group in trying to acquire MoneyGram International Inc, urging the U.S. government to closely scrutinize the rival Chinese bid saying it raises “significant national security risks.” In a March 27 letter to Treasury Secretary Steven Mnuchin, Euronet Chief Executive Officer Michael Brown said MoneyGram’s new owner would be asked to help law enforcement efforts aimed at combating “terrorist financing” and money laundering by complying with data requests that are often highly confidential.
‘MoneyGram, along with Western Union, has long dominated the global money transfer industry with its large network of retail locations’ “A money transfer company’s ownership and leadership at the top are critical in ensuring that all of these responsibilities are carried out fully and effectively,” Brown said in the letter, which was also sent to more than a dozen congressional offices and reviewed by Reuters. “We feel... there are significant
national security risks that merit careful evaluation for any foreign buyer of a company in this industry,” he said. Euronet offered US$1 billion for MoneyGram in mid-March, arguing that an all-American deal would face less regulatory scrutiny than the US$880 million offered by Ant Financial, an affiliate of Alibaba Group Holding Ltd. MoneyGram said Euronet’s offer was potentially superior to its existing agreement with Ant Financial, but has not yet endorsed it. The bidding war comes at a time of rising tensions between China and the United States, with U.S. President Donald Trump accusing China of unfair trade policies and criticizing its
increasingly assertive stance in the South China Sea. Mnuchin’s Treasury Department chairs the inter-agency Committee on Foreign Investment in the United States (CFIUS), which also includes the departments of Defence, Justice and Homeland Security, among others. It assesses potential mergers to ensure that they do not jeopardize national security. The CFIUS has been a stumbling block for several Chinese deals in the United States and was considered a big hurdle for Ant Financial. Euronet declined to comment on the company’s letter, said spokesman Pat Tucker. The Treasury Department declined comment. A representative for Ant Financial could not be immediately reached for comment. Brown said Ant Financial’s bid merited a “close” CFIUS evaluation
because money transfer companies obtain substantial personal and financial information on customers, including U.S. government employees. This information includes a customer’s name, address, social security and other identification numbers. A new owner also would need to assist U.S. efforts to combat terrorism financing or money laundering, by reporting suspicious activity, complying with subpoenas and requests to locate accounts and transactions, Brown said. Euronet has “consistently embraced and prioritized compliance,” he said in the letter. In recent years, U.S. authorities have increasingly held money transfer companies responsible when criminals process transactions. In January, Western Union Co agreed to pay US$586 million to settle allegations that it failed to prevent criminals from using its service for money laundering and fraud. MoneyGram has had issues in the past. A U.S. criminal investigation revealed in 2012 that MoneyGram had processed thousands of transactions for fraudsters who were scamming the elderly. MoneyGram admitted to money laundering and wire fraud violations and agreed to pay US$100 million. MoneyGram, along with Western Union, has long dominated the global money transfer industry with its large network of retail locations. It has about 350,000 outlets in retail shops, post offices and banks in nearly 200 countries and territories. Euronet has four money transfer businesses, including Ria, IME, HiFX and XE. Euronet’s Ria is in 146 countries, according to its website. Euronet focuses more on independent agents, while MoneyGram targets large retailers and national post offices. Reuters
Business Daily Thursday, March 30 2017 11
Asia Consumption
Japan’s tepid retail sales raise concerns Spending on foodstuffs fell an annual 1.5 per cent in February, the first decline in five months Stanley White and Izumi Nakagawa
J
apanese retail sales were effectively flat in February as consumers cut back on food and durable goods after employers offered the lowest spring wage increases in four years. Retail sales rose 0.1 per cent in February from a year ago, well below the median estimate for a 0.5 per cent annual increase, and much less than year-on-year growth of 1.0 per cent in January.
policies. “I was expecting consumption to pick up in January-March, but so far things look weak,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“This reflects concerns that wages this year won’t rise as fast as last year. Some people are also feeling the pinch from higher energy prices.” The data showed that spending on foodstuffs fell an annual 1.5 per cent in February, the first decline in five months. Spending on durable goods fell
an annual 2.2 per cent in February versus a 0.8 per cent annual decline in the previous month. Spending on general daily goods fell 5.1 per cent from a year ago, considerably faster than January’s a 2.9 per cent annual decline. Most major Japanese companies offered their lowest increase in base pay in four years at annual spring wage negotiations this year in a setback to consumer spending and overall economic activity. In addition, a rise in crude oil prices last year and a falling currency have pushed up prices of gasoline, which is also starting to hurt consumer sentiment. Reuters
Key Points Feb retail sales +0.1 pct y/y vs f’cast +0.5 pct y/y Sales slowed as shoppers cut back on food, durable goods Weak consumption raises doubts about inflation The anaemic figures raise further doubt about the strength of private consumption, emphasizing how difficult it will be for Japan’s economy to generate sustained wage growth and price inflation, as envisaged in the government’s “Abenomics”
Poll
Australian shares to firm this year, rally to extend into 2018 Sentiment has been boosted by a sharp rebound in economy in the fourth quarter of 2016 Shashwat Pradhan
Australia’s stock market is seen edging higher in 2017 and into the next year, a Reuters poll found, supported by broad optimism that has swept global equities in recent months though some analysts see risks from any aggressive U.S. interest rate hikes. The benchmark S&P/ASX 200 index closed at its highest in nearly two years on Tuesday, underpinned by hopes regulators will tighten the screws on mortgage lending to hose down a heated housing market. The rapid surge in house prices over the past few years has raised fears of a property market crash, so the tighter rules are seen as tempering those risks. While concerns still persist around the housing market, a strong rally in iron ore prices and the Reserve Bank of Australia’s optimistic view about the economy have kept investor sentiment high. The improved confidence has been supported by a rally in global stocks this year thanks to expectations U.S. President Donald Trump will cut taxes and ease financial regulations, which have pushed U.S. shares further into record territory. According to the latest poll of 15
strategists, taken over the past week, the Aussie index is expected to rise 2 per cent this year from Tuesday’s close of 5,821.23. That would mark the fourth straight quarterly Reuters stocks poll in which respondents have predicted a strong 2017 for Australian stocks. The index is expected at 5,800 by mid-2017 and then rise to 5,950 by the end of the year before continuing its climb above the 6,000 barrier by mid-2018. Sentiment has also been boosted by a sharp rebound in Australia’s
economy in the fourth quarter of 2016, as commodity exports boomed while consumers and the government lifted spending, extending the resource rich nation’s 25-year streak of uninterrupted expansion. But spiking bond yields and concerns around the pace of interest rate hikes in the United States are seen as the greatest risks facing the expected rally. The Fed’s widely-anticipated rate hike earlier this month was only its third since the global financial crisis. But it came earlier than what markets had expected only weeks before, and has set the stage for two more increases this year as the U.S. economy strengthens.
“The pace of U.S. monetary policy normalisation will need to be accelerated to accommodate the improving economic fundamentals - particularly in light of a much tighter U.S. labour market,” said Andrew Tang, equity strategy analyst at stockbroker Morgans. “We see higher global bond yields as a tipping point for equity markets towards the end of 2017.”
‘The Aussie index is expected to rise 2 per cent this year from Tuesday’s close of 5,821.23’ When asked on the likelihood the Australian index falls 10 per cent by the end of the year, most strategists said such a drop was likely. “We have had four 10 per cent or more pullbacks since the GFC (global financial crisis), that is four pullbacks of 10 per cent in eight years. Since 2002 there have been seven pullbacks of 10 per cent or more, suggesting a 50 per cent chance,” said Damien Hennessy of Heuristic Investment Systems. “Causes could be more rapid hike in Fed funds, Chinese slowdown, and European politics.” Reuters
12 Business Daily Thursday, March 30 2017
Asia
GDP
Vietnam’s economic growth slips to 3-year low The extension into 2017 of last year’s drought and salination problems hurt agricultural output Mai Nguyen
V
ietnam’s economy grew at its slowest pace in three years in the first quarter, government data showed yesterday, as production was weak in agriculture, mining and manufacturing. The General Statistics Office (GSO) said annual growth in January-March was 5.1 per cent. That was the slowest expansion for any quarter since the first three months of 2014. Nguyen Bich Lam, head of GSO, said
that if current trends are maintained, Vietnam is “unlikely to reach” its 2017 growth target of 6.7 per cent. Vietnam has been among Asia’s fastest growing economies, though in 2016, the economy slowed for the first time in four years, to 6.21 per cent from the previous year’s 6.68 per cent pace. The extension into 2017 of last year’s drought and salination problems hurt agricultural output of Vietnam, a major exporter of rice and coffee. In the first quarter, mining sector production dropped 10 per cent from
the same period last year, the GSO said, amid the government’s effort to steer away from natural resources, especially in coal, crude oil and gas.
Key Points Q1 growth was 5.1 pct y/y, lowest for a quarter since Q1 2014 Trends could make 2017’s 6.7 pct target unreachable - official Electronics production impacted by Samsung’s Note 7 woes Annual growth of manufacturing in the first quarter slipped to 8.3 per cent
from 8.9 per cent one year earlier, due to falls in food processing and electronics, said Ha Quang Tuyen, head of the GSO’s National Accounts Department. Tuyen said electronics production fell 1 per cent in the first quarter from a year, partly due to problems South Korea’s Samsung Electronics’s experienced with its Note 7 battery. Samsung, Vietnam’s biggest foreign investor, has invested billions of dollars in the Southeast Asian nation. Lam of GSO said challenges facing Vietnam include low labour productivity, a continuing impact from drought and salination, inflation, and how the current economic structure is not facilitating stable growth. Reuters
Markets
Japan stocks to slip before mid-2017 Analysts said in the longer term, investors will buy Japanese cyclical stocks such as exporters as the dollar gains against the yen thanks to rising U.S. interest rates Ayai Tomisawa
Japanese stocks could step back before mid-year as uncertainty over the U.S. legislative agenda and elections in Europe slow recent modest momentum but they are expected to finish the year up around 7 per cent, a Reuters poll found. Market participants say anticipated U.S. interest rate hikes this year could strengthen the dollar against the yen, a positive for Japanese equities, even as the Bank of Japan is expected to eventually start moving away from its ultra-easy monetary policy, perhaps as soon as this year. The Nikkei share average is forecast to trade at 19,000 at end-June 2017, compared to Tuesday’s close of 19,202.87, according to the median in a poll of more than 20 analysts taken by Reuters in the past week. It will then reach 20,500 by the end of the year. The benchmark index closed out 2016 at 19,114.37. Forecasts for mid-2017 ranged from 16,500 to 22,000. They were 12,000 to 24,000 for the end of the year, and 9,000-26,000 for June 2018. On Monday, the Nikkei skidded
Business Daily is a product of De Ficção – Multimedia Projects
to more than six-week lows after the perceived safe-haven yen rose to its strongest level since November against the dollar as U.S. President Donald Trump’s failure to pass a healthcare bill raised questions about his ability to push through tax cuts and fiscal spending to boost the economy.
Another near-term risk is the French presidential election on April 23, analysts said. “There is about 40 per cent chance that the Nikkei may fall below 18,000 before June. The key negative risks include Trump’s protectionist trade stance as well as the French presidential election,” said Akio Yoshino, chief economist of the investment management division at Amundi Japan. He said a victory for far-right National Front leader Marine Le Pen in the French presidential election would be negative for French and
European stocks, and may have repercussions for Asian shares. Current opinion polls show it will be won by independent centrist Emmanuel Macron. Japanese equities have made double-digit percentage gains since Trump’s election on hopes his administration will boost U.S. economic growth to 3 per cent or even higher. Analysts said in the longer term, investors will buy Japanese cyclical stocks such as exporters as the dollar gains against the yen thanks to rising U.S. interest rates. A cheaper yen makes Japanese exporters more competitive abroad and lifts their profits when repatriated.
Key Points Nikkei will likely end year 7 pct higher from 2016 Risks in first half of 2017 include French election Trump expected to turn focus to stimulus in second half of 2017 Also benefiting from stronger U.S. economic footing are Japanese financial stocks - such as banks and insurers - as they seek to boost returns from higher yielding U.S. bonds, they said. “After many twists and turns, I think Trump will focus on his economic policies in the fall. I expect the dollar to trade above 115 yen and the Nikkei will likely regain momentum,” said Takuya Takahashi, a strategist at Daiwa Securities. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Thursday, March 30 2017 13
Asia Data
In Brief
Economic chief says India’s data not politically influenced He also said that getting economic growth up to 8-10 per cent is essential for job generation India’s chief economic adviser rejected the notion that official data was politically influenced as “utter nonsense”, after surprisingly strong growth in the wake of a government ban on high denomination bank notes caused raised eyebrows among independent analysts. Speaking to an investment forum in Hong Kong yesterday, Arvind Subramanian said India was seeking to improve its methodology, and its data should not draw the same scepticism with which some analysts treat China’s economic data.
“Let me say this categorically to all the investors and I am not batting on behalf of the government here,” he told the annual Credit Suisse Asian Investment Conference in Hong Kong. Many analysts were surprised that a slowdown in growth during the December quarter was not as bad as they had expected following Prime Minister Narendra Modi’s decision in November to outlaw 500 and 1,000 rupee banknotes in a radical move against tax avoidance and corruption in the cash-reliant economy.
The decision sucked 86 per cent of cash out of circulation, and everyone from street hawkers to big consumer goods firms suffered a slump in sales. With data on commercial vehicle output, rail freight, service tax receipts and home appliance sales showing slowing growth or contraction, economic expansion in the quarter to December was forecast by economists at 6.4 per cent. Instead, the official data showed the economy grew 7.0 per cent, enough for India to retain the title of the world’s fastest growing major economy even though it was slower than the 7.4 per cent growth posed for the September quarter. Getting economic growth up to 8-10 per cent is essential for job generation in India, Subramanian said, adding that boosting private sector investment remains a challenge. He told the investor conference that there was a need for more direct investment in the manufacturing sector. New Delhi’s GDP data has been questioned since a change in methodology in 2015 transformed India into the world’s fastest-growing major economy. The government defended the overhaul, which occurred less than a year after Modi swept to power, citing an improved database covering hundreds of thousands of firms. Data reporting has long been a challenge in an economy where the informal sector accounts for 40 per cent of output and employs nine in 10 workers. The IMF expects India to remain one of the fastest growing emerging market economies, forecasting 6.6 per cent growth in the fiscal year ending on March 31, and 7.2 per cent for the coming fiscal year. Reuters
Private poll
South Korea March exports seen rising for 5th month The poll also forecast annual inflation in March at 2.0 per cent South Korean exports were expected to rise in March for a fifth straight month in annual terms although slightly slower than they did in February, a Reuters poll found yesterday, lending more evidence that global economic growth is recovering. The median forecast of the 15 analysts polled was a 13.0 per cent gain on-year, following a 20.2 per cent jump in February, which was the fastest in five years and a beacon of hope for an economy battling soft consumption. “The recovery trend in exports will be maintained for the time being as we’ve seen volume and product prices both rise globally after entering the new year,” said Lee Sang-jae, chief
economist at Eugene Investment & Securities. Lee said recent actions taken by China against South Korean businesses in retaliation over the deployment of a U.S. anti-missile radar system in South Korea would have a limited, if any, impact on export figures. “Spending by Chinese tourists isn’t included in export numbers. I doubt it had much of an impact,” the economist said. The number of Chinese tourists to South Korea has fallen substantially since China began publicly opposing the Terminal High Altitude Area Defence (THAAD) system, although Beijing says it has done nothing officially to curb South Korean businesses.
China insists the weapon’s powerful radar can penetrate its territory, while South Korea and the United States have repeatedly assured China the system is only intended to deter North Korean provocations.
Imports seen gaining, industrial output flat
The same poll showed imports were expected to have soared 23.7 per cent in March from a year earlier, nearly level with a 23.9 per cent jump in February. Separately, the Reuters poll projected February industrial output likely showed no growth, worse than a seasonally adjusted 3.3 per cent growth seen in January, due to base effects. Factory output data tends to be volatile but is broadly expected to improve if exports continue rising. The poll also forecast annual inflation in March at 2.0 per cent, accelerating slightly from 1.9 per cent in February as producer prices continued to rise in line with improving exports. Producer prices in February recorded the fastest growth in over five years. Factory output data will be published on March 31 while the trade data is due on April 1. Inflation data will be published on April 4. Reuters
Toshiba
Westinghouse files for Chapter 11 Toshiba Corp’s U.S. nuclear unit Westinghouse filed for Chapter 11 protection from creditors yesterday, as its Japanese parent seeks to limit losses that threaten its future. A bankruptcy filing will allow Pittsburgh-based Westinghouse, whose nuclear plant projects have been dogged by delays and cost overruns, to renegotiate or break its construction contracts, although the utilities that own the projects would likely seek damages. For Toshiba, the aim is to mitigate soaring liabilities stemming from guarantees it provided. Toshiba said Westinghouserelated liabilities totalled US$9.8 billion as of December, more than an earlier estimate of around US$6.3 billion.
Report
New Zealanders move to greater belief in climate change New Zealanders are becoming increasingly convinced that climate change is real and that human activity has caused it, according to research out yesterday. The study from Victoria University and the University of Auckland examined climate change beliefs over a six-year period from 2009. “The two beliefs we investigated were if people believe climate change is real, and if people believe climate change is caused by humans,” said study leader Dr Taciano Milfont, of Victoria University. The study found 33 per cent of New Zealanders strongly agreed climate change was real in 2009.
Bank of Japan
Board member says reform must accompany easing Bank of Japan board member Takehiro Sato said labour market reform and other measures to boost Japan’s growth potential must accompany monetary easing to raise the country’s low long-term inflation expectations. Prolonged economic stagnation has pushed down long-term inflation expectations to around zero per cent, and it is not easy to raise them even through massive monetary stimulus if monetary policy is the “only game in town,” Sato said in a speech at Yale University on Tuesday. Japanese companies and labour unions have traditionally prioritised job security over pay rises, Sato said. investment
Lao PM calls for measures to boost investment Lao Prime Minister Thongloun Sisoulith has urged line ministries to remove any unnecessary barriers to help boost the country’s business environment and promote domestic and foreign investment. “The government is trying to develop a favourable business environment and simplify unnecessary procedures that are a hindrance to the operations of both domestic and foreign businesses,” Prime Minister Thongloun said when addressing the 10th Lao Business Forum in Vientiane on Tuesday. He noted that Laos has been facing challenges and obstacles, resulting in slow change and the ineffective promotion of a suitable business climate.
14 Business Daily Thursday, March 30 2017
International In Brief Report
Lloyd’s of London picks Brussels for subsidiary Lloyd’s of London, the world’s largest speciality insurance market, has picked Brussels for its planned European Union subsidiary, The Insurance Insider reported late on Tuesday. It will ask its council to ratify the decision when it meets later, the publication said. Lloyd’s has been one of London’s financial services firms most vocal about the need for a European Union subsidiary if Britain has no access to the single market after leaving the bloc. On Monday Reuters reported Lloyd’s shortlist of six locations had been reduced to Brussels and Luxembourg. Dublin, Frankfurt, Malta and Paris were dropped. Angola
Minister says corruption may be of concern to next president Corruption in Angola is a “complicated phenomenon” which is going to be the priority of the next president, Angola’s mining and geology minister, Francisco Manuel de Queiroz, said. “Corruption is a phenomenon that is somewhat complicated, Sometimes there are superficial approaches without knowing the contours and how it appears”, he said at the UK-Angola trade and investment forum that is taking place in London. The minister regretted, in reply to the former UK minister Peter Hain that there was corruption in Angola and that the corrupters are not mentioned when the matter comes up in conversation and defended the need to fight corruption.
Watchdog
EU blocks Deutsche Boerse’s takeover of rival LSE Failing to sell MTS was crucial because it undermined the viability of LSE’s offer to sell its French clearing unit, the EU said Aoife White
E
uropean Union regulators dealt a final blow to Deutsche Boerse AG’s planned takeover of London Stock Exchange Group Plc, a symbolic block on EU-U.K. integration. The US$14 billion deal to create Europe’s biggest exchange would have harmed competition in the soon-to-be 27-nation EU by creating a de facto monopoly for clearing bonds and repurchase agreements, the European Commission said in an emailed statement yesterday. The decision, flagged last month by LSE, thwarts Deutsche Boerse’s expansion just five years after the EU also banned a proposed tie-up with NYSE Euronext. “As the parties failed to offer the remedies required to address our competition concerns, the commission has decided to prohibit the merger,” said Margrethe Vestager, the EU’s antitrust commissioner. EU regulators have become increasingly tough on big deals, demanding
weighty concessions to eliminate overlapping businesses amid concerns that a combined firm could dominate an industry and increase prices. While this is the second time that Vestager has formally blocked a merger, several transactions have been ditched over antitrust opposition. Opposition to the Frankfurt-based exchange’s merger plans went up a gear after the U.K. voted to leave the EU last year. German concerns over moving the combined firm’s headquarters to London added to political riptides over clearing euro trades outside the euro area. LSE signalled last month that it didn’t expect to win EU antitrust approval, saying the European Commission’s demand that it sell its MTS unit, a trading platform in Italy for government bonds, was impossible. Failing to sell MTS was crucial because it undermined the viability of LSE’s offer to sell its French clearing unit, the EU said. “It is the responsibility of the parties to address competition concerns either by rebutting them or
by proposing adequate remedies,” the EU said in the statement. “To be effective, remedies have to address all of the commission’s competition concerns and be viable long-term.” While LSE cited impossible regulatory demands, half a dozen people familiar with the discussions say that obscured other hurdles. These include a stalemate over the location of the headquarters, which was magnified by the Brexit vote. That decision exposed key parts of the business, like euro clearing, to political forces, said the people who asked not to be named because the talks are private. Yesterday’s formal veto means LSE probably won’t follow through on the sale of its French clearinghouse, which it had offered to sell to win over regulators, people familiar with the matter said this week. Euronext NV still wants to acquire the unit. The EU block on a U.K.-German exchange transaction comes a year after Vestager stopped the merger plans of two U.K. mobile phone operators. Deutsche Boerse’s last attempt to merge with another exchange, NYSE Euronext, fell by the wayside after regulators said it would have created a quasi-monopoly for European financial derivatives traded globally on exchanges. Bloomberg News
Portugal
Overdue loans rise by 0.1 per cent in February The rate of overdue loans of both companies and households in Portugal rose by 0.1 percentage points in February, the Bank of Portugal said on Tuesday. In February loans granted to companies totalled €77.715 billion, 2.6 per cent less than the €82.212 billion provided in the same month of 2016. Compared to the previous month, the loans granted to companies rose by just €5 million. The rate of overdue loans in February was 16.2 per cent, rising 0.1 percentage points on the previous month, while the percentage of debtors with overdue loans rose by 0.4 percentage points to 27.9 per cent. Aviation
IATA criticizes U.S., UK electronics bans as ineffective The leading international airline trade organization’s top official on Tuesday denounced U.S. and British bans on some electronic devices on flights from several Muslim-majority countries, criticizing the policies as a move toward “more restricted borders and protectionism.” Alexandre de Juniac, director general and chief executive of the International Air Transport Association (IATA), questioned the efficacy of the bans on devices larger than a cell phone. The restrictions, announced last week, apply to direct flights to Britain and the United States from certain airports in the Middle East and North Africa.
Investment
Mercedes hastens electric-car rollout as combustion era fades German diesel demand in December fell to the lowest level since September 2010 Elisabeth Behrmann
Mercedes-Benz is accelerating plans to introduce a suite of battery-powered cars by three years in a race to meet tighter emissions rules as European buyers turn away from fuel-efficient diesel cars. In a 10 billion-euro (US$10.8 billion) project, the world’s largest luxury-car maker intends to roll out 10 new electric vehicles by 2022, compared with the 2025 target announced at the Paris auto show in September. The expedited time frame reflects the urgency facing carmakers as they brace for a shift away from traditional automotive technologies. Combustion engines would continue to be refined for a “transitional period,” Mercedes parent Daimler AG said yesterday. “We want to shape the profound transformation of the automotive industry from the forefront,” Daimler Chairman Manfred Bischoff said in a statement at the company’s annual shareholder meeting in Berlin. “Further fundamental changes will be required for Daimler to remain successful,” as the industry adjusts
to cars running on electric motors and capable of driving themselves. The faster pace comes as the car industry battles with a backlash against diesel cars stemming from Volkswagen AG’s cheating scandal. Daimler has also been embroiled in increased scrutiny of the technology with German prosecutors investigating the Stuttgart-based automaker’s employees over diesel-manipulation allegations. The technology is key for meeting increasingly stringent rules for lowering carbon-dioxide emissions.
Flat emissions
After achieving steady reductions in CO2 emissions in previous years, Daimler struggled in 2016 with levels in Europe steady at 123 grams per kilometre as buyers favoured larger vehicles. In its home region, Daimler needs to achieve a level of 100 grams per kilometre by 2021 or face heavy fines. German diesel demand in December fell to the lowest level since September 2010, accounting for 43 per cent of total sales, according the Center for Automotive Research at the
University of Duisburg-Essen. Early signs of carmakers shifting focus from combustion engines are showing, Germany’s IG Metall union said after conducting a survey of manufacturers and suppliers in Daimler’s home state of Baden-Wuerttemberg.
“We want to shape the profound transformation of the automotive industry from the forefront” Manfred Bischoff, Daimler Chairman
“Among development teams, especially in diesel, there are signs there’s less to do as electrification is starting to have an impact,” Roman Zitzelsberger, a union representative on Daimler’s supervisory board, told reporters in Berlin Tuesday. “We found there are fewer follow-up requests and general degree of activity.” Bloomberg News
Business Daily Thursday, March 30 2017 15
Opinion Business Wires
Viet Nam News As part of a programme to create an agricultural supply chain by 2020, HCM City will build a safe supply chain each for vegetables, pork and seafood, open shops selling safe agricultural produce and develop brands for safe food markets. The city’s agricultural output meets just 30 per cent of its 10 million people’s demand, and the rest is supplied by other cities and provinces. It had carried out a pilot programme to create a safe food supply chain in 2013-15, and achieved reasonable results. But the supply of products as well as their variety were modest.
The Times of India State Bank of India, which would start merger process of five associates and Bharatiya Mahila Bank (BMB) from April 1, expects integration to be completed in three months. “SBI has sought threemonth time from RBI for merger. It should be done by that timeframe,” SBI managing director (national banking group) Rajnish Kumar said here. “The merger has to be done in phases. As data are integrated, the new passbook and cheque books would be issued. The complete integration of various banks should take 3 months,” he said. Post merger, he said about 1,500 branches to be shut because of duplication.
New Zealand Herald Russia is willing to restart free trade talks with New Zealand that were halted after the annexation of the Crimean peninsula, but Trade Minister Todd McClay says it is too soon to resume negotiations with the world’s 12th-biggest economy. Last week Prime Minister Bill English released New Zealand’s refreshed trade strategy, which seeks to have 90 per cent of goods exports covered by a free trade agreement within 13 years, and cited potentially concluding free trade talks with Russia and its Customs Union partners among initiatives to meet that target.
The Jakarta Post The Indonesian Palm Oil Producers Association (GAPKI) has revised the 2016 palm oil production and stock figures. According to the revised figures, production stood at 35.57 million tons and stock at 3.57 million tons, from 34.5 million tons and 1.07 million tons, respectively, as reported previously. The 35.57 million tons of production consists of 32.52 million tons of crude palm oil (CPO) and 3.05 million crude palm kernel oil (CPKO). “The revision is based on data collection and field surveys with various related associations,” said GAPKI executive director Fadhil Hasan in a recent press statement.
Unlocking the potential of Chinese cities
R
esidential property prices in China’s first-tier cities – Beijing, Shanghai, Guangzhou, and Shenzhen – are back up. A home there now runs buyers half as much as a home in the world’s most expensive cities: New York City, London, and Hong Kong. Letting some of the air out of this housing bubble, before too much pressure builds up, will require improved management of China’s rapid urbanization – and not just in the four first-tier cities. Of course, the housing situation is most urgent in the first-tier cities. And their governments have moved quickly to cool the market. Beijing, for example, raised the required down payment for residents purchasing a second flat for investment to as much as 80 per cent of the price, and barred non-residents from such investments altogether. But this is just a temporary fix. A longer-term solution will require the authorities to address the fact that demand for a limited supply of residential property is high and rising, owing to the rapid flow of often-young Chinese talent to cities that offer access to economic opportunities, not to mention better public infrastructure. Policymakers must determine the proper balance between state control and market forces in guiding urbanization throughout the country. As it stands, urbanization pressure is being felt by the top 100 (out of 600) Chinese cities, which housed 714.3 million residents – 52.8 per cent of the total population – and generated 75.7 per cent of China’s GDP in 2016. Of those 100 cities, six recorded GDP growth above 10 per cent last year, compared to the national average of 6.7 per cent; 82 recorded GDP growth between 6.7 per cent and 10 per cent; and just 12 grew by 6.7 per cent or less. Perhaps more significant, per capita GDP in 33 Chinese cities is higher than US$12,475, meaning that, by World Bank standards, they have attained high-income status. Four years ago, only 16 Chinese cities had crossed that threshold. Urbanization in these highincome cities may provide more valuable insight into how to continue China’s remarkable development story than the experiences of the first-tier cities. A new book, China’s Evolving Growth Model: The Story of Foshan (co-authored by one of us), offers a case study of one of those cities. In recent years, Foshan has transformed itself from a rural county outside Guangzhou, the capital of Guangdong province, into the most dynamic industrial city in China, with per capita income reaching US$17,202 in 2016, compared to US$16,624 for Beijing and US$16,251 for Shanghai. In 2015, Foshan’s GDP grew by 8.3 per cent, compared to 6.7 per cent in Beijing and 6.8 per cent in Shanghai, with industry accounting for 60 per cent of the city’s GDP. Moreover, in a country where excessive debt is a growing concern, Foshan’s loan-to-GDP ratio in 2011 was only 85 per cent – far less than the national average of 121 per cent. Foshan’s rapid GDP growth – among the fastest in China – was driven by the private sector, with appropriate localgovernment support, and therefore depended largely on self-financing, not debt. Likewise, the private sector has financed about two-thirds of Foshan’s fixed investment, which runs up to 3040 per cent of GDP. Foshan’s development strategy focused on embedding the city within the supply chains of the dynamic Pearl River Delta – which includes the global cities of Hong Kong, Shenzhen, and
“
Andrew Sheng a Distinguished Fellow at the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance Xiao Geng President of the Hong Kong Institution for International Finance, is a professor at the University of Hong Kong
Guangzhou – thereby securing linkages to the entire world. It also included the development of skills and capacity in specialized sectors, creating the world’s largest lighting and furniture markets in the world. Foshan now boasts numerous private firms and small- and medium-size enterprises spread across the city’s more than 30 specialized industrial clusters and integrated into global supply chains. Midea Global, for example, is a global leader in the development, manufacture, and sale of household appliances. The city also created linkages with others nearby, with each complementing the others’ comparative advantages, thereby reinforcing collective progress. At the same time, however, Foshan fostered intense competition internally and with other cities in China, which may well be the biggest reason for its success. Foshan’s municipal government, which was among the first to experiment with township and village enterprises and privatization in the early 1980s, has played an important role in buoying private enterprise. In particular, it has supported skills upgrading and built critical infrastructure, while avoiding creating unaffordable housing or unnecessary office buildings. In a country plagued by excess capacity and housing bubbles, this was a prescient policy. The key to success has been the authorities’ flexible approach, guided by close monitoring of market signals. Thanks to such monitoring, Foshan’s municipal- and county-level governments recognized a dramatic restructuring in global supply chains and responded accordingly, such as by improving housing and health care, providing such social services even to migrant labour, and addressing excessive pollution. The local government has also driven Foshan’s private enterprises largely to complete a difficult process of restructuring since 2008. Foshan’s ceramic industry, for example, has transformed itself from a dirty, energy-intensive, and fragmented industry into a clean, energy-efficient, and consolidated sector, largely owing to high standards designed and enforced by the municipal government. Meanwhile, local governments in Northeast China continue to struggle with the supply-side structural reforms needed to tackle overcapacity, excessive leverage, high transaction costs, and gaps in technology upgrading. There is increasing awareness in China of the potential of cities. As Foshan has proved, cities have a unique capacity to support growth – including by fostering competition, advancing innovation, and phasing out obsolete industries – while addressing social challenges, tackling pollution, and creating a labour force that can cope with technological disruption. As China attempts to manage urbanization – responding to, rather than attempting to overpower, market forces – the Foshan model may well prove invaluable. Project Syndicate
Policymakers must determine the proper balance between state control and market forces in guiding urbanization throughout the country
”
16 Business Daily Thursday, March 30 2017
Closing Politics
British PM May fires starting joined in 1973. The prime minister, an initial opponent of Brexit who gun on Brexit Prime Minister Theresa May filed formal Brexit divorce papers yesterday, pitching the United Kingdom into the unknown and triggering years of uncertain negotiations that will test the cohesion of the European Union. Nine months after Britons voted to leave, May notified EU Council President Donald Tusk in a letter that the UK is quitting the bloc it
won the top job in the political turmoil that followed the referendum vote, now has two years to settle the terms of the divorce before it comes into effect in late March 2019. “The United Kingdom is leaving the European Union,” May told lawmakers in the British parliament “This is an historic moment from which there can be no turning back.” Reuters
Management
Fosun CEO steps down, reshuffle to impact conglomerate Along with the announcement, Fosun reported a net profit jump of 28 percent Anne Marie Roantree and Julie Zhu
F
osun International Ltd, one of China’s most aggressively acquisitive conglomerates, said its chief executive and vice president stepped down in a surprise reshuffle that has raised concerns over the group’s strategy. The resignation of co-founder and Chief Executive Liang Xinjun and Senior Vice President Ding Guoqi will have some impact on the leisure-to-insurance group, one of China’s largest privately held firms, said chairman and fellow co-founder Guo Guangchang. “The departure of Ding Guoqi and Xinjun, in particular that of Xinjun due to health reasons, will have an impact on Fosun in the short-term,” Guo told reporters and analysts in Hong Kong, without elaborating. “But we have to turn bad things into good news. As you all see today, the new management team, Fosun is full of talents.” Liang, who was Fosun’s public face, was replaced by fellow co-founder and billionaire Wang Qunbin, said the company, whose businesses include French leisure group Club Med and entertainment company Cirque du Soleil. Wang, a genetic engineer by training who owns 11 percent of Fosun International Holdings, has kept a lower-profile than the firm’s other co-founders. Fosun has been the poster child for China’s decade-long outbound push, which saw Chinese bidders spend a record US$105 billion on assets ranging from movie studios
to football clubs in 2016. But over the past year Beijing has begun reining-in outbound deals in a bid to curb outflows - estimated to be more than US$725 billion last year - and shore-up the weakening yuan which fell to eight-year lows in December. Guo and Chief Financial Officer Robin Wang reassured investors regarding the impact of Beijing’s capital restrictions, saying they were a “challenge” for the group but that it continued to have several means of raising capital offshore, which could actually offer Fosun more opportunities to compete for assets. These included offshore bonds and also using the group’s 20 billion euros’ worth of insurance assets.
Manpower
Guo emphasised the group’s strategy to contain funding costs while investing heavily in new technologies, including artificial intelligence and automation. Along with its reshuffle announcement, Fosun reported a net profit jump of 28 percent to a record high of over RMB10 billion (US$1.45 billion) in 2016, led by gains from its investments in finance, healthcare and tourism-related businesses.
Growing tensions
Several sources close to Fosun said there had been growing tensions between Guo and Liang. Yesterday, Guo said he had been especially “hard and demanding” on Liang but said he, Liang and Wang college mates who went on to work together for 25 years - remained as close as ever. “Xinjun, Wang Qunbin and myself
have never abandoned each other, we are like brothers. Xinjun has made a great contribution to Fosun’s development today,” Guo said. Liang and Ding, who stepped down due to family commitments, will have no honorary positions in the company. Liang, who owns 24 percent of the group and has a personal fortune worth US$2.2 billion according to Forbes Real-Time Billionaires List, was instrumental in driving Fosun’s acquisition strategy.
Key Points Reshuffle will have short-term impact on company - chairman Fosun says CEO Liang Xinjun resigned for health reasons Analysts raise concerns over firm’s strategy after reshuffle Profits soar 28 percent to more than RMB10 billion He took on a more prominent role when Guo became embroiled in an investigation on the Chinese mainland in late 2015. The company’s shares opened up initially but then quickly steadied yesterday. Its bonds traded slightly lower on fears the departure of two key executives could hurt its acquisition strategy, analysts said. “With the latest announcement, one more founder together with another key personnel have left,” said Annisa Lee, a Nomura credit analyst. “This may raise concerns on the company’s business and financial strategy going forward and that’s why bonds are trading lower.” Reuters
Climate
Monetary policy
Singapore to train 10,000 public Beijing committed to Paris Thai c.bank hikes 2017 growth servants with data science accord as Trump undoes policy forecasts, holds key rate The National University of Singapore (NUS) will provide data science training to public servants under a five-year Memorandum of Intent signed with the Government Technology Agency of Singapore (GovTech) yesterday. The two parties plan to train 2,000 public officers annually for five years. GovTech chief executive Jacqueline Poh said increased adoption of data science in the public sector will transform the way the government delivers services to the public. “We are glad to partner NUS, which will help us put this tool into the hands of 10,000 public officers over the next five years, and educate them to use it effectively,” Poh added. NUS and GovTech will also cooperate to work in the areas of technological innovation, specifically manpower and capability development, for the benefit of public sector agencies, GovTech said in its press release. Other areas of collaboration include knowledge sharing to co-create solutions in the aspects of cyber security and artificial intelligence. Xinhua
China is still committed to the Paris climate change accord agreed in 2015, the Foreign Ministry said yesterday, after U.S. President Donald Trump signed an order to dismantle Obama-era climate change regulations. Trump’s main target is former president Barack Obama’s Clean Power Plan, which required states to slash carbon emissions from power plants - a key factor in the United States’ ability to meet its commitments under the climate change accord reached by nearly 200 countries in Paris. Chinese Foreign Ministry spokesman Lu Kang said climate change was a common challenge for everyone and the Paris agreement was a landmark that came about with the hard work of the international community, including China and the United States. China is keen to be seen leading the way in reducing climate change which Trump has in the past dismissed as a “hoax”. “We still uphold that all sides should move with the times, grasp the opportunities, fulfil their promises and earnestly take proactive steps to jointly push the enforcement of this agreement,” Lu told a daily news briefing. Reuters
Thailand’s central bank raised its forecasts for 2017 economic growth and exports while leaving the key interest rate where it has been for nearly two years. As expected, the Bank of Thailand’s Monetary Policy Committee (MPC) yesterday voted unanimously to keep the one-day repurchase rate at 1.50 per cent, where it has been since April 2015, a quarter-point above the record low. The central bank is counting on government spending to support economic growth, which has lagged regional peers, as Southeast Asia’s second-largest economy faces global uncertainties as well as risks at home from household debt. Thailand’s military government has ramped up investment and planned an extra budget of 190 billion baht (US$5.52 billion) for the fiscal year ending Sept. 30. “The overall growth outlook improved on the back of a clearer recovery in merchandise exports. Meanwhile, tourism continued to recover, and public expenditure remained an important growth driver,” the MPC said in a statement. “Nonetheless, the Thai economy still faced many risks, particularly on the external front,” it said. Reuters