Business Daily #1298 May 18, 2017

Plot sale in HK Central hits US$3 billion record Property Page 5

Thursday, May 18 2017 Year VI Nr. 1298 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Entertainment

Expert: Immersive entertainment experiences should complement gaming industry Page 7

Gaming

Operators cannot ignore millenials and tech savvy crowd, says panel Page 6

www.macaubusinessdaily.com

MICE

Internet giant

International Congress and Convention Association ranks MSAR 72 in annual review Page 5

Tencent results fail to meet expectations Page 16

DICJ Hints at Tax Tweak Gaming

About 40 junket operators have so far been audited.

DICJ director Paulo Martins Chan says the city’s 120 or so junkets are “balanced”.

Reducing MSAR gaming taxes could be on the menu to help fend off regional competition.

Meanwhile, the gov’t is likely to maintain current junket levels as the VIP sector rebounds. Page 7

The Coding Guys

Developing mobile apps in the MSAR. Currently, enterprises have to involve the gov’t or the gaming sector. So says Michael Lau, MD of local startup Coding Guys. And winners of the Innol CT Business Plan Competition in Macau.

Founded in 2014, the company must compete in a “difficult” market, facing competition from Zhuhai.

Housing The local anti-graft body has slammed the Housing Bureau. For new standards applied to those seeking economic housing. CCAC says the new standpoint does not strictly adhere to the law regarding those married during the waiting period. The watchdog tells the Housing Bureau to accept them ‘if all other legal conditions are met’ with housing laws ‘perfected in time’. Page 2

Deleverage measures in China relaxed

25,293.63 -42.31 (-0.17%) Worst Performers

Cathay Pacific Airways Ltd

+4.91%

Link REIT

+1.63%

Galaxy Entertainment Group

-2.30%

China Construction Bank

-0.93%

MTR Corp Ltd

+2.29%

Kunlun Energy Co Ltd

+1.56%

Henderson Land Develop-

-1.49%

Hang Seng Bank Ltd

-0.91%

AAC Technologies Holdings

+2.18%

Wharf Holdings Ltd/The

+1.46%

China Life Insurance Co Ltd

-1.41%

Sands China Ltd

-0.87%

China Mengniu Dairy Co Ltd

+2.13%

Cheung Kong Property

+1.23%

Bank of East Asia Ltd/The

-1.37%

China Resources Power

-0.78%

Hengan International Group

+1.71%

Sun Hung Kai Properties Ltd

+0.78%

AIA Group Ltd

-1.27%

China Overseas Land &

-0.45%

24° 27° 25° 27° 25° 27° 25° 27° 25° 28° Today

Source: Bloomberg

Best Performers

FRI

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

Debt control The People’s Bank of China boosted liquidity injections this week. After months of intensifying action on interbank market rates, authorities are loosening their grip. With markets reacting accordingly. Page 8

Interview | Start-up focus Page 4

HK Hang Seng Index May 17, 2017

Housing Bureau blunder

2 Business Daily Thursday, May 18 2017

Macau CCAC

Anti-graft body slams Housing Bureau on housing practices Group says February release contradicts previous practices on attribution of economic housing for couples married during the waiting period Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

T

he local anti-graft body the Commission Against Corruption (CCAC) believes that the economic housing laws should be ‘perfected in time’ in order to improve the ‘just, reasonable and efficient’ distribution of housing to those in need.

The statement follows an investigation initiated by the anti-graft body after 27 complaints from candidates for economic housing were received, prompting Legislator Ella Lei Cheng I to also complain to the body.

The results of the investigation found that the contents of a new release by the Housing Bureau (IH) ‘not only contradict the internal instructions that the service itself had emitted on October 12 of 2011 - altering the instructions given to the public and its own practices over the years - but also create the situation in which candidates who have followed the referred instructions could lose their economic housing units which they already occupy’.

The release in question, from February of this year, also ‘refuses the presented requests by candidates who were married during the waiting

period so that couples are not considered part of the family household’.

The group notes that despite the intentions of the alteration being to better utilise the housing resources available, the ‘decision by the IH should be taken from the basis of an expressed legal foundation and be in conformity with the respective provisions set out in the law of economic housing’.

The CCAC found that the current law on economic housing does not impose the necessity for members of couples to be considered part of the family household and that the February notice issued by the Bureau ‘has the fundamentals of law and fact [regarding] that interpretation’.

This has led it to announce that the Housing Bureau ‘should accept the requests presented by candidates for economic housing units’ who were

married during the waiting period and give them authorisation for ‘sale or purchase’ of the units ‘if all other legal conditions are met’.

Trade

China-Portuguese-speaking countries’ trade up Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

After the first quarter of last year saw a 23 per cent year-on-year decline in trade between China and Portuguese-speaking countries, this year’s first quarter shows a marked turnaround, with a 43.33 per cent increase year-on-year, reaching US$23.97 billion (MOP192.28 billion), according to data from the China Customs published by the Forum for Economic and Trade Co-operation Between China and Portuguese-speaking Countries (Forum Macau).

Goods from Portuguese-speaking countries sold to China were valued at US$16.89 billion during the first quarter, a 55.27 per cent increase from the same quarter last year, while Chinese merchandise exports to the countries

reached US$7.08 billion, a 21.09 per cent uptick year-on-year.

During the month of March, the value of merchandise traded reached US$9.13 billion, a 37.8 per cent increase month-on-month and a 65 per cent increase year-on-year.

Imports to China from Portuguese-speaking countries totalled US$6.62 billion during the month of

March, seeing a 77.4 per cent year-onyear increase, while that of goods sold to Portuguese-speaking countries from China amounted to US$2.52 billion, a 39.23 per cent increase year-on-year.

Status quo

Brazil continued to be the strongest exporter of merchandise to China

in terms of value, at US$6.42 billion during the month of March and US$16.77 billion during the first quarter, increases of 62.12 per cent and 44.56 per cent year-on-year, respectively.

Angola saw a 61 per cent year-onyear uptick in its trade with China during the first quarter, hitting US$5.55 billion during the period, while Portugal saw a 5.79 per cent drop in its overall trade during quarter, compared to last year, despite a 50.5 per cent increase in exports from the country to China, offset by a 23.5 per cent drop in the value of imports to Portugal from China, year-on-year.

São Tomé and Príncipe, the smallest of the trading partners among the Portuguese-speaking countries, imported goods worth US$144,480 from China during the first quarter, while not exporting a large amount of goods to China (registered as US$0.00 in the data).

Economy

Industry

Trade down between MSAR and Mainland

Industrial Fund support plunges in first quarter

Cecilia U cecilia.u@macaubusinessdaily.com

Trade between the MSAR and Mainland China decreased by 16.3 per cent year-on-year in the first quarter of this year, dropping to US$615 million (MOP4.93 billion), according to official data released by the Chinese Ministry of Commerce.

Exports from the city to the Mainland dropped by 14.84 per cent yearon-year, at US$593 million.

Similarly, imports from the Mainland to the MSAR saw a year-on-year decrease of 42.79 per cent, amounting to US$22 million.

In March, trade between the city and the Mainland amounted to US$236 million, down 16.31 per cent

year-on-year but up by 38.04 per cent month-on-month.

During the month, US$226 million in exports from the MSAR to the Mainland was recorded, down 12.49 per cent year-on-year but seeing an uptick of 36.84 per cent month-on-month.

For imports to Macau from the Mainland, the third month of the year generated US$10 million, registering a year-on-year decrease of 32.75 per cent, but a month-on-month increase of 72.69 per cent.

For the first three months of this year, a total of 156 investments from Macau were approved in Mainland China, a doubling of investments made during the same period of last year.

The 156 investments generated US$309 million, up 67 per cent year-on-year.

In the month of March alone, 54 Macau investments were approved in the Mainland, an increase of 28.57 per cent month-on-month.

Some US$246 million was created from the 54 investments, indicating a threefold increase when compared to the previous month.

In March, Mainland China placed US$2.20 billion in non-financial investments in Macau.

Meanwhile, also for the month of March, the turnover of completed construction projects in the MSAR by companies from the Mainland reached US$14.14 billion.

The Industrial and Commercial Development Fund disbursed MOP9.39 million (US$1.17 million) in financial support during the first quarter of 2017 to subsidise events held by local associations and the setting-up of service centres, in addition to the establishment or maintenance of websites hosted by Small and Medium Enterprises (SME), according to data published yesterday in the Official Gazette.

The latest amount represents a decrease of 350 per cent from the previous quarter, ended December 2016, when the total amount of subsidies disbursed by the Fund totalled MOP42.25 million.

The number of beneficiaries in the first quarter of 2017 was also down to 297 from the 977 that received the Fund’s support in the previous

quarter.

According to the latest data, the largest amount of funding was allocated to the Industry and Commerce Federation of Macau Central and Southern District, at MOP1.77 million. The financial aid was granted to ‘partially finance the development costs of the Small and Medium Enterprises Service Centre in Macau’.

Second on the list came the Industry and Commerce Federation of the Islands of Macau, which received MOP1.44 million, also granted to finance the development costs of SMEs from the islands.

Also of note was the financial support attributed to the All-China Youth Federation, amounting to a total of MOP1.42 million.

All other subsidies amounted to less than MOP1 million. S.Z.

Business Daily Thursday, May 18 2017 3

Macau

4 Business Daily Thursday, May 18 2017

Macau

Gathering in one place only grow when you have connections with these big corporations and companies. Otherwise, businesses which mainly serve SMEs are very difficult. Most local entrepreneurs prefer to serve casinos and the government. And so we’re all looking and fighting against each other for the same resources and it makes business difficult.

Startup name: Coding Guys Limited Industry: IT Elevator Pitch: Elevator Pitch: A mobile application and software development firm which provides support in translating business ideas into tangible solutions, including the provision of technical skills as well as project development experience that assists clients achieve business objectives Interviewee: Managing Director Michael Lau Cecilia U cecilia.u@macaubusinessdaily.com

W

hen was Coding Guys created and by whom?

In 2013, we won the InnolCT Business Plan Competition, organised by the Macau New Technologies Incubator Centre (Manetic). After the competition, we received some funding from the MSAR Government and a working place in Manetic and so we set up our company in 2014, founded by four entrepreneurs.

What was the main idea behind creating the company?

Our main focus is the development of mobile applications. During that time we brought along one project to take part in the competition but at the same time we were also developing some projects. For now, we help some companies and associations set up mobile applications.

Are there many other local companies in the same field?

There aren’t many. Honestly, potential customers for SMEs (small and medium sized enterprises) in the city are very limited. If you are to establish a company to develop mobile applications normally you need to invest at least an amount of six digits; therefore, many SMEs are not able to pay this big amount.

received help from friends, and we got a place in Manetic. Also, the Macau Anglican College and General Union of Residents’ Associations of Macau (União Geral das Associações dos Moradores de Macau) provided us with job opportunities plus other small projects involving the setup of websites and, as such, stabilised our cash flow. In addition, in terms of developing mobile applications, we provided support services for bigger companies as well as foreign companies.

How many employees do you have at the moment?

For now, two owners work fulltime, two owners work part-time, and we have one full-time employee and one part-time employee.

“Honestly, potential customers for SMEs in the city are very limited”

What area were you in before founding Coding Guys?

Previously, I had been working in Canada for quite some time. During that time when my partner and I won the competition we thought this would work and so I came back from Canada. I used to work for an IT company but I myself have a business degree, and my partners all have technical backgrounds.

What support have you received from the government?

Every year the government holds this InnolCT Business Plan Competition; the prize money we received was some MOP100,000 (US$12,467).

Also, the office is provided by Manetic in Macau Square. For the first year we took the place at free rent. Aside from us, Manetic also accommodates other companies and so we were given opportunities to collaborate with these neighbouring companies. Although some collaborative projects failed, we exchanged experiences with these companies.

What were the first years of the company like?

We are pretty lucky because we

How do you see the market in Macau at the moment?

Those who engage in the field likely

mostly have taken projects from the government or casinos for providing maintenance services, and so have the resources to develop their own projects and to provide services to other SMEs. As such, the market for the pure development of mobile applications is difficult. Also, Zhuhai is close to us and the competition with the market in Zhuhai is quite severe in terms of price.

Is the Macau Government adequately promoting this field?

No, not for the promotion of developing mobile application or even software. It seems to me that the government is more into promoting innovative technology such as those that relate to environmentally friendly or Chinese medicine [technologies]. Let’s say online payment. It’s only begun to be more strongly promoted by the city in the past year - Macau really lags behind when compared to the rest of the world.

Has the company found suitable investors?

We actually talked about this with Manetic. Manetic itself has been approaching investors and Manetic assists mature companies to link with the investors. And so now we’re working hard to ensure we’re heading toward our goals. For now, we’ll focus on our own operation.

Secondly, we’ll also [only] consider getting funding from the government that is suitable for us. We wish to get more funds in order to allow us to work on our development.

When we pass our first stage and allow the public to realise our performance then it’ll be easier for us to approach potential investors. My own experience is that investors in Macau and Hong Kong are rather conventional about investments in online platforms.

What are the main problems affecting start-ups in Macau?

To start a company in Macau is easy, but to run a business is not. As discussed a lot in the past, the heavy weight on the gaming industry is really a big hurdle. Your business can

How would you compare the startup ecosystems of Macau and Hong Kong?

It is definitely easier for start-ups to establish their business in Hong Kong, especially those starting from zero. As I mentioned, it’s easier for new companies in Macau when they have already established close connections with casinos and the government. In terms of our field, the market in Hong Kong is bigger and companies are willing to put more money into promoting their business. Also, there are many marketing agencies in Hong Kong and they are more active in using social media.

What are the main business objectives for Coding Guys in 2017?

We have two internal and external objectives. For external objectives, we would like to develop an automatic selection of interesting news from the information we gather to attract the public. In the coming two months, we wish to provide free lucky draws and gifts every day from post activities. The next step is discounts. We would like to provide information to the public about any discounts and coupons out there and to post regularly on social media. For internal, we would like to analyse the gathered data that relates to the aforementioned things and to approach companies such as casinos. By providing the data we gather from social media [we can] allow these companies to draft their own business plans, to understand the market and their competitors.

What are the most important traits an entrepreneur should possess?

In my own experience, it is cheesy, but I think one has to stay objective and possess courage to try new things. Staying objective is important because I believe spectators see the game better than the players. Take us as an example. Often when we finish a project we think it’s satisfactory but it’s important to put ourselves in our clients’ shoes.

Nevertheless, one also cannot be too conventional. Because sometimes we might be worried about this and that. In short, one should stick to the plan - but also have the courage to work the best on it.

Business Daily Thursday, May 18 2017 5

Macau Congress and conventions

MICE jumps up 2016 rankings Sheyla Zandonai sheyla.zandonai@macaubusiness.com

M

acau ranked 72nd in the latest Annual Statistics and Rankings by the International Congress and Convention Association (ICCA) 2016, jumping

21 places compared to 2015, when the city first reached the global top hundred, according to a release by the Macao Trade and Investment Promotion Institute (IPIM) yesterday.

The new position puts Macau above places such as Brisbane (Australia), Auckland (New Zealand), Busan and

Jeju (South Korea).

The city has also reached 17th position in the ICCA ranking for Asia Pacific 2016, up four places from a year earlier.

In addition, the association recognises 37 international meetings held in Macau last year, representing an increase of nine events from the 28 of 2015, while signalling the highest number of international meetings taking place in the city in a decade.

IPIM observed that Macau ‘is moving further towards the development

of the MICE industry, with the strategy [of] “Priority to Convention”.’

IPIM officially became an ICCA member in August 2012.

Currently, there are a total of seven ICCA members from government departments, hotels, professional conference organisers and conference service providers in the city.

ICCA was founded in 1963 and has a membership of more than 1,000 governmental organisations, exhibition related companies and convention centres based in more than a hundred countries.

Some 1,276 conferences were held in Macau in 2016, according to data from the Statistics and Census Service (DSEC).

Distribution by conference type - Corporate meetings: 693 (54.4%) - Organisation/Association meetings: 336 (26.3%) - Major conferences: 43 (3.4%) - Exhibitions: 55 (4.3%)

F&B

Bubbly a nightclub thing, says exporter Around 85 to 90 per cent of champagne drinking in China occurs in nightclubs, according to Bastien Mariani, Bollinger’s export area manager, as quoted by The Drinks Business.

Mariani opines that “customers in China in general don’t like champagne. They like to have champagne at parties, though. But they don’t like drinking champagne,” pointing out the Chinese market is the most challenging for the champagne house.

“The awareness of champagne is still very low. We have to educate before building the brand. I would say China is the most difficult market today, and hopefully in the coming months or years this is going to change,” he told the publication.

The group recently launched its 2007vintage of ‘La Grande Année’, currently available in the MSAR and neighbouring Hong Kong and Macau at Jebsen Fine Wines for HK$990 (US$127/MOP1,020).

6 Business Daily Thursday, May 18 2017

Macau Opinion

Ashley Sutherland-Winch* The art of education As the school year for most students is drawing to a close, many adults in Macau are heading back to school. The Statistics and Census Service (DSEC) released a survey this week revealing that vocational courses in Business and Administration saw the highest number of participants last year. Some 20,271 participants joined these courses during the year, making up 30.8 per cent of all participants in vocational training courses, followed by Computing and Language courses. DSEC noted that the increase in the number of participants, up 9.6 per cent to 65,751, was due to people taking advantage of the Continuing Education Development Plan last year, ‘the last year of the Plan’s second phase.’

It is not uncommon that during an economic downturn adults tend to reconsider their value in the workplace. The rapidly changing climate of social media alone in the business sector is enough to have anyone running back to the classroom or towards the nearest teenager that can explain all the new technology being thrown our way.

Of the total participants in vocational training courses, DSEC reported 39.4 per cent were Public Administration workers, while 15.3 per cent hailed from the gaming sector. Hotel employees comprised 12.9 per cent of participants, while Financial Intermediation, Restaurants, and Wholesale & Retail Trade staff made up 2.2 per cent, 1.8 per cent and 1.5 per cent, respectively.

Non-traditional students are returning to school across the globe in record numbers. Often juggling roles as caretakers, parents, spouses and full-time employees, they are ‘rich in life’ but perhaps not as up to date in business as they once were, or they want to learn new skills.

Non-traditional students are eager to increase earning ability, gain a competitive edge amongst colleagues, want to secure their future, and also want to set a good example for younger generations.

I am eager to see how the Macau education systems keep up with this vigour for continuing education and professional development. I am also hopeful that Macau universities and learning institutions will increase levels of academic programming for continuing education and add new programmes for trades that are not represented in town.

Macau must become more advanced in the fields of medicine and the arts. Too many residents travel away for medical procedures and we are just lacking academic programing in the dramatic and musical arts overall.

With the increase in interest to explore academia for adults, perhaps this will ignite education institutions to paint a new portrait or landscape to improve the art of education in Macau.

*Marketing and Public Relations Consultant and frequent contributor to this newspaper.

G2E Asia

The M word Developing entertainment and gaming for millennials and a more tech savvy crowd will be the greatest challenges for gaming operators and electronic game developers in the future

installed in Atlantic City properties last year.

“The average age of the players attracted to the machines is higher than you would expect and the appeal is just huge,” he added.

Age all but a number

interests besides gaming it becomes imperative for integrated resorts to offer a whole-family experience.

“More and more we’re seeing families with parents in their thirties coming. We need to provide more services for them such as childcare, playroom, or theme park-type attractions,” the Sands China President stated.

For the CEO of gaming for MGM China the sector should attempt to study types of gaming that would be more attractive to millennials, adding that operators would be “remiss” to ignore areas like e-sports, skill-based gaming, peer-to-peer gaming and how to incorporate it in their properties.

“The explosion of e-sports has just been mind boggling. The numbers are just huge and we have to develop, in conjunction with the manufacturers, the facilities for some of those games,” said Mr. Shigley.

The CEO cited the example of the U.S. state of New Jersey approving skill-based gaming machines to be

For the Chief Executive Officer of electronic game developer company IGT International, Walter Bugno, the main issue is not so much demographics as new technology trends.

“Technology is operating a change in how people engage. The concept of socialising through games versus playing by yourself is creating a different model we’re trying to explore.

You just need to see the thousands of people that go to e-sport stadiums in South Korea to watch other people play games,” Mr. Bugno said.

For the IGT International CEO, more important than targeting a specific age group is to create entertainment experiences that can attract gamers from all age groups.

This opinion was shared by Mitchell Bowen, Managing Director for Australia, New Zealand and International of Aristocrat Technologies, who considered that rather than focusing on “age or gender” the main focus should be on the content provided.

“Gaming operators have the bricks and mortar locations where gamers already go, we just need to provide them with as many different experiences as possible across the floor despite their age,” Mr. Bowen said.

No more ferries, no more honey

“Since the number of operators and routes in the new terminal will remain the same for the time being, probably there won’t be any immediate upsurge in the number of passengers using the terminal.

However, with more improved facilities and more Cotai casino openings the number of routes will increase,” Mr. Wong concluded.

The new Pac On Ferry Terminal opening ceremony is to take place today, after 12 years in development, with a capacity to receive 400,000 people per day whilst maintaining the same companies - Turbo Jet, Cotai Water Jet and Yuet Tung - which operated ferries in the previous temporary terminal.

No talk of Legionnaires

allowed to comment on the issue by his media relations team.

A recent investigation of the property by the Health Bureau revealed that of 78 water samples collected from The

Parisian Macao water taps from hotel rooms, the washroom in the lobby, and shower room at the pool, ten contained levels of Legionnaires bacteria that exceeded safe limits.

Nelson Moura nelson.moura@macaubusinessdaily.com

G

aming operators and electronic gaming manufacturers should not ignore the millennial and tech savvy crowd, by developing gaming and entertainment that caters to their specific needs, sector authorities said yesterday at G2E Asia.

“I believe millennials are a group we should give great attention to. It’s a group connected to the emerging younger, more wealthy middle class in China, who wants to travel with their family,” the President of Sands China Ltd, Wilfred Wong, stated in the panel discussion entitled ‘Content and Amenities for the Mass Market’.

The roundtable also included the Chief Operating Officer of Gaming at MGM China Holdings, Ltd., John Shigley, and three representatives from the electronic gaming industry.

According to Mr. Wong, as millennials now start to constitute families that travel together and have other

The opening of the new Pac On Ferry Terminal is not likely to have an immediate impact upon Cotai visitation but will likely have a long term impact as the number of routes is upgraded, Sands China Ltd. President Wilfred Wong told Business Daily.

When requested to comment upon the progress of the handling of the Legionnaires bacteria outbreak at The Parisian Macao, Mr. Wong was not

Business Daily Thursday, May 18 2017 7

Macau G2E As of now around 40 junket operators have been audited by the DICJ

Giving it a break Director of the Gaming Inspection and Co-ordination Bureau says possibility to reduce current gaming tax is on the table as a way of supporting the sector in face of increased regional competition Nelson Moura nelson.moura@macaubusinessdaily.com

R

educing gaming taxes in the MSAR is one of the options being discussed to counter increased regional competition, the Gaming Inspection and Co-ordination Bureau (DICJ) Director Paulo Martins Chan said yesterday at G2E. In statements to the press following his keynote address the DICJ Director admitted “everything is being considered” to improve the sector’s performance but that there were no immediate plans to reduce

the current gross gaming revenue of 39 per cent tax.

“We’re collecting opinions from the sector so we can make a better decision in the future,” he added.

However, the DICJ Director shut down any possibility of opening up the online gaming market in the territory as a future step.

In his keynote address Mr. Chan noted that in the last year’s G2E edition the Macau gaming sector was facing “turbulence” and was “also facing competition from other gaming jurisdictions” but that the city had managed to achieve a “rebound” in gaming revenues and saw

the situation as a “transformation” opportunity.

Junkets under control

The DICJ head also said that so far the department has audited 40 junkets in the city, with the current number of junkets at a “balanced” number of “around 120”.

“Some are good, some need some improvement; we have told them to improve their accounting system,” Mr. Chan added.

When questioned on how the DICJ would manage a possible increase in the number of junket operators in Macau and in credit debt as the VIP sector rebounds, Mr. Chan responded that the department would currently seek to maintain the same number of junkets and the 53 per cent proportion they represent in gaming revenues.

“We think this is a good proportion and we want to keep it like this,” he added.

The DICJ head also commented he believed the new Union Pay identity requirements would not “have any impact” upon gaming revenues.

At the beginning of the month the

MSAR Government launched a new policy aimed at ensuring the identity of Mainland Chinese using UnionPay cards corresponds with the owner when withdrawing money from the city’s ATMs as a way of preventing money laundering practices.

According to the CEO, a successful immersive entertainment experience can considerably increase the levels of visitation in its properties but its theme and concept has to be carefully considered.

As a positive example he cited Universal Studios’ Harry Potter-themed park The Wizarding World of Harry Potter, which managed to increase the company’s revenue by almost 109 per cent between 2010 to 2015 to reach US$3.34 billion.

On the other hand, he mentioned that the Star Trek Experience project,

a theme park that opened at gaming property Las Vegas Hilton in 1998, closed after 10 years due to its inability to attract gamblers to the property.

“At the moment, no property in Las Vegas has attempted an innovative immersing experience joined with an Integrated Resort. The first one to attempt it will have to be courageous. However, if it starts gaining traction, it will lead to an arms race between operators to develop more similar attractions,” Mr. Stanton concluded.

G2E

Immersing the gamer Immersive entertainment experiences and theme parks can be a successful complement to modern Integrated Resorts by attracting younger, more diverse types of consumer Nelson Moura nelson.moura@macaubusinessdaily.com

Immersive entertainment experiences such as theme parks can be a “complement” and not a “distraction” for the gaming experience in local Integrated Resorts, the CEO of Mars World Enterprises, Inc., Lewis Stanton, told Business Daily.

For Mr. Stanton the traditional notion that theme parks and casinos are completely separate industries was true in the past but not anymore, and if integrated resorts manage to include technologically advanced entertainment experiences they will attract more people to their gaming areas.

“Chinese consumers are more tech savvy than consumers in Europe or the United States but Integrated Resorts there are adapting. And if the Macau [Integrated Resort market] doesn’t change it will end up shrinking,” Mr. Stanton added.

The statements were made after Mr. Stanton’s presentation yesterday entitled ‘Future Focus: The Next Generation of Integrated Resorts’ at the Global Gaming Expo (G2E) Asia.

Different from the rest

According to the Mars World CEO, theme-based Integrated Resorts could transform a location-based entertainment facility with a general theme to a “highly engaging,

authentic experience where the visitor is part of the action”.

“I guarantee you if you go to The Venetian canals you won’t say to yourself ‘well I don’t need to go to Venice now this is how it looks’. This is a theme-based location but it is not immersive,” he said.

The businessman is currently part of a company that is developing Mars World, a US$2 billion (MOP16 billion) theme park project in Las Vegas that will involve creating a futuristic city simulated to be on Mars in what Mr. Stanton described as the “largest dome in the world”.

“Visitors will be able to look at a Martian sky and have other simulated experiences in what will essentially be an Integrated Resort with a casino,” he added.

According to Mr. Stanton, the company has reached an agreement with a country outside the Chinese city of Shanghai to develop a similar property without the gaming aspect.

The CEO believes offering this complementary experience is something more appealing to the millennial market - customers born post-1980’s - that tends to give more importance to experiences over material possessions.

“This is a very important market for casinos. In 2015, of the 43 million that visited Las Vegas, 34 per cent were millennials, 24 per cent more than in the previous year,” Mr. Stanton said.

8 Business Daily Thursday, May 18 2017

Greater china Debt

Beijing gives markets break as deleverage fever begins to ease China’s embattled investors may be finally catching a break

A

fter spearheading a deleveraging campaign that wiped some US$500 billion from local stocks and debt, the central bank boosted cash injections this week and provided more seven-day funds, the cheapest form of financing it offers. A quarterly report from the People’s Bank of China late Friday signalled that officials see little need to drive interbank rates any higher, and they’ve refrained from increasing borrowing costs since mid-March.

Markets are responding.

The yield on benchmark 10-year bonds is down seven basis points from a May 10 high, and the Shanghai Composite Index rebounded 2 per cent in the last four days. While support from President Xi Jinping means there’s little chance that the campaign to reduce financial-system risk will disappear, a softer approach is

welcome news for investors, especially amid signs that the economy is losing traction.

“The PBOC doesn’t want to squeeze the market and banks too much,” said Becky Liu, Hong Kong-based head of China macro strategy at Standard Chartered Plc. “The PBOC wants to carefully take care of liquidity, offering amounts that are just right, so the deleverage campaign could continue.”

China’s central bank started to boost the cost of its money-market loans in the third quarter of last year, after the previous loosening cycle pushed benchmark interest rates to record lows. It resumed the use of 14- and 28-day reverse repos in August -- to shift focus to longer tenor, more expensive cash -- and raised their costs by 10 basis points each in February and March. The PBOC refrained from offering 28-day funds in open-market operations Tuesday and yesterday

-- the first time it has avoided using the tool in six months, apart from around the Lunar New Year holidays earlier this year.

“The central bank tried to raise the costs of funds injected into the financial system to achieve the goal of deleverage, and funding costs have surged,” said Li Liuyang, a Shanghai-based analyst at China Merchants Bank Co. “It’s less necessary now to provide the funds of longer terms.”

The deleveraging efforts have hurt the nation’s stocks

and bonds, with the Shanghai Composite tumbling the most this year in April and the benchmark 10-year bond yield advancing almost 100 basis points since August to a 25-month high last week.

The economy is beginning to feel the stress as well, with data for manufacturing and factory gate inflation missing estimates for April.

The PBOC said in its May 12 policy report that it will mainly use the seven-day reverse repos in the daily operations, and that it will balance the efforts between

deleveraging and ensuring liquidity supply. The monetary authority injected a net RMB170 billion (US$24.7 billion) into the financial system on Tuesday, the most in four months.

The comments show that the authorities want to slow the pace of monetary tightening while enhancing policy implementation to achieve the goal of reducing leverage in an orderly way, Citic Securities Co. analysts led

by Beijing-based Ming Ming wrote in a research note on May 15. The authorities won’t loosen so much as to fuel asset bubbles and they won’t tighten so quickly that it will spur systemic risks, they said.

“The PBOC is aware that using multiple monetary tools confuses expectation and intensifies price volatility,” said George Wu, chief economist at Huarong Securities Co. in Beijing who worked as a monetary policy official at the central bank for 12 years. The PBOC is trying to streamline its toolbox to ease market volatility, he added. Bloomberg News

Markets

Bond link to spur foreign inflows through Hong Kong The move is the latest step in China’s efforts to open its capital markets and integrate into the global financial system China’s government increased access to its bond market through Hong Kong, opening another path for foreign investors after the central bank stemmed record capital outflows.

Authorities are seeking to counter outflows and win inclusion in global bond indexes. Foreign holdings of Chinese onshore notes rose to RMB830 billion (US$120 billion) in March, from RMB815 billion in February, according to central bank data.

The bond connect will be the third trading link between mainland markets and the former British colony, after the start of two cross-border systems connecting stock exchanges.

“Bond connect will bring new blood into China’s bond market,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. “Given the high onshore yields, foreign investors may have strong demand if yuan is stable.”

The average yield on China’s AAA rated corporate bonds due in five years has jumped 106 basis points this year to 5.01 per cent, around the highest since 2014.

The People’s Bank of China and Hong Kong Monetary Authority (HKMA) said Tuesday that the bond

connect system would be one-way at its start, with flows only going northbound from Hong Kong to the mainland. There will be no daily quota, and the regulators didn’t provide a date for when trading would begin.

“Given the high onshore yields, foreign investors may have strong demand if yuan is stable” Liu Dongliang, a senior analyst at China Merchants Bank

Authorities in Hong Kong and the mainland will sign a memorandum of understanding to coordinate supervision, the statement said. In a separate statement, the HKMA said the scope of eligible investors would include overseas central banks, sovereign wealth funds, international financial companies, and medium- to

long-term institutional investors.

“Bond connect will facilitate investors’ participation in the bond markets, improve the connectivity between market infrastructures and promote the healthy development of the bond markets, thereby enhancing Hong Kong’s status as an international financial center and the global offshore renminbi business hub,” Paul Chan, Hong Kong’s financial secretary said in another statement.

Northbound first

The announcement follows the start of two equity channels between Hong Kong’s stock exchange and bourses in Shanghai and Shenzhen. The Shenzhen-Hong Kong link opened in December, two years after the start of the system with Shanghai. More than 1,400 mainland stocks are now available for offshore investors to trade via Hong Kong. Unlike the initial plans for bond connect, the equity programs allow mainland investors

southbound access to Hong Kong securities.

“Now that the interbank bond market is already open, it’s much easier to open the northbound first, whereas there are more infrastructure considerations before southbound can be rolled out,” said Sun Binbin, an analyst at Tianfeng Securities Co. The bond connect is another step in Hong Kong Exchanges & Clearing Ltd. Chief Executive Officer Charles Li’s plan to enhance his firm’s role as a conduit for global investors seeking access to Chinese securities. Li previously said that the program would be followed by further links, including ones for commodities, exchange-traded funds and initial public offerings.

“The HKMA will work closely with PBOC and other relevant parties to finalize the arrangements and roll out bond connect as soon as possible,” said Norman Chan, chief executive of HKMA. Bloomberg News

Business Daily Thursday, May 18 2017 9

Greater China Gauge

Goldman builds Mainland financial-stress index - and it’s risen The analysts incorporated measures from the banking sector, interbank lending and the bond, stock and foreign-exchange markets Christopher Anstey

With China’s leadership focused anew on curbing the economy’s leverage, Goldman Sachs Group Inc. analysts are rolling out a new gauge of stress in the country’s financial markets.

With corporate bond sales being cancelled, stocks sliding and government debt yields climbing in recent months, it’s no surprise that the measure shows an increase in strain.

But the financial-stress index, or FSI, has dropped from the recent high in late 2016 and early 2017, and might not necessarily translate to weakness in the economy, Goldman analysis showed.

“We find that an increase in financial stress hurts economic growth, but only to the extent that broader financial conditions tighten as a result,” economists including Hong Kong-based Zhennan Li wrote in a note dated May 16. “Growth will not necessarily be affected significantly if a sharp increase in financial stress is followed by a quick reversal.”

Some of the metrics underlying

the index have short histories, so Goldman Sachs built both an extended-history measure with the ingredients that have longer histories, and a “full” version, as noted in the chart above. A Z-score is a normalized measure based on standard deviation, which gauges moves compared with a longer-term average.

The analysts incorporated measures from the banking sector, interbank lending and the bond, stock and foreign-exchange markets to build the FSI, which is distinct from their existing financial conditions index. Goldman’s FCI has shown some tightening in financial conditions recently, thanks in part to a slowing in money-supply growth.

Stress levels remain well below highs reached during the 2008 global credit crisis and more recent turmoil, such as that triggered by the surprise August 2015 yuan devaluation, the new Goldman index indicates. That may help explain why China’s deleveraging initiative has so far stirred little concern among foreign investors.

China’s central bank has boosted

cash injections this week, in a sign that policy makers want to calibrate their deleveraging efforts to avoid the kind of market volatility seen in 2015 or 2013.

With regard to the banking sector, Goldman Sachs used measures of lenders’ stocks and bonds in the FSI. “Overall stress in the banking sector is not high in the long-term context, though has increased since end-2016,” the analysts wrote. As for measures of interbank lending, such as the gap between the three-month Shanghai interbank offered rate and three-month government bills, these indicators have shown sharp jumps since October.

‘Stress levels remain well below highs reached during the 2008 global credit crisis and more recent turmoil’ In taking the temperature of the bond-market, the analysts used items including the swings in 10-year Chinese government bond yields. For stocks, margin finance outstanding along with fluctuations in the overall equity index were picked -- and showed less stress than other components.

Most of the inputs on the foreign-exchange front “are closely related to capital outflow pressure,” the analysts wrote. Since the 2015 devaluation trauma, “financial stress in the market has been relatively high, though the stress has decreased in recent months,” the report showed.

Bloomberg News

Property

Hong Kong sells car park to developer for record US$3 billion Office space in Central is the world’s most expensive Moxy Ying

Henderson Land Development Co. outbid eight other developers and will pay a record HK$23.3 billion (US$3 billion) for the first commercial land to be sold by Hong Kong’s government in the Central district since 1996.

The Hong Kong company’s shares fell the most in the Hang Seng Properties Index yesterday, sliding as much as 2.9 per cent.

Henderson Land beat local rivals including units of Cheung Kong Property Holdings Ltd. and Wharf Holdings Ltd., the Lands Department said on Tuesday. The firm will build an office tower on the site.

The record price for the property, currently used as a car park, underscores strong demand for office space in Central. Since MTR Corp. sold a waterfront site for the landmark International Finance Centre in 1996, no new supply has come on stream. The area’s vacancy rate was only about 1.5 per cent in the first quarter of this year, according to CBRE Group Inc. “The price surprises on the high side,” said Alfred Lau, an analyst at Bocom International Holdings Co. “However, the market may not share such a bullish outlook,” Lau said, adding that Henderson Land should

consider introducing a partner to share the risk.

Office space in Central is the world’s most expensive, according to a CBRE survey released in March, which ranked the rents ahead of those in Beijing districts, Hong Kong’s West Kowloon, London’s West End, midtown Manhattan and Tokyo.

The price per square foot for the deal is about HK$50,000, according to Bloomberg calculations based on a maximum gross floor area of 465,000 square feet. That compares with: HK$36,200 per square foot when China Evergrande Group paid a record for a commercial building in 2015 HK$39,700 per square foot in March for units in 9 Queen’s Road Central that are the city’s most expensive office space, according to the Apple Daily newspaper Only one of the nine bidders was a mainland company, indicating a cooling of interest from Chinese

buyers after three recent residential land auctions where at least a third of the bids were from mainland businesses. Previously, Chinese bidders such as HNA Group Co. have snapped up Hong Kong sites.

The car park building is in the heart of Central, near the iconic Bank of China skyscraper and billionaire Li Ka-shing’s Cheung Kong Center. Last year, Colliers International estimated that the property was worth HK$15.8 billion to HK$17 billion.

Henderson Land will finance the acquisition through its internal resources and bank funding, and plans to complete an office building, with some retail facilities, by 2022, the company said in a statement.

Aggressive bidding for the commercial site echoes brisk developer demand for residential plots amid record home prices in the world’s least affordable housing market.

Bloomberg News

In Brief Energy

Power capacity near record China’s installed power capacity rose 7.6 per cent to the second-highest on record in April, with coal accounting for nearly two-thirds of the total, data showed yesterday, even as the country has pledged to curb excess and shift to cleaner power. Capacity rose to 1,613.25 gigawatts (GW) by the end of April, just shy of December’s record 1,645 GW, National Energy Administration (NEA) data showed, in line with China’s expansion to keep pace with its industrial demand. That was up 7.6 per cent from a year earlier and 0.3 per cent from March.

Index

Shares in Meitu dive after MSCI reverses inclusion Shares of Meitu Inc fell as much as 10 per cent yesterday after index provider MSCI reversed its decision to include the Chinese selfie app maker in the MSCI China Index, without giving a reason. MSCI said in a statement on its website that Meitu will not be added to its indexes.

On Tuesday, MSCI had said it would add Meitu to its China index from June 1 as part of its quarterly review. “We did not contact MSCI and have no comment on its internal decision and action. In future, we are committed to developing business operations to create long-term values for shareholders and gain recognition from the market,” Meitu said in an emailed statement.

Auto industry

VW’s Mainland JV to recall nearly 600,000 vehicles Volkswagen AG’s joint venture in China, FAWVolkswagen Automobile Co Ltd, will recall 577,590 Golf and Sagitar cars because of a headlight fuse defect that may lead to safety risks, the quality watchdog said yesterday. The recall covers 416,364 Golfs produced between September 2009 and May 2014, and 161,226 Sagitars produced between July 2010 and March 2012, said the General Administration of Quality Supervision, Inspection and Quarantine. The watchdog said the defects could cause headlight failure.

FAW-Volkswagen, majority owned by state-owned China FAW Group Corp, could not be immediately reached for comment.

Volkswagen China declined to comment.

Commodities

IRC may reopen Russian iron ore mine Commodity company IRC Ltd yesterday said it was considering restarting its 1.1-million tonnes per year iron ore mine in the far east of Russia, the latest sign of revival in a sector shaking a years-long downturn.

“Following the positive price movements in 2017 and the recent stabilisation in the bulk commodity market, the board is considering restarting Kuranakh, including options of potential cooperation with other parties,” the Hong Kong-listed company said in a statement.

10 Business Daily Thursday, May 18 2017

Greater China M&A

Shanghai Pharma may submit rival bid for Germany’s Stada The company said in March it was in early-stage contact with several U.S. and European drug firms Adam Jourdan

S

hanghai Pharmaceutical Holding Co Ltd said it may bid for Stada Arzneimittel AG - a move that would pit it against buyout firms Bain and Cinven which have made a joint offer of nearly US$6 billion for the German generics drugmakers.

Key Points Bain and Cinven have bid 5.3 bln euros (US$5.9 bln) for Stada Shanghai Pharma in talks with Advent re possible bid - Bloomberg Shanghai Pharma says reported bid price of 70 euros unrealistic

The Chinese drugmakers said in a filing that it had recently discussed the matter with ‘a couple of financial investors’ but added that it had not made a concrete offer and there were still many uncertainties.

Bloomberg reported this week that Shanghai Pharma, along with

investor Advent International, was discussing a bid of about 70 euros a share, which would top Bain and Cinven’s offer in April of 65.28 euros per share and a dividend of 0.72 euros per Stada share.

But Shanghai Pharma, which has a market value of around 63 billion yuan (US$9.2 billion), said the reported offer price was “inconsistent

with reality”.

Stada said on Tuesday it had not been notified of any rival offer.

Bain and Cinven’s 5.3 billion euro offer had beat a rival consortium of Advent and Permira, and had carried a premium of 49 per cent over Stada’s Dec. 9 share price, before the first report of a takeover approach.

Shanghai Pharma said in March it was in early-stage contact with several U.S. and European drug firms.

Founded in 1895 in Dresden as a pharmacists’ cooperative, Stada’s generic drug business has come under price pressure as medical insurers in Germany, its largest market, are seeking bulk procurement deals at low prices. Reuters

Food

Top pig farmer pushes into meat processing as pork prices lose sizzle When prices for hogs fall, slaughterhouses and processors typically benefit Dominique Patton

China’s top pig farmer Guangdong Wen’s Foodstuff Group is pushing into processing meat, broadening its operations to limit the impact from tougher competition and falling pork prices in the world’s biggest market for the food.

Hog and pork markets have tumbled in recent months as suppliers rushed to cash-in on last year’s record prices for the meat, a staple form of protein at the heart of Chinese cuisine.

That is driving Wen’s to branch out into livestock slaughtering and meat processing, Luo Xufang, a vice president at the company, said late on Tuesday.

“Large-scale companies are increasing, so Wen’s has to consider the issue of competition. In the second-half of this year, we will push ahead into the slaughter and processing industry,” Luo said in a presentation to an industry conference in China, without giving details.

When prices for hogs fall, slaughterhouses and processors typically benefit, boosting the incentive to

become more integrated, said Luo. Live hog prices, currently around RMB15 (US$2.18) per kg, are expected to fall further after dropping from a record RMB22 per kg last June.

But tapping the potentially lucrative processing market could also be risky, as rivals, including WH Group Ltd , have ramped up investment in processing in recent years, leading to overcapacity there too.

Key Points Pig farmer Wen’s to move into meat processing Looking to dampen impact from competition, falling hog prices Also wants to boost number of retail outlets

Meanwhile, the company also plans to build more than 5,000 retail outlets in southern China to sell Wen’s-branded food products, a move that fulfils government policy to focus more on consumption rather

than simply production, said Luo. It was unclear how many such shops are already operating and what the timeframe for this would be.

China’s 10 largest pig farming firms accounted for only 5.8 per cent of hogs sent to slaughter last year, but that was up by 2.8 per centage points on the previous year, said Zhang Guangan, director of the China Swine Industry Association.

Their share is set to keep growing, with groups like state-owned Cofco Corp and Wen’s building huge new farms in less developed parts of the country.

Wen’s, which produced 17 million

pigs last year to rival U.S. company Smithfield, is aiming to lift output to 27.5 million hogs in two years.

But that comes as China’s meat industry grapples with stagnating demand-growth and changing tastes, with many younger people willing to splash cash on Western-style meats like bacon and burgers.

Luo said that pork demand had been lacklustre.

“We haven’t done a very detailed study, but from our sales situation, we get the impression that consumption has dropped,” he said, referring to volumes sold to slaughterhouses.

Reuters

Business Daily Thursday, May 18 2017 11

Asia Official data

Australia’s weak wage growth, consumer confidence threaten spending Annual wage growth held at 1.9 per cent, the lowest on record Swati Pandey

A

ustralian wages were rising at their slowest pace on record, official data released yesterday showed, subduing both inflation and spending at a point when household debt has climbed to an all-time peak.

And worries over worsening family finances following the federal budget announced last week contributed to weakening consumer sentiment, according to an independent survey by the Melbourne Institute and Westpac Bank.

It will all make disappointing reading for the Reserve Bank of Australia (RBA) which has held interest rates at a record-low 1.50 per cent for a ninth straight month, hoping for a pick-up in the labour market as well as in wages and inflation.

The wage price index rose just 0.5 per cent in the January-March quarter. Quarterly wage growth has been stuck in a range of 0.4-0.6 per cent since June 2014.

Annual wage growth held at 1.9 per cent, the lowest on record. That was less than half the wage growth rate workers enjoyed a decade ago when a mining boom boosted pay

across Australia.

“The rise in wages hasn’t even been enough to cover the rise in prices, let alone allow households to consume more,” said Paul Dales, chief economist at Capital Economics.

“This goes a long way to explaining the low level of consumer confidence.”

The consumer sentiment index dropped 1.1 per cent in May to 98, its lowest since January and below a long-run average of 101.2.

It was the second consecutive month that the index has fallen, taking it further away from the 100 level where the number of pessimists matches optimists.

Key Points Q1 wage price index up 0.5 pct, in-line with forecasts Annual wage growth stood unchanged at 1.9 pct Annual pay hike in private sector 1.8 pct; 2.4 pct in public Consumer confidence falters 1.1 pct to 98 in May Inflation edged over 2 per cent last quarter for the first time since 2014, although key measures of core inflation stayed stubbornly below the RBA’s 2 to 3 per cent target band.

Economists pointed to elevated

levels of underemployment - which captures employees who want to work more hours - as one of the key reasons why wages were not gathering pace.

Jobs data for April is due today.

There were tentative signs of a turnaround in March, when 60,900 full time jobs were added, and other leading indicators of the economy have also generally been more encouraging.

“One positive in today’s (consumer confidence) data is a 3.4 per cent drop in the unemployment expectations index,” said Kristina Clifton, economist at Commonwealth Bank of Australia.

“Nonetheless job security fears remain reasonably high. This is not

surprising given the elevated underemployment rate and fairly modest jobs growth.”

The RBA sees wages rising gradually in line with an improvement in the jobs market and the end of the drag on growth from a slump in mining investment.

Yet there was scant sign of a pickup in the latest wages report. Not a single industry from manufacturing to healthcare raised wages more than 2.3 per cent annually. Workers in mining, formerly Australia’s star sector, saw annual wage increases of 0.6 per cent.

Wage hikes were better in the public sector at 2.4 per cent compared with 1.8 per cent in the private sector. Reuters

Trade

Singapore non-oil exports fall after 5 months of growth Exports to China showed annual growth of 10.9 per cent in April Singapore’s April non-oil domestic exports unexpectedly fell after five consecutive months of growth, due to a downward swing in pharmaceutical exports.

Singapore’s exports fell 0.7 per cent from a year earlier, data from trade agency International Enterprise Singapore (IE Singapore) showed yesterday.

Non-oil domestic exports also fell month-on-month, dropping by a seasonally adjusted 9.0 per cent in April from March.

A Reuters poll had forecast April exports would expand 12.4 per cent from a year earlier and shrink 4.1 per cent from March.

Pharmaceutical exports fell sharply at 39.9 per cent on a year-on-year basis, after growing 17.7 per cent in March. But analysts say that the decline is a “one-off” that would moderate in the months to come as the sector is volatile.

“The pharmaceutical sector is liable to a two-way swing,” said Mizuho senior economist, Vishnu Varathan.

Electronics to moderate

Singapore’s electronic exports in April grew 4.8 per cent from a year ago, slowing from 5.2 per cent annual growth in March.

The city-state’s electronics sector has been key in driving the stellar growth in exports over the last few months, helping the trade-dependent economy avert a recession.

Singapore has been among a number of export-reliant Asian economies to benefit from a general uptick in global demand in recent months, enjoying strong sales of tech products.

Doubts over exports to China

Singapore’s exports to China showed annual growth of 10.9 per cent in April, significantly slower that the 45.5 per cent posted in March. Analysts expected that trend to hurt Singapore’s export performance in the second quarter.

“Given that most of the pickup

in Q1 is due to a bounce of China demand, the deceleration of data from China points to a weaker Q2 NODX performance versus Q1,” said Trinh Nguyen, senior economist for Natixis in Hong Kong adding that she doesn’t expect the MAS to tighten policy soon.

Singapore’s economy has struggled over the past two years. In the first quarter of this year, it shrank 1.9 per cent from the previous three months and grew 2.5 per cent from a year earlier.

The country’s central bank has held its policy steady and warned of risks to the global outlook, even with recent improvements in exports and broad economic growth momentum. Reuters

12 Business Daily Thursday, May 18 2017

Asia Prosecution

Indonesia gives tax office access to accounts at financial institutions The regulation calls on banks, insurance companies and other financial institutions to report client information as required under international standards Gayatri Suroyo and Hidayat Setiaji

I

ndonesian President Joko Widodo has signed a new regulation giving tax authorities access to information on accounts held at financial institutions, including banks.

The regulation was signed last week as part of Indonesia’s pledge to join the Automatic Exchange of Information (AEOI) initiative led by the Organization for Economic Cooperation and Development, a rich-country think-tank.

The government considered it “very urgent” for the tax office to get wider access to financial data, the regulation said. Failure to meet

AEOI commitments could lead to significant losses and disrupt stability in Southeast Asia’s largest economy, it said.

The president can issue a government regulation in times of emergency. It becomes effective immediately, although parliament must debate and vote on the regulation during its next sitting, which starts on Thursday, to turn it into law. If parliament votes it down, the regulation is repealed.

The regulation calls on banks, insurance companies and other financial institutions to report client information - including cash balances and financial gains from assets - as required under international standards, and for the tax office to share

the information with authorities in other countries.

The tax office can also ask financial institutions to share information for tax collection purposes.

Previously, under laws protecting banks and other financial institutions, the tax office had to file a request to the Financial Services Authority (OJK) to get access to a taxpayer’s accounts, and only for the purpose of an investigation.

The process could take more than six months and in some cases allow people to cover up possible evidence of tax avoidance, tax officers have said.

Bahana Sekuritas said there was a risk the move “could hamper the economy” if people pull money out of financial firms, although Head of Research Harry Su said tax reform would benefit Indonesia over the longer term.

Bank Central Asia (BCA) Chief

Economist David Sumual said the new regulation would probably not have a big impact on banking clients.

“If this opening up only happens in Indonesia, then we are at risk. But because this is affecting many other countries, I don’t think it will affect us,” said Achmad Baiquni, President Director of Bank Negara Indonesia, adding that his bank is preparing to educate clients about the change.

The new regulation follows an amnesty campaign encouraging taxpayers to declare hidden wealth. Almost 1 million taxpayers joined the programme, declaring 4,881 trillion rupiah (US$366.8 billion) of previously concealed assets.

Key Points Tax office to get account data from banks, insurances, etc Regulation effective immediately, but must be passed by parliament Wider access for tax office given after amnesty “We were not ready before the tax amnesty. But now that we’ve had the amnesty, we are,” BCA’s Sumual said.

Widodo’s flagship nine-month amnesty ended in March. It generated 135 trillion rupiah (US$10.16 billion) of additional tax revenue to the government, equivalent to 1.08 per cent of GDP. The largest sums amnesty participants had concealed offshore were held in Singapore, the British Virgin Islands, Hong Kong and the Cayman Islands. All of those jurisdictions are signatories to the AEOI, along with about 100 others. Reuters

Industry data

Japan’s March core machinery orders disappoint The Cabinet Office maintained its assessment of the indicator, saying the pick-up in machinery orders was stalling Minami Funakoshi

Japan’s core machinery orders fell short of expectations in March from the previous month and companies forecast a decline in investment over April-June, underscoring the fragile nature of the country’s export-driven economic recovery.

But analysts say the data, considered as highly volatile, does not signal any major change in a moderate but broad-based uptrend in capital expenditure in a recovering economy.

Core orders, regarded as a leading indicator of capital spending in the coming six to nine months, rose 1.4 per cent in March from the previous month, Cabinet Office data showed yesterday. The outcome marked a second straight rising month but undershot the median market forecast for a 2.1 per cent gain.

Companies surveyed by the Cabinet Office forecast that core orders, which exclude those for ships and from electric power utilities, would fall 5.9 per cent in the April-June period following a 1.4 per cent drop in the first quarter.

The weak outlook suggests some

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companies may be turning cautious on investing because of uncertainty about the possible impact of U.S. President Donald Trump’s protectionist policies on export-reliant Japan.

“Uncertainty in the global economy, Trump’s protectionist policies and the political situation in Europe all came together to produce a weak

result,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Machinery export orders fell 2.8 per cent in March to mark a second consecutive declining month, reflecting weak overseas demand for industrial, electronic and communications equipment.

But many analysts, including Minami, warned against reading too much into the temporary weakness in orders, pointing to prospects of recovery in global demand and business morale.

“The March result was weaker than

expected but it’s not that bad,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“The global economy is recovering, business sentiment is improving...I don’t think the underlying trend has changed.”

The Cabinet Office maintained its assessment of the indicator, saying the pick-up in machinery orders was stalling.

Japan’s economy has shown signs of life with exports and factory output benefiting from a pick-up in global demand.

Key Points March core orders +1.4 pct m/m vs forecast +2.1 pct Core orders seen -5.9 pct in April-June March orders -0.7 pct yr/yr vs forecast +0.6 pct Capital spending seen crucial for economic growth GDP due at 2350 GMT May 17 Policymakers hope that companies will use some of their profits to boost wages and capital expenditure, helping to sustain a moderate recovery.

Data due out today is expected to show the economy expanded for a fifth straight quarter in January-March, according to a Reuters poll. Reuters

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Business Daily Thursday, May 18 2017 13

Asia Lenders

In Brief

Non-bank finance firms cash in on Indian bad loan pain Criminal investigations into some loan defaults have made bankers extremely cautious of extending new credit Rajesh Kumar Singh

Indian banks’ struggles with bad loans over the past three years have opened an opportunity to ramp up lending for so-called non-banking financial companies (NBFCs), which are not as strictly regulated as banks.

With their share of total credit rising, new players and new investors have piled into the NBFC market.

The latest such player is Incred.

Backed by Deutsche Bank’s former co-CEO Anshu Jain, it lends to individuals and small- and medium-sized enterprises (SMEs) including start-ups.

Saurabh Jhalaria, who heads Incred’s SME division, says the company aims to disburse US$234 million in new credit by next March. As much as 60 per cent would be lent to SMEs, he said.

“There is great demand for credit from small entrepreneurs, but supply is very limited,” Jhalaria told Reuters, referring to the reluctance to lend among state banks.

Public sector lenders led by State Bank of India and Punjab National Bank, which as a group account for two third of banking assets, are saddled with bulk of India’s US$150 billion in stressed loans.

Criminal investigations into some loan defaults have made bankers extremely cautious of extending new credit. The process of approving loans has become lengthier and requires lots of paperwork.

Banks are also reluctant to lend without matching collateral. In some cases, they even demand collateral twice the value of the loan.

As a result, bank credit to industry shrank by 1.9 per cent in the fiscal year that ended in March. In contrast, NBFCs have posted double-digit rates of lending growth.

A study by research firm Crisil shows NBFCs have doubled their market share in SME loans and wholesale finance in the past five years. The Indian unit of rating agency Standard and Poor’s expects their share in overall loans to rise by 3 per centage points to nearly 18 per cent over the next two years.

“There is a demand that is not being met by banks.

We are filling in that gap” Saurabh Jhalaria, head of Incred’s SME division Since its launch in February, Incred has lent nearly US$16 million to 1,000 borrowers. It offers loans to SMEs of up to 100 million rupees (US$1.56 million) and charges interest of between 13-19 per cent.

While the loans are costlier than those offered by banks, which charge around 12 per cent on average, they are processed more quickly and require little paperwork.

“Our target is ambitious but achievable,” said Jhalaria. “There is a demand that is not being met by banks.

We are filling in that gap.” Reuters

Ratings

S&P affirms Australia’s AAA, retains negative outlook The rating firm expects headline GDP growth to be around 2.3 per cent in 2017 Swati Pandey

S&P affirmed Australia’s coveted triple-A rating yesterday, citing low public debt and a “wealthy and resilient economy” although concerns remain about the government’s ability to return to a budget surplus.

“We believe that the potential for wage growth and inflation to remain low remains a downside risk to the government’s current projections” S&P report

The Australian government last week pledged to deliver a small surplus in 2020/21, ending more than a decade of deficits that have threatened its top-notch credit rating.

Both Moody’s and Fitch welcomed the government’s economic blueprint, adding the budget had no major impact on ratings.

Australia is one of only 10 nations in the world with a AAA credit rating

from the top three agencies. However, S&P retained its negative outlook.

“The substantial delay in fiscal repair, and the risk of further delay, raises our doubt over the ability of the Australian government to meet its fiscal objectives,” S&P said, adding: “We believe that the potential for wage growth and inflation to remain low remains a downside risk to the government’s current projections.”

S&P also saw risks in the booming housing market, mainly in Sydney and Melbourne where median property prices have nearly doubled since 2009. At the same time, bank credit to households has jumped to a record high of 175 per cent of gross domestic product (GDP).

S&P sees the credit-to-GDP ratio climbing to 188 per cent in 2020. “...Such rapid credit growth can lead to vulnerabilities with regard to financial, fiscal, and economic stability if the dynamic expansion experiences a sudden and unexpected slowdown,” it added.

Australia’s A$1.7 trillion economy has, in recent months, benefited from higher prices for iron ore, its top export earner. The economy grew at 2.4 per cent in 2016, extending a run of 101 quarters without a recession.

S&P expects headline GDP growth to be around 2.3 per cent in 2017 and accelerate to around its “potential growth rate” in the following years.

That is lower than the government’s budget forecast of 2.75 per cent in 2017/18 and strengthening to 3 per cent through to 2020/21. Reuters

South Korea

President taps chaebol reform activist as antitrust chief South Korea’s presidential office will name corporate reform activist Kim Sang-jo as the administration’s nominee to head the Korea Fair Trade Commission yesterday, South Korea’s Yonhap news agency reported. The 54-year-old Kim, nicknamed “chaebol sniper” for his shareholder activist campaign and calls for reforms at the top family-owned conglomerates, was an economic adviser for President Moon Jae-in during his election campaign.

Bank of Japan

Governor told PM will continue ultra-easy policy Bank of Japan Governor Haruhiko Kuroda said he told premier Shinzo Abe that the central bank will continue its ultra-easy monetary policy in a meeting held yesterday. “I told the prime minister that Japan’s economy is steadily recovering and will continue to grow above its potential,” Kuroda told reporters after the meeting. “Under these conditions, prices will rise. But inflation is still far from our (2 percent) target. I told the prime minister that we will continue with our monetary easing programme,” he said.

Inflation

Malaysia’s CPI rises below forecast Malaysian consumer prices in April were 4.4 percent higher than a year earlier, government data showed yesterday, due to rising transport and food costs.

Inflation was just below the 4.5 percent annual pace forecast in a Reuters poll, and was down from March’s 5.1 percent, the highest rate in eight years. Transport costs in April rose 16.7 percent year-on-year on higher fuel prices, data from the Statistics Department showed, while prices for food and non-alcoholic beverages increased 4.1 percent.

Malaysia’s central bank said the annual headline inflation rate was 4.3 percent in the first quarter of 2017.

Autos industry

Indonesia car sales rise in April Car sales in Indonesia rose 5.7 percent in April from a year earlier, data released by the automotive industry association showed yesterday, as quoted by PT Astra International Tbk, an Indonesia-based firm primarily engaged in the automobile business.

Automakers sold 89,588 vehicles in April, the data showed. However, on a monthly basis, car sales were down 12.5 percent from March. Car sales in March were revised to 102,336 units from previously reported 101,484 units, an 8.8 percent increase from a year earlier.

14 Business Daily Thursday, May 18 2017

International In Brief Portugal

IMF early refunds of €7.2Bn in 2018, 2019 The Portuguese government intends to repay the International Monetary Fund (IMF) €7.2 billion in 2018 and 2019, before the due date the budget support units said yesterday. In its monthly debt note, the experts who support parliament said the government wants to pay the IMF “€6.5 billion in 2018 and at least €700 million the year after”. Initially, before any early payments, the repayments that Portugal was scheduled to make to the IMF only began in 2019, when it would repay €2.5 billion, followed by €4.9 billion in 2020 and another €4.3 billion in 2021.

Trade

Tusk says EU wants safeguards against dumping by UK Any trade deal linking the EU and Britain after Brexit will require guarantees against “unfair competition” by the UK, EU Council President Donald Tusk said yesterday. With tensions high as next month’s Brexit talks approach, Britain has said it will fight back if the EU will not strike an acceptable exit deal. This has sparked fears in Brussels that London would attempt to undercut EU regulations after the divorce on a range of issues if talks turn sour. “The UK must be aware that any free trade agreement will have to ensure a level playing field and encompass safeguards against unfair competitive advantages,” Tusk said.

Bailout

No more austerity, Greeks demand, in nationwide strike Unemployment is running at close to one in four and there is a 48 per cent jobless rate among youth Renee Maltezou and George Georgiopoulos

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housands of Greeks walked off their jobs and marched through central Athens yesterday protesting against additional austerity measures being demanded by international lenders in exchange for disbursing scheduled bailout funds.

The strike was called by the country’s main public and private sector unions a day before Greece’s parliament is due to vote on reforms that would help unlock the funds from the 86-billion-euro bailout, the country’s third in seven years.

New austerity attached to the funds release include the 13th cut in pensions since 2010 and a reduction in tax-free allowances on income. They come after years of cuts that for a time threw the country into deep recession.

Unemployment is running at close to one in four and there is a 48 per cent jobless rates among the youth.

Pensioners, teachers, doctors and lawyers stopped work while public transport was disrupted throughout the capital Athens. At least 14,000 took to the streets in protest marches, according to initial police estimates.

Protesters held banners reading “No to austerity, yes to debt relief!” and “Bring back the conquered rights that you stole from us!” They chanted

“They talk about losses and gains and we talks about human lives”.

Some expressed anger at the coalition government of Prime Minister Alexis Tsipras, whose leftist Syriza party one election promising to stop the cuts.

“They told us they would end austerity and tear apart the bailouts,” said Paraskevi Tsouparopoulou, 62.

“Instead they brought us disaster.”

Greece has agreed to the further spending cuts to end a logjam in talks with its foreign lenders over its bailout progress.

Once the new measures are approved by Greek lawmakers -- as is expected -- euro zone finance ministers will then discuss the disbursement of the loans at the next scheduled Eurogroup meeting on May 22.

Athens needs the funds urgently to repay 7.5 billion euro (US$8.18 billion) in debt maturing in July.

Savings and relief

The new cuts a re designed to produce savings worth 2 per cent of gross domestic product and meet a target for a 3.5 per cent of gross domestic product primary surplus which excludes debt servicing costs.

If it outperforms those goals, it will activate a set of measures offsetting the impact of the additional austerity, including mainly lowering taxes.

Once approved, the Eurogroup

has said it will consider some form of debt relief for Greece, which is still struggling under a debt mount amounting to 179 per cent of gross domestic product.

When this may happen, however, is in contention between the lenders - the International Monetary Funds and the euro zone.

Greece has needed three multi-billion bailouts since 2010 and additional spending cuts are a contentious issue Tsipras’s leftist-led

Key Points Greeks walk off job over new austerity Parliament expected to pass measures May 18 Government ‘brought disaster’ say pensioners government, which now trails opponents in polls.

“We have been fooled. We believed in their promises,” said Nikos Moustakas, 71, a retired mechanic who worked for 38 years. “They have lost me as a voter,” he said.

Tsouparopoulou, the pensioner, was waiting in a queue for food handouts, a common feature in Greece where thousands have come to rely on charity. She held a bag with a loaf of bread, a packet of pasta and two eggs.

“Any other government would have at least given us a piece of bread.” Reuters

Reform

Saudi minister expects expansionary 2018 budget Saudi Arabia’s budget next year will be “expansionary but not significantly” and in line with plans to balance state finances by 2020, Finance Minister Mohammed Al-Jadaan said. “Where the expansion will come is from the efficiency,” Al-Jadaan said. The target for a balanced budget is central to the kingdom’s long-term plan to wean the economy off oil, which includes creating the world’s biggest sovereign wealth fund and privatizing some state assets. The Finance Ministry reported this month that the first-quarter deficit narrowed on higher oil revenue, boosting efforts to repair public finances.

Infrastructure

Expansion of Dubai’s airport delayed An expansion of Dubai’s Al Maktoum International Airport has been delayed by a year until 2018, the airport’s operator said yesterday. Currently Dubai’s second largest airport, it is expected to become the world’s largest airport when the expansion is completed, with the capacity to handle 26 million passengers a year.

Al Maktoum airport opened in 2013 and can currently handle about seven million passengers a year. Its expansion has been delayed due to the completion of construction and to allow time for trials and testing, a spokesman for Dubai Airports said.

IATA head

Wider laptops ban would cost airlines US$1 Billion De Juniac’s comments come as U.S. and European Union officials prepare to meet in Brussels to discuss American plans for widening of the ban on laptops, tablets and games consoles to trans-Atlantic flights Christopher Jasper, Guy Johnson and Matthew Miller

The widening of a U.S. ban on carrying electronic devices aboard aircraft to include flights from Europe would cost airlines in excess of US$1 billion, the head of the industry’s global lobby group said.

Extending the curbs, which currently apply only to some U.S.-bound services from the Middle East and North Africa, would obstruct travel and might not be the best way of countering the threat, International Air Transport Association Chief

Executive Officer Alexandre de Juniac said in an interview yesterday.

“It could impose an additional cost of more than US$1 billion on passengers, and it will disrupt business between the U.S. and Europe,” De Juniac told Bloomberg Television. “We are not sure that this ban is adapted to the threat. We don’t know what is the basis or intelligence that justifies this measure.”

IATA needs to be told more about U.S. concerns in order to contribute to developing a solution, he said, adding: “We can provide appropriate advice when it comes to security and protection measures for passengers.”

Steps such as the increased use of electronics and explosives scanners and spot checks on carry on luggage could be effective, he argued.

“What we have said to the U.S. and U.K. authorities and to the Europeans is, please, if you want to take this measure, work very closely with the industry.” IATA has written to the European Commission to express its views, and while there has been some U.S. consultation with airlines that has allowed the industry to at least express its concerns, more detail needs to be provided.

“What we have said to the U.S. and U.K. authorities and to the Europeans is, please, if you want to take this measure, work very closely with the industry” Alexandre de Juniac, International Air Transport Association Chief Executive Officer De Juniac’s comments come as U.S. and European Union officials prepare to meet in Brussels to discuss American plans for widening of the ban on laptops, tablets and games consoles to trans-Atlantic flights. The EU has no information on the reasons for the move, officials have said. Bloomberg News

Business Daily Thursday, May 18 2017 15

Opinion Business Wires

The Times of India The United Nations has revised downward India’s economic growth forecast for 2017 but predicted an increased 7.9 per cent GDP growth next year as it cautioned that stressed balance sheets in the banking sectors will prevent strong investment rebound in the near term. The UN World Economic Situation and Prospects as of mid- 2017 report, launched on Tuesday, said India is projected to achieve a 7.3 per cent growth in 2017, a downward revision from the 7.7 per cent forecast for the year made when the report was launched in January.

Chinese President Xi Jinping (C) speaks at a news conference at the end of the Belt and Road Forum in Beijing, China, 15 May 2017. Lusa

Bangkok Post Land prices in Bangkok central business district (CBD) are expected to continue rising despite the already pricey levels in the area. The average land prices in the CBD rose 6.4 per cent last year, with the highest price recorded at 1.91 million baht per square wah in 2015. Surachet Kongcheep, associate director for research at property consultant Colliers International Thailand, said land plots in locations along the skytrain route from Siam to Asok stations are getting scarcer, driving offering prices to over 2 million baht per sq w.

Viet Nam News The State Bank of Vietnam (SBV) recently permitted the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) to issue VNĐ20 trillion (US$893 million) worth of bonds in 2017.

BIDV’s targeted demography includes both domestic and foreign organisations and individuals. Credit organisations, their subsidiary companies and foreign bank branches are not allowed to buy these bonds on the primary market.

The yields will be decided by BIDV in accordance with market interest rates and the current set of bond yields regulations as dictated by the SBV.

Inquirer.net Finance Secretary Carlos G. Dominguez III yesterday reiterated that as mandated under the law, the government would implement mining rules and regulations, whether critics like it or not. Dominguez said that “those who have a beef with the country’s laws that allow mining should do themselves a favour by working on having them repealed or amended by the Congress rather than training their guns on those who believe it is part of their duty as civil servants to uphold the laws of the land.”

A new model for Chinese overseas investment

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wo Chinese initiatives – “One Belt, One Road” (OBOR) and “International Production Cooperation” – encapsulate President Xi Jinping’s views on overseas investment. Both slogans are supported by development approaches (the former in Eurasia, the latter globally) that signal China’s desire to forge a new model of globalization built on mutual cooperation.

Chinese enterprises are already taking these investment cues seriously. By 2020, China’s overseas assets are forecast to triple, to US$20 trillion, from US$6.4 trillion today. But moving quickly to invest in overseas projects, while appealing to many, carries great risks – and could mean high debt – if not managed properly. If Chinese companies, both state- and privately owned, are to benefit from the leadership’s new vision, they must learn from past failures, and adapt their priorities for the long term.

One key area where China is trying to refashion its outward investment strategy is in Latin America. In recent years, China has vigorously sought to recast its bilateral diplomatic and economic ties to the region. The publication in November 2016 of the second Sino-Latin American and Caribbean policy document (which followed Xi’s visit to Latin America the same month) has created a unique opportunity to deepen bilateral investment, by placing it in a more cooperative framework.

Previous approaches, often backed by risky loans that in some cases turned bad, hurt Chinese investors.

Thenewpolicyexplicitlyencourages Chinese enterprises to work with local businesses in sectors like logistics, electricity, and information systems, and it promotes interaction among business, community, and government leaders. Equally important, the policy also expands the availability of Chinese funding, credits, and insurance to investors.

Taken together, this holistic approach is something new for China.

Despite considerable political uncertainty in a number of countries in Latin America, governments the region appear keen to meet China’s reform efforts with changes of their own.

For example, Brazil’s government has promoted an “Investment Partnerships Program” to coordinate investments in the finance and transportation infrastructure sectors. In Argentina, President Mauricio Macri’s government has introduced investor-friendly policies to restore confidence after years of political and economic isolation for the country. And in Mexico, structural reforms to increase competition in the telecommunications and electricity sectors, alongside other policies, have curbed inflation and boosted resilience to external shocks, and are expected to help return the country to a primary budget surplus.

With so many country-specific reforms underway, Latin America can serve as a testing ground for China’s new approach to overseas investment. But policy documents and bilateral agreements are just two components of China’s new “going out” strategy.

Chinese businesses must change how they think about and act upon foreign investment opportunities.

The traditional Chinese investment model – mergers and acquisitions – is no longer appropriate, because concentrated M&A activity entails tremendous risk.

And, unfortunately, that risk has multiplied in recent

“

Liu Jiahua a former Deputy Director General of China’s State Administration for Foreign Exchange

years. China’s overseas M&As jumped from 5 per cent of the global total in 2011 to 20 per cent in the first half of 2016, reaching some US$13 billion in value. According to data released by China’s Ministry of Commerce, non-financial outward direct investment exceeded US$170 billion in 2016, a 44.1 per cent increase from 2015.

This trend has been unprecedented for China, which overtook Japan for the first time last year to become the world’s second-largest overseas investor, behind only the United States. But it has also been poorly thought out. The biggest problem is that such concentrated acquisitions have increased leverage, and a higher debt-equity ratio carries a greater risk of downgrading. Historically, roughly 25 per cent of all enterprises are downgraded after an M&A. Such a scenario would be particularly painful for Chinese firms, given their lack of experience with the significant integration and management challenges that M&As pose for any business.

Given these risks, the most important priority for Chinese firms as they interpret the government’s new vision for overseas investment – whether in Latin America or elsewhere – is to stick to the principle of sustainability. Indeed, “long term” must be the strategic starting point.

The OBOR and International Production Cooperation strategies have a commitment to long-term partnerships at their core, and investments that presuppose many years of engagement will complement both frameworks.

Only if the financial base is solid, growth prospects sustainable, and multi-year collaboration in place will an investment support the government’s strategy.

Another priority in considering new overseas investmentistoconsiderfullythegoalsof“international production cooperation.” The aim here is to encourage the transfer of production capacity to other countries, in order to strengthen the “global industrial chain” in mutually beneficial ways. It is imperative to avoid using direct Chinese investment for the short-term export of production capacity, which would not be in China’s interest – and often not in the recipient’s interest, either.

For most equity investors, the value of any project depends to a large extent on effective post-investment management. Clear rights and obligations must therefore be carefully worked out at the start of an investment, something that has been all but absent previously. After all, an M&A is only the first step on a long road.

As Chinese firms invest overseas – as mine does currently in Latin America – they have a responsibility not only to invest wisely and sustainably for the sake of their companies, but also to integrate their strategies with China’s national investment priorities.

Those are not mutually exclusive goals, especially if business leaders adhere to the newly articulated principles of sustainable investment and long-term engagement. Project Syndicate

With so many countryspecific reforms underway, Latin America can serve as a testing ground for China’s new approach to overseas investment

”

16 Business Daily Thursday, May 18 2017

Closing Trade

S. Korean ICT exports post double-digit growth on solid demand

South Korea’s information and communications technology (ICT) product exports posted a double-digit growth last month on the back of solid demand for semiconductors, a government report showed yesterday.

The ICT product exports jumped 24.2 per cent from a year earlier to US$15.55 billion in April, according to the Ministry of Trade, Industry and Energy.

Imports in the ICT sector increased 7.8 per cent to US$7.88 billion.

The ICT trade surplus accounted for about 60 per cent of the exports in all industries.

Strong demand for locally-made chips led the ICT exports. Semiconductor shipments surged 59.1 per cent to US$7.24 billion.

Display panel exports gained 6.9 per cent to US$2.27 billion, with those for computer and peripherals growing 24 per cent to US$680 million.

Exports for mobile phones, including smartphones, tumbled 19.3 per cent to US$1.81 billion as local companies increased the percentage of production in overseas factories. Reuters

Results

Tencent’s revenue beats estimates as WeChat, games drive growth The stock has gained 37 per cent this year, compared with a 41 per cent rise for New York-listed rival Alibaba Group Holding Ltd Lulu Yilun Chen

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encent Holdings Ltd. posted a better-than-expected 55 per cent surge in quarterly revenue as blockbuster titles including Honour of Kings drove a billion-plus users on WeChat and QQ to spend on game items.

Revenue climbed to RMB49.6 billion (US$7.2 billion) in the three

months ended March, the Shenzhen-based company said yesterday, surpassing the RMB46.4 billion analysts projected on average. Net income climbed 58 per cent to a record RMB14.5 billion, compared with the RMB13 billion projected.

China’s internet titans are defying a slowdown in the world’s second largest economy. Chairman Pony Ma is now bolstering a US$300 billion empire that encompasses

everything from online gaming and social media to film and TV production. Tencent’s adapting a plethora of hit novels and anime into mobile games, distributed via messaging services WeChat and QQ, with an eye toward safeguarding its dominance of domestic media.

“Honour of Kings specifically drove Tencent mobile games in March,” Alan Hellawell, an analyst at Deutsche Bank AG, wrote before the earnings. He expects “Tencent to further maintain its leading position in the gaming sector in the long run.”

Shares of Tencent inched 0.4 per cent higher before earnings were

announced. The stock has gained 37 per cent this year, compared with a 41 per cent rise for New York-listed rival Alibaba Group Holding Ltd. WeChat had 937.8 million monthly active users and the mobile version of QQ had 678 million users at the end of the quarter.

“Honour of Kings specifically drove Tencent mobile games in March” Alan Hellawell, an analyst at Deutsche Bank AG Tencent, which is growing in online advertising but remains reliant on in-game spending, rode strong takeup for Honour of Kings. Developed in-house, the title is a mobile battle game in the same vein as the world’s most popular desktop title League of Legends -- also owned by Tencent. It topped both revenue and downloads in Apple Inc.’s iOS store in March, according to App Annie. Monthly active users reached 167.7 million in the quarter, likely generating RMB2 to RMB3 billion in gross revenue a month during the Lunar New Year period, Hellawell estimates.

Tencent unveiled another 19 mobile titles in April including the much-anticipated JX Online III, according to JP Morgan Chase & Co. analyst Alex Yao. A majority of those were adapted from hit novels, shows or anime in hopes of appealing to an established fan base. Bloomberg News

Technology

Currencies

Ransomware

Central government to build integrated big data centre

Mainland banks’ net forex sales rise

China’s banking regulator to step up protection after cyber attack

China plans to build an integrated national big data centre as the country seeks to tap the value of massive data resources in a more efficient and safer way, an official said yesterday.

The centre aims to promote better sharing of public data for wider application, especially for data in sectors such as credit, transportation, health and employment, said Zhang Feng, chief engineer of the Ministry of Industry and Information Technology (MIIT).

China will also study the formulation of a development roadmap for industrial data to push the integration of big data and manufacturing.

China will strengthen security protection in the collection, storing, application and sharing of big data.

Zhang shared the information at an MIIT conference to mark World Telecommunication and Information Society Day on May 17, with “Big Data for Big Impact” as this year’s theme.

China’s data volume is projected to expand at an annualized rate of over 50 per cent and account for 21 per cent of worldwide data by 2020. Xinhua

Net foreign exchange sales by China’s commercial banks rose to their highest level in three months in April, but capital outflows remained under control due to tighter regulatory scrutiny.

China has tightened rules on moving capital outside the country in recent months as it seeks to support the yuan and stem a slide in its foreign exchange reserves.

Commercial banks sold a net US$14.9 billion of foreign exchange in April - the highest since January, compared with a net sale of US$11.6 billion in March, the State Administration of Foreign Exchange said yesterday.

China’s cross-border capital flows in April maintained good momentum, with foreign exchange purchased by individuals hitting the lowest level in nearly one-and-a-half years, the regulator said.

For the January to April period, net forex sales stood at US$55.8 billion, it added.

Earlier data showed net foreign exchange sales by China’s central bank fell to the lowest in nearly two years in April, as capital outflows eased in the face of strict regulatory curbs and a pause in the dollar’s rally. Reuters

China’s banking regulator said yesterday it will strengthen cyber security protection at banks to prevent “disruptive systemic risk events” after the global WannaCry “ransomware” attack infected more than 300,000 computers in 150 countries.

The China Banking Regulatory Commission (CBRC) said in an emailed statement it has not received any major infection reports from the country’s banks on the cyber attack.

The attack had infected close to 30,000 Chinese organisations by Saturday evening, Chinese security software maker Qihoo said. But the spread of the WannaCry worm in the country appeared less aggressive than initially feared, said an official at China’s cyber administrator.

CBRC also pledged to increase its own cyber security management and risk prevention capabilities, and guide banks to conduct monitoring, assessment, early warning and prevention for similar events.

China is preparing to enforce a wide-reaching cyber security law that U.S. business groups say will threaten the operations of foreign firms in the country with strict local data storage laws and stringent surveillance requirements. Reuters