Business Daily #1299 May 19, 2017 by Business Daily

What to do, what to wear, and where to do it, with impeccable style Consigliere Pages 8 & 9

Friday, May 19 2017 Year VI Nr. 1299 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro G2E

Panel dissects and discusses online betting Page 5

Virtual reality

New generation of immersive slot machines to land in local casinos in September Page 7

Property

Small cities stoke the fires of Mainland real estate Page 10

www.macaubusinessdaily.com Gaming security

Implementation speed and oversight key to shielding gaming from hackers Page 4

Social media

Gaming visionary sets sights on millennial millions Page 6

Welcome Aboard! Ferry Terminal

But not just yet. Passengers will need to wait until June to use the new ferry terminal in Taipa. Gov’t authorities and related bodies assembled at the official opening ceremony yesterday to laud the 200,000 sq. m., 16 docking berth, 127 border crossing channel behemoth which took MOP3.8 bln (US$474m) to build over a decade. Page 2

Property soufflé sags

Full house for hotels

Hotel occupancy outperformed y-o-y in April. Official numbers released yesterday by Macao Government Tourism Office also signal that average prices fell. Predictably, 5-star hotels experienced the biggest gain in the sector.

Real estate Figures released yesterday reveal that transactions in Q1 shrank sharply. Every sector saw business dip from a year ago. Page 5

The watcher of the Net

Cyber threat The Secretary for Security has addressed pressing cybersecurity concerns. Local authorities have not fallen foul of WannaCry ransomware activity. But that’s no cause for complacency. The MSAR is mooting a cybercentre to anticipate possible future threats. Page 4

Local banks go global

Occupancy Page 2

HK Hang Seng Index May 18, 2017

25,136.52 -157.11 (-0.62%) Worst Performers

Cathay Pacific Airways Ltd

+1.98%

Hang Seng Bank Ltd

+0.55%

AAC Technologies Holdings

-9.78%

Link REIT

-1.61%

Tencent Holdings Ltd

+1.62%

Power Assets Holdings Ltd

+0.36%

China Unicom Hong Kong

-3.21%

Ping An Insurance Group Co

-1.50%

MTR Corp Ltd

+1.12%

China Shenhua Energy Co

+0.21%

Galaxy Entertainment Group

-1.86%

New World Development

-1.42%

Hong Kong & China Gas Co

+0.76%

Hengan International Group

+0.18%

China Life Insurance Co Ltd

-1.83%

Hong Kong Exchanges &

BOC Hong Kong Holdings

+0.75%

CLP Holdings Ltd

+0.12%

CK Hutchison Holdings Ltd

-1.69%

HSBC Holdings PLC

-1.21% -0.77%

24° 26° 25° 27° 25° 27° 26° 28° 26° 29° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Assets International assets owned by domestic banks increased in Q1. Data released by the Monetary Authority of Macau reveals the size of international assets ballooned 7.7 per cent year-on-year. Page 3

2 Business Daily Friday, May 19 2017

Macau Infrastructure

Taipa Ferry Terminal to officially open on June 1 The Director of the DSAMA said the management company of the new terminal’s commercial area for shops and restaurants will only start its service one to two months after the official launch Cecilia U cecilia.u@macaubusinessdaily.com

fter a decade, the new Taipa Ferry Terminal will be put into service on the first day of next month, the Director of the Marine and Water Bureau, Wong Soi Man, announced yesterday during the opening ceremony. Compared to the initial plan in 2005, the size of the infrastructure has expanded fourfold to 200,000 square metres from 50,000 square metres, supports 16 docking berths, three multi-functional berths and 127 border crossing channels. The launch in June will put only eight berths into service. The temporary ferry terminal will be permanently closed on the same day the new ferry terminal is launched. The site of the temporary ferry terminal will be used for the third phase construction of the new ferry terminal. Given the substantial expansion of the terminal’s size, infrastructure cost has been driven up 5.5 times to MOP3.8 billion (US$474 million) compared to the initial budget of MOP583 million some ten years ago. Secretary for Transport and Public Works Raimundo Arrais do Rosário responded to reporters’ enquiries on the sidelines of yesterday’s opening ceremony that the overblown expenses were reasonable. “I don’t think it’s overblown; it’s a huge development of 200,000 square

The Chief Executive, Mr Chui Sai On, presides at the plaque-unveiling ceremony of the Taipa Ferry Terminal

metres plus exterior works,” said Rosário. “It is six times larger than the initial one [...] because the initial project had 8 berths, and this one has 16 berths.” The Secretary also said that the project started small but suffered several alterations and addition of parts, adding that “now it’s larger than the [Macau International] Airport”. With other infrastructure such as the Zhuhai-Hong Kong-Macau Bridge

Rosário: Will definitely follow CCAC guidelines re. housing practice Speaking on the sidelines of yesterday’s opening ceremony of the new Taipa Ferry Terminal, Secretary for Transport and Public Works Raimundo Arrais do Rosário stressed that the government will definitely follow CCAC guidelines in handling the issues of the economic housing practices.

to be launched in 2019, some expressed concern that the new project might be underused. “We are expecting that the travellers now using the temporary terminal next door will move here for the short term,” said the Secretary, expressing confidence that more travellers will be attracted when more supporting facilities are ready in later stages. Director Wong perceived that

The Commission Against Corruption (CCAC) slammed the Housing Bureau on Wednesday, saying the February release contradicts previous practices on attribution of economic housing for couples married during the waiting period. The Secretary, meanwhile, also affirmed the plan to revise the economic housing law, although he was unable to share a solid timetable of the procedures.

package tours would prefer to use the new ferry terminal given the expanded space and the provision of convenience for tourists who aim to shop in Cotai.

Place to shop, eat

The DSAMA Director, meanwhile, said it will take one to two months after the official launch in June for the company to commerce management and operation of the commercial area in the ferry terminal. The MSAR Government contracted CSI Group Ltd. as the management and operational company of the new infrastructure in April. Director Wong affirmed that drink machines will be stationed for the time being, while restaurants and shops will gradually be established but without confirming any timetable. Meanwhile, the Director cited the Infrastructure Development Office as saying that the third phase construction is estimated to take one to two years to complete.

Hotels

Easter hotel occupancy up Room prices in April, meanwhile, dropped y-o-y although up m-o-m Cecilia U cecilia.u@macaubusinessdaily.com

This year’s Easter holiday boosted the city’s hotel occupancy in April to 88.7 per cent occupancy, up 7.2 percentage points year-on-year, while the rate also indicated an increase of some 3.1 percentage points when compared with that registered in March. The data, released by Macao Government Tourism Office (MGTO) yesterday, also shows that the average hotel prices during the month of April dropped 2.1 per cent yearon-year, hitting MOP1,241.9 (US$155) per night. H o w ev e r, A p ri l r o o m rat es were more expensive than March (MOP1,162), up 6.9 per cent. Among the three hotel categories, 5-star hotels experienced the highest year-on-year difference in the occupancy rate last month, up 9.2

percentage points at 87.3 per cent. The second highest increase in occupancy was in 4-star hotels, which saw a rate of 90.3 per cent, posting an increase of 5.5 percentage points year-on-year. Three-star hotels experienced the highest occupancy rate, at 92.1 per cent, but had the lowest year-on-year increase, at 1.6 percentage points. Regarding room prices, 4-star hotel rooms were the only ones to experience growth in April, up 5.2 per cent year-on-year to MOP784.6. Prices for rooms in 3-star and 5-star hotels dropped year-on-year by 2.3 per cent and 4.9 per cent, to MOP816.7 and MOP1,571.6, respectively.

Rate growing, prices declining

The accumulative occupancy rate for the first four months was 86.2 per cent, an increase of 6.6 percentage points year-on-year. All categories - 5-star, 4-star and

3-star - experienced year-on-year growth in the accumulative occupancy rate, with both 5-star and 4-star recording increases of 6.9 percentage points while 3-star hotels saw 4.6 percentage points increase. In terms of room prices, the difference between the first four months and the same period a year ago was a 2.3 per cent decrease, with cumulative prices MOP1,284.3.

MGTO data reveals that prices of 3-star hotel rooms during the January-April period experienced the highest decrease, down 6.6 per cent year-on-year to MOP815.4 whilst 5-star and 4-star declined by 1.6 per cent and 4 per cent, to MOP1,640.5 and MOP766, respectively. There are currently 41 3-star, 4-star and 5-star hotels, according to the Macau Hotel Association.

Business Daily Friday, May 19 2017 3

Macau

Banking

Growing savings abroad The amount of international assets held by local banks increased in the first three months of this year by 7.7 per cent yearly to reach MOP1.21 trillion, as international liabilities increased by 6.6 per cent to reach MOP1.13 trillion. Nelson Moura nelson.moura@macaubusinessdaily.com

he share of international assets in total banking assets in the local banking sector managed to recover in the first three months of 2017, data released recently by the Monetary Authority of Macau (AMCM) reveals. As of March 2017, the amount of international assets increased by 7.7 per cent year-on-year to MOP1.21 trillion (US$151.8 billion) while the amount of international liabilities increased 6.6 per cent year-on-year to MOP1.13 trillion (US$142.0 billion). I n t h e f i rst t h r e e m o n t h s, both international assets and liabilities increased by 3.9 per cent

quarter-to-quarter. The share of international assets in total banking assets increased by 0.6 percentage points quarter-toquarter to 84.7 per cent, while the share of international liabilities in total banking liabilities went up 0.5 per centre points to 79.2 per cent.

Assets and liabilities breakdown

Within the total international assets, external assets went up 6.2 per cent yearly to MOP883.8 billion, while local assets in foreign currencies went up by 12 per cent to MOP331.7 billion. At the same time, external nonbank loans - considered a major component of the assets - increased by 6.5 year-on-year to MOP392.6 billion.

Of total international liabilities, local liabilities in foreign currencies registered a considerable yearly increase of 22.3 per cent to MOP592.8 billion, although external liabilities dropped year-on-year by 6.5 per cent to MOP543.8 billion. Foreign currency deposits held by local residents and the MSAR Government in local banks accounted for a major part of total liabilities, seeing a hike of 18 per cent yearly at the end of March to almost MOP517 billion.

Currency by currency

In terms of currency, at the end of the first three months of this year the Hong Kong Dollar (HKD) and U.S. Dollar (USD) accounted for the majority of total international assets, amounting to 42.3 per cent and 45.3 per cent, respectively, and of international liabilities, representing 53.6 per cent and 36.6 per cent, respectively. Meanwhile, the Renminbi (RMB) represented 6.2 per cent of international assets and 5.1 per cent of

international liabilities, while the Pataca (MOP) accounted for only 0.8 per cent and 1.5 per cent share of total international assets and liabilities, respectively. Other international currencies represented 5.5 per cent of international assets and 3.3 per cent of international liabilities as at the end of March.

Country by country

In terms of region, countries in Asia and Europe comprised the majority of external assets and liabilities. Claims on Hong Kong and Mainland China accounted for 36.7 per cent and 27.2 per cent of total external assets, respectively, as at the end of March this year. At the same time, claims in the United Kingdom and Portugal accounted for 2.3 per cent and 2 per cent, respectively. As for external liabilities, Hong Kong and the Mainland accounted for 50.6 per cent and 21.3 per cent, while France and Portugal represented a share of 1 per cent and 0.8 per cent. Claims on Portuguese-countries and countries part of the ‘One Belt, One Road’ development policy represented 1.1 per cent of external assets and 7 per cent of external liabilities.

4 Business Daily Friday, May 19 2017

Macau Opinion

Cybersecurity

Enough to make you WannaCry Pedro Cortés*

Open future doors Mr. Francis Lui mentioned in G2E Asia taking place this week that there should be no borders between Hengqin Island and Macau. That would be a great move for the Macau economy which once and for all would enlarge our local market, not only for gaming but also - and above all - for tourism and local small and medium enterprises. It would be an innovative move which would ena ble our economy to think big in terms of the Pearl River Delta context. As mentioned in the past by Matthew Ossolinsky - who is probably the foreign player who best knows the Hengqin market and what is happening and is going to happen in the future in the neighbouring island - what we will see in the future is a big Macau metropolis, in which all will be integrated. Mr. Lui had the courage to say that out loud for the government entities to hear and to let the operators prepare themselves for future investment. The fact that Mr. Lui’s corporation already has investments in Hengqin is not negligible, of course, but it seems that the strategic track for the future is already in the mind of the Galaxy Entertainment Group. On the other hand, we have also heard from Mr. Lui that the “millennials” must be the generation to catch as far as gaming operation is concerned. It is, once again, a fresh breeze for Macau to have executives of this high rank considering that the millennials shall be the market to target. And here we shall not talk only of the gaming industry but the whole of the Macau economy. Some governments are afraid of them as if they had a disease. The conservative parts of societies do not understand that they shall govern in the future and must put behind the old practices of the past and adapt the future to a skilled generation which with a finger can get access to information and use other tools much faster than the previous generation. They do not follow existing standards but, rather, think globally and act globally. Macau needs them and should also govern for them. In this case, in all areas: cultural, political and social. Our kids need to teach our politicians that any false move can put an entire generation in jeopardy and break the creativity of our local minds. *lawyer and frequent contributor to this newspaper.

The Secretary for Security said the city is in need of a cybersecurity centre to anticipate possible cyber threats, while confirming that the WannaCry cyber attack that affected 300,000 computers worldwide did not impact the MSAR Nelson Moura with Lusa nelson.moura@macaubusinessdaily.com

he Secretary for Security has announced that “as of now” authorities have not received any complaints apropos the international cyberattack launched last Friday, but highlighted the necessity of creating a cybersecurity centre to detect threats in advance. According to Secretary Wong Sio Chak, at the end of last year a law proposal on cybersecurity was sent to the Executive Council for consideration with the objective of detecting cyber threats ahead of time and immediately alerting the public. The statements by Secretary Wong were made on the sidelines of a seminar on ‘Emergency Treatment of Incidents and Post-Treatment Strategies’. This proposal intends to “unify the cybersecurity prevention system” in Macau, integrating three main services: the Public Administration and Civil Service Bureau (SAFP), Judiciary Police and Macao Post and Telecommunications Bureau. The 2016 Governance Action Lines (LAG) already mentions the development of a cybersecurity centre in order to ‘guarantee the security of the information systems of the most local important infrastructures, reinforce the capacity for collaboration between departments and the communications sector, in Macau or overseas, against cyber attacks’. The LAG’s for last year also highlighted the necessity to ‘improve

judicial support and efficiency in countering cyber threats’. Last week ‘ransomware’ cyber attack - dubbed WannaCry - affected some 300,000 computers worldwide. A ransomware is software that blocks access to the infected computer’s system, requesting the payment of a ransom to unblock the system.

Always alert

When questioned about the three security officers arrested for criminal association and abuse of power, Secretary Wong said there was the need for a reinforcement of the oversight system. “This Administration is not afraid of revealing any eventual criminal cases and will always be alert,” the Secretary stated, adding he hoped

that through more oversight there would be a decrease in such cases. On May 13, three Macau police officers were arrested in Cotai together with eight other suspects, for allegedly accepting bribes from non-residents seeking to enter the city.

Safe passage

When questioned about the Hong K o n g-Z h u h a i - M a c a u B r i d g e (HKZMB), Secretary Wong said a “full Customs inspections system” will be put in place through co-operation in oversight and transfer of information. Macau and Hong Kong residents wishing to travel to Mainland China will only be required to present a safe-conduct granted by the two SAR Governments, while residents returning to Macau will only have to present their MSAR Resident Identity Card (BIR). At the end of this month and the beginning of June, Mainland China police offers and authorities will be present in Macau to conclude a proposal for the system to be adopted, according to an official release.

Secretary for Security Wong Sio Chak

Regulation

Preventing slot hacks via speed and oversight Kelsey Wihelm kelsey.wihelm@macaubusinessdaily.com

The two main things dictating electronic gaming machines’ vulnerability to being hacked are the speed at which the product gets to market from the development floor and the oversight of the machines once they’re in place, according to Gaming Laboratories International’s Vice President of Global Services, Ian Hughes. The comments came on the last day of Global Gaming Expo (G2E) Asia. Given that the machines are based on Random Number Generators (RNGs), the perception is that the combinations are completely random, which is inaccurate, notes the VP.

“A computer that generates a random number - it can never be a truly random number; we call it a pseudo random number,” notes Hughes. “The industry tries to create as close to random as possible [but] without a truly random number there will always be some patterns,” he says regarding potential points of exploitation, citing the case of a syndicate that exploited a slot machine weakness in Las Vegas, predicting its payouts. “We saw recently over the weekend with Ransomare attacks that those computers that were attacked were computers that were not updated in a timely fashion [and] more vulnerable, same thing in the gaming industry,” declared. However, the responsibility of divulging to the public or to authorities

when an exploitation has been detected is often a blurred line. “You have to be wary of the time. If there’s a known hack or cheat you want to fix it before it can be globally exploited. In some cases it’s important to keep that as confidential as possible. In the case of the RNG attack it was 12 to 14 months before it became public,” said Hughes. Internationally, no “gold standard” exists for the industry in terms of best oversight and reporting potential points of exploitation, points out Jennifer Roberts, the Associate Director of the International Centre for Gaming Regulation in Nevada. “[In] Las Vegas many of the casinos will actually meet on surveillance issues; they might discuss some issues they see or some suspicions. But that’s more of an informal meeting, not mandated by regulation. And because there’s so much consolidation in gaming, at least in Nevada, you’re only talking about a handful of operators. It’s the small operators that have to be part of that dialogue,” she states. Regulators, however, are faced with a unique set of challenges given that they need to be reliant on industry experts to implement effective regulation, points out Mr. Hughes. “I don’t think regulators look to any one source. They talk to as many people as they possibly can and are pretty good at telling if someone’s not being truthful or honest and they know the right questions to ask,” he said. “It’s very difficult for any regulator to keep up with tech so they have to rely upon industry experts”.

Business Daily Friday, May 19 2017 5

Macau Property

Real estate market dampens in Q1 Both transactions and prices of real estate declined Cecilia U cecilia.u@macaubusinessdaily.com

total of 3,337 building units and parking spaces were transacted and sold as per Stamp Duty record during the first three months of this year, down 35 per cent quarter-to-quarter according to the latest data released by the Statistics and Census Bureau (DSEC) yesterday. The aforementioned transactions generated some MOP17.93 billion (US$2.24 billion) to post a drop of 38.9 per cent quarter-to-quarter. For residential units, the number of transactions in the first quarter decreased by some 1,262 units to 2,313, generating MOP13.61 billion, down 41.8 per cent. Of the total of residential transactions, the performance of pre-sale residential units experienced that greatest decline of 69.3 per cent quarter-to-quarter, for 306. The total value generated by presale transactions plummeted 68.5 per cent to MOP3.08 billion. On the other hand, a total of 2,007 transactions were recorded for the purchase and sale of existing residential units, amounting to MOP10.54 billion, posting decreases of 22.1 per cent and 22.5 per cent, respectively. During the first quarter of this year, DSEC data shows an increase

of 4.7 per cent and 2.4 per cent quarter-to-quarter for the average price per square metre of usable area of pre-sale residential units (MOP129,439) and existing residential units (MOP83,333), respectively. Meanwhile, the price for presale units dropped 4.4 per cent to MOP90,858 per square metre. In geographical terms, the unit price on the Macau Peninsula increased by 4.1 per cent in the first quarter when compared to the previous quarter, at MOP85,893 per square metre. However, a different scenario unfolded for prices in Taipa and Coloane, with prices hitting MOP97,117 and MOP121,921, down 8.7 per cent and 0.9 per cent, respectively. For industrial units, the price increased 9.3 per cent quarter-to-quarter to MOP56,248 per square metre. The price of office units, meanwhile, dropped 3.7 per cent to MOP104,394. DSEC data also revealed that 4,077 properties were involved in the 4,058 signed real estate purchase and sales contracts, indicating a decline of 4.2 per cent quarter-to-quarter. While a total of 4,246 properties were involved in the 3,665 mortgage contracts signed, down 27 per cent. Regarding construction in the private sector, some 381,000 square metres of gross floor area of new building were created in the first quarter, providing 2,964 units, of which 2,890 were residential units and 1,752 were parking spaces for cars. Meanwhile, 254,000 square metres of gross floor area of existing buildings provided 551 units, with 513 units for residential usage and 720 parking spaces.

Melco

Melco Philippines Resorts records positive results in 2017 Q1 Philippines-listed casino operator Melco Philippines Resorts Corp. registered 148.6 million pesos (US$2.97 million) in profits in the first three months of 2017, a positive record following the net loss of P1.13 billion registered in the same period of last year, according to a release by the company. The casino operator, which owns half of City of Dreams Manila, saw its total net operating revenues increase 73.6 per cent year-on-year to 7.9 billion pesos in the first three months of this year. This increase was mainly driven by improved casino revenues, which increased yearly by 80 per cent between January and March of this year to 7.3 billion pesos, with room revenues rising 17 per cent to 264.1 million pesos while F&B, retail and other operations went up 23.5 per cent yearly to 175.2 million pesos. The company’s total operating costs and expenses in the first three

months of this year also registered a considerable increase of 43.4 per cent year-on-year to reach almost 7 billion pesos. In the filing, Melco Philippines Resorts states it is ‘a growing company with significant financial needs . . . [which] . . . expects to have additional capital expenditure in the future’ as it continues to develop its City of Dreams Manila property. The release also stated that the company’s total long-term debt, net, and equity saw only a 1 per cent rise in the first three months of this year to 20 billion pesos. The company was formally known as Melco Crown Philippines (Resorts) Corp. but was re-branded in February of this year after Melco International Development Ltd. - a Hong Kong listed company belonging to local businessman Lawrence Ho Yau Long - achieved a majority stake in Melco Crown Entertainment Ltd., which will also be re-branded Melco Resorts & Entertainment. N.M.

6 Business Daily Friday, May 19 2017

Gaming

G2E Asia

The sky’s the limit Online sports wagering is on cricket, not football. Investors should look south of Ecuador, rather than toward Asia - and get locals to do the red tap if they want to get it right from the start Sheyla Zandonai sheyla.zandonai@macaubusiness.com

ricket is the sport to look at in the online betting market and it is in Africa, said David Leppo, CEO of Footballbet.com in a panel moderated by KMiGaming CEO Keith McDonnell held at the iGaming Summit yesterday during the last day of the Global Gaming Expo (G2E) Asia. “Africa is the largest tax betting market in the world in terms of volume. And Egypt has one of the largest membership demographics in the African market. The Indian population in Africa is huge, and within that, cricket continues to grow.” Leppo was accompanied by three other speakers who discussed current challenges and strategies for getting a slice of the emerging international online betting markets from the perspective of suppliers and operators. While the product offer has diversified a lot over the last few years in Asia, there is still room for online operators to grow, suggested Charlie Choi, CEO of the Macau Gaming Information Association (MIGIA). “As demand from players changes, you need diversified products. With the trend for the Internet in the past few years, like in the Philippines, where we can find lots of online operators, and also with several suppliers in Asia [going] for online, I believe they would break out to the Asia market,” he said. While Asia is still an expanding

market, and while casinos and online betting games in countries such as the United Kingdom are harnessing the Asian cultural approach - “clearly focused on the Chinese,” according to Barry Martin, Senior Consultant at KPI Consultants - other countries have been developing gaming niches and profiting. “We used to think that China was the largest market, but with the regime change in Beijing, it has been affected. There is no doubt football is the largest market but cricket is the largest bet market, very popular in countries such as New Zealand, Indonesia and India,” clarified Leppo. For Asian investors searching for new markets, Martin identified several correspondences that draw upon China. “For any operators looking further west, there are similar models of what they are doing in Asia. Indonesia and

Macau focus

Charlie Choi, CEO of the Macau Gaming Information Association (MIGIA), said that “Macau has the best conditions and is the most stable [market] in Asia today.” He suggested, though, that in order to improve the offer “Macau should have more tech companies devoted to gambling.” Another issue he pointed to is the lack of local talent. “Surrounding areas like Hong

Thailand, for instance, are very good parallels with China. The focus is quite bonus heavy, regulation is zero. Payment methods are also very similar in Turkey,” he pointed out.

is finding a local partnership. “We affiliate ourselves with one of the utilities, usually a cell phone company or a land- based company, which would take a small percentage of the transactions, so that we would not have to worry about the payment,” he explained.

Money movement

Go local

The issue of money movement and payment operations was also raised as an important aspect for investors willing to get a share of new markets either opening up or regulating online gambling. In order to address these issues, the Senior Consultant at KPI Consultants explained that “any operator has, usually, to be very careful. It is something that has to be taken with a very considerate view.” Building on the cautious approach to payment operations, Daniel J. Kustelski, CEO and Co-Founder of Chalkline Sports, gave an example from Western Union, a global money transfer company, which he said was fined half a billion dollars in January for facilitating gaming betting [in Africa]. As for Leppo, whose company has been investing in football and cricket online betting, the strategy to follow

Kong have lots of talent, and companies also. So, for Macau it is good if we can find people outside. For that, we would like to see advances from the government,” he opined. In particular, he raised the development of customer services as a strategy to strengthen the offer in the city. “We need good online services to be able to overcome whatever obstacles come our way,” he concluded.

Panel speakers agreed that localisation is the way to go in order for companies to cope with payment methods as well as getting around complicated regulations, red tape hassles, and understanding betting behaviour. To Martin, “challenges everywhere is the amount of paper. As long as there are clear lines about ownership, it is pretty straightforward. In that regard, in Asia, the matter of ownership can be a bit convoluted.” Speaking about the African case, one of his areas of expertise in addition to Europe, Kustelski explained that regulators in countries such as Nigeria, Ghana, Tanzania and all the way down to South Africa are finding a “formula approachable, much easier to work with, helping coach, teach and mentor, not only regulate.” In particular, on-the-ground knowledge is perceived as a key point. “Before you consider going into a different region or demographics - and we have learned this by experience - you need to get a good stronghold on the ground. The people who control the municipalities, the so-called tax payments to the municipalities, you have to sort that out first,” emphasised Leppo. Martin also believes that in order “to get it right” it is important “to get a local that understands the market, like in Turkey, where you need it fully localised, localised language, with a nice array of payment solutions,” he explained.

G2E Asia

Who needs casinos when you have Instagram? Sheyla Zandonai sheyla.zandonai@macaubusiness.com

ombining games of skill and social media is the million-dollar formula to hook millennials, according to Myles Blasonato, Creative Director of Royal Wins Pty Ltd., speaking in a panel at the iGaming Summit held yesterday at Global Gaming Expo (G2E) Asia. “The video game industry is dominated by youth, and this audience wants skilled games, social games,” said Blasonato in his opening remarks. “As an industry we must collectively innovate to entice these players, or else stagnate.” According to Blasonato, 30 per cent of the global workforce in 2016 comprised millennials, and predictions have it that such number will increase to 50 per cent by 2020. In a comparison with global online casino players, the CD pointed out

in a slide that the number of players amounted to 49 million people in 2016, while the number of casual gaming players was estimated at 900 million over the same period. Blasonato further said that key strategies targeting the younger market ball for both to reach out to pure games of skill by giving players the option to bet on their abilities and “make money”, and to social media platforms, since millennials’ presence in the virtual world, from Facebook to Instagram, has gradually increased. In his owns words, “millennials are lazy and want to earn an easy wage.” According to data provide by the speaker, millennials using Facebook represented 50.3 per cent of the global population in 2016, while those on Instagram amounted to 30.3 per cent. Drawing on the example of Instagram, Royal Wins Pty Ltd.’s CD explained that the 89 million millennials using it today spend 90 minutes a day on average on it.

Amongst other “benefits” ensuing from the platform in terms of skillgaming-meets-bet, he claimed that it has “high average orders for conversion,” that is to say that it is an efficient means of converting usage into money. Email platforms, too, are efficient

in reacquiring users, Blasonato highlighted, and is “cheaper than social media platforms.” “To sum up, when understood correctly, social media can be very useful in converting acquisition into retention,” he concluded.

Business Daily Friday, May 19 2017 7

Gaming G2E

Virtual Reality bets Malta-based company Join Games Malta Ltd. is planning to bring the “first iGame for mobile Virtual Reality (VR)” to Macau in September Nelson Moura nelson.moura@macaubusinessdaily.com

lectronicgaming software company Join Games Malta Ltd. will bring what they call the “first iGame for mobile Virtual Reality (VR)” to Macau in September, the company told Business Daily at G2E Asia. “There’s zero entry barriers for players’ entry and for the [gaming industry] - it’s an obvious way to get mass market penetration,” the company’s Commercial Director, Martin MacDonald told Business Daily. The company has previously developed Video Slots that combine live actors with game play, revealing this year an interactive Virtual Reality Slots iGame called Kleopatra VR. According to MacDonald, the game “can be used on any regular mobile phone” and requires VR equipment at a cost of “US$20 (MOP160) from Amazon or Alibaba” while “the complete equipment for Oculus VR and HTC VIVE can go for around US$3,000 to

US$4,000”. According to the Commercial Director, Join Games is currently in discussions with several gaming operators worldwide to include the game in its offerings, with the game available in Macau in September. “We want to reinvent the iGaming industry by creating new kinds of experiences

for players. What the modern and young player is looking for is a better value exchange between him and the operator,” he said. For Mr. MacDonald most gaming offers so far have been “quite prescriptive” with Join Games focusing on developing something appealing to the “Playstation generation”. “People are now used to games that are more cerebral, more competitive, that allow multiplying and offer more recognition such as leader tables and boards. This makes it more

interesting,” he added. When it comes to legislation of skill-based gaming, he said “legislators are starting to get their head around it trying to keep up with developments”.

iGaming Malta

Although having developers “spread out” in Europe, Join Games is based on the small island country of Malta in Southern Europe. With a population of around 450,000 people, the online gaming industry has become one of the country’s thriving sectors, representing around 8 per

“The sensible jurisdictions are realising that this is what the industry needs, with many people lamenting the lack of innovation in the sector for years,” he concluded.

cent of its Gross Added Value (GAV) and currently employs more than 5,000 people, according to the Malta Gaming Authority. In 2015, the local government collected almost 28.2 million euros (MOP251.4 million/US$31.3 million) from the 269 licensed operators in the country’s remote online gaming industry.

8 Business Daily Friday, May 19 2017

Consigliere

T O U C H

FOR HER

What to wear on an island vacation

mandatory for your beautiful pix. As mentioned, a one-piece dress is the must-have item for vacation; put on a multi-coloured dress with an off-theshoulder design – it’s really trendy this Summer! you can be even more impressive and sexy by showing just enough skin. And no need to worry about your dress being inconvenient for activities - just wear a strappy multi-coloured top paired with hot pants or bikini bottoms. This outfit serves breakfast to a bike ride to the beach, all in the same day.

Beach knitwear + Jute

s Spring gives way to the heat of Summer, it’s time to plan a vacation. There are lots of direct flights from Macau to the islands of Southeast Asia. Now that have such convenient transport, you might as well spend your weekend with sunshine, sea, sand and spa as well as a luxury resort on a beautiful island. As soon as you book the tickets and

accommodation, it’s time to think about what you should pack for a sun and sand vacation – with amazing outfits a must. If you still have no clue, Zara Vacation Editorial might give you some inspiration.

One-piece dress

A good island vacation outfit should be flowing, comfortable and cool. There’s no easier and breezier way to enjoy the sunshine than wearing a

one-piece dress. No island trip would be complete without a party. Aside from the embroidered floral dress, a plain dress with lace-up neckline is the “Less is more” choice that is perfect for brunch, shopping, a date, or a night-time party.

Multi-coloured

It goes without saying that where there’s sun, sea, sand and tropical plants, multi-coloured outfits are

Beach knitwear is the perfect way to maximise your travel wardrobe. During your coastal getaway you know that you’ll be moving around a lot so best to wear it simply with a well-designed swimsuit or bikini and cover up with a long oversized knit jacket or a cotton tunic that you can wear on or off the sand. Pack all the belongings with a lightweight jute tote bag and you’ll find that a fresh and stylish look is within easy reach. This collection is now available at Zara stores in Macau. Too busy to shop in-store? Not to worry - you can also prepare your favourite outfits at Zara.com and receive the parcel at home. A note of caution: most of the clothes above will not provide enough protection from the sun, so don’t forget to lather on that high factor sunscreen. Editorial courtesy of Essential Macau

Art in the casino

MGM Macau brings oversized art installations to Grande Praça This Summer, the iconic indoor square Grande Praça in MGM Macau hosts a new art installation of gigantic dimensions ‘embellished with designs based on nature and flowers much adored by all,’ the company says in a press release. ‘With large glass flowers, butterflies and woven bulbs that can be lounged in, the brightly coloured

indoor garden is the picture-perfect spot for families and friends to spend quality time together.’ Under the title of ‘Beauty in the Air,’ MGM displays the creations of Stephen Stefanou, a renowned figure in the world of oversized art. “I’ve been collaborating with MGM both in Macau and the United States for many years

and I’ve always enjoyed the synergy, creativity and innovation that spur our teams,” says Stefanou. “This is my first time to create an interactive piece of art that enables people to sit down and relax, and it makes a delightful enhancement to the Garden.” According to the MGM information ‘the spacious atrium is stylishly

decorated with more than 110 oversized butterflies and 17 flowers of four different types (crocuses, anemones, irises and sunflowers) all made of synthetic glass. Six custom-woven loungers make the bulbs of the flowers, offering guests cozy swaying pods to take a moment to enjoy the scenery’.

Business Daily Friday, May 19 2017 9

Consigliere

O F

S T Y L E

FOR HIM

In defence of the everyday bow tie Adopted by fashion-forward athletes and progressive philanthropists, this most polarizing piece of neckwear risks it all Troy Patterson, a Bloomberg writer

o be blunt about it—to knot together a tidy truth about neckwear—there are three types of bow tie guys in this world: The absolutists, who proudly wear nothing but bow ties; the innocents, who know not how to tie one; and the dabblers, some of whom are out to play now. These dabblers sport bow ties at horse races, springtime outdoor weddings, garden parties, and other festive occasions, where they contribute to the atmosphere with these antique decorations. In Manhattan, they are a male rite of the springtime street scene. It is natural law: In some neighbourhoods, the month of May brings out playboys idling in convertible Jaguars. In others, bow ties migrate onto collars like a kaleidoscope of butterflies. You always see them worn with pride— strong pride, because the bow tie arouses strong feelings. Why is the bow tie such a polarizing piece of cloth? My theory is that it reveals all male neckwear—even the cravat of choice for Croatian

mercenaries in the 1600s—to be ornamental ribbons. The choicest bow tie district in Manhattan is Madison Avenue in the 40s, with its foot traffic to and from Grand Central, Brooks Brothers, and many financial and legal institutions. Recently, on a warm afternoon, I spotted a couple of madras bow ties worn with nifty seersucker jackets, a couple of striped ones paired with blue blazers, and a polka-dotted blue one matched with a good, dark suit in the Winston Churchill style. I was taking this all in while walking to the Tie Bar, which just opened a six-month pop-up on this stretch of Madison, to meet Chief Executive Officer Allyson Lewis. She reported that the bow tie business, after years of robust growth, “has plateaued.” Five or 10 years ago, when pro athletes were normalizing the bow tie at post-game interviews and Mad Men’s Bertram Cooper was giving them a dapper boost, a lot more men began dabbling. As Lewis said, “Guys were like, ‘It’s OK! A bow tie doesn’t have to be professorial!’” Having expanded its niche, it now is settled in. But not all is quiet on the bow-tie

front. On the contrary, they are everywhere in the news—from the collar of Bill Nye at climate-change events to the neck of a canine in first class. They are, also, everywhere on the news, beneath the talking head of George Will and all around the aura of Tucker Carlson, who used to be a Bow Tie Absolutist but recanted. “People despise you when you wear a bow tie,” he has said. (You can take the boy out of the bow tie, but you can’t take it out of his personality.) These ornamental ribbons have taken on a new, symbolic life. Organizations that include BowTie Foundation and celebrities such as Modern Family star Jesse Tyler Ferguson encourage wearing and buying them for socially conscious purposes through the Tie the Knot foundation. These organizations support causes to which I would gladly donate. Still, I wonder: How much money do I need to pledge to get them to leave bow ties out of it? Their good intentions may reshape the garment’s meaning in the direction of kitsch, pushing it toward the stunt-y neckwear equivalent of a Movember moustache. That’s the potential future. For now, take a look at the state of things on the bow tie plateau. Clothiers keep supplying traditional absolutists with traditional styles: The bow tie is the official sponsor of black-tie events, after all. Tradition weighs heavy.

And the bow tie innocents? This is special time of year for them, too. The manager of a made-to-measure suit maker recently told me he’s been organizing “bow tie lessons for groomsmen”—once fitted, the guys learn how to tie one on, first practicing on their thighs. Meanwhile, more dandyish dabblers are getting a bit wild with pattern and form. Alexander Ochs makes stubby ones with colours and textures that range from frisky to freaky. Drake’s is playing nicely with flashy paisley. Brooks Brothers is experimenting with reversible numbers that offer a two-for-the-price-of-one deal— stripes on one side, flowers or plaid on the other. And because, with an extra flip of the silk, you can halfway un-reverse the tie to expose clashing patterns, it’s technically a three-inone deal. But only one in a million guys can pull off that extra twist and stick the landing. One last reminder: Even though the field of pre-tied, high-end bow ties is constantly expanding—including new options from such brands that should know better as Tom Ford International LLC, Alexander McQueen, Dolce & Gabbana—you’re still selling off a little bit of your soul when you buy one. Fendi has some nerve, pushing a US$395 pre-tied minkand-silk number. It looks like a giant caterpillar, which is the upside: Wear it, and you’ll be tickled into joining in the laughter of everyone looking at you. Bloomberg

10 Business Daily Friday, May 19 2017

Greater China Real estate

Smaller cities keep property market hot in April Prices for new units in Beijing in April grew at a slower pace on a monthly basis Yawen Chen and Ryan Woo

ome prices in China’s biggest cities softened in April as administrative curbs to dampen a red hot property market took effect, but robust demand in smaller cities resulted prices nationwide rising by their strongest in six months. Average new home prices rose 0.7 per cent in April, faster than the 0.6 per cent increase in March, Reuters’ calculation of National Bureau of Statistics data showed. And although that was the biggest monthly rise since October analysts stuck to their view that the property market has peaked thanks to measures taken to stifle speculation, and the question was only when it would come down. “We expect tightening measures to increase in severity for the rest of the year, though we do not see a severe correction in prices, developers should suffer from a tight liquidity environment and continued declines in transaction volume,” North Square Blue Oak, a London-based boutique investment bank, said in a note commenting on the data. “While timing will vary city-bycity, we expect to see a price inflection point in many markets with price growth slowing under demand containment measures but cushioned by lack of supply.” Despite slightly sharper gains on average, more cities reported price

drops or slower price rises compared with March, the NBS said in a note accompanying the data release yesterday.

Spillover

Since late March authorities in the bigger cities have intensified their campaign to drive speculators out of the property market, taking steps like forbidding buyers from selling newly purchased homes too quickly. But as result some demand spilled over into smaller cities where curbs are less stiff. In China’s Tangshan city, a small city near capital Beijing, prices growth more than doubled in April from a month ago to 2.2 per cent, NBS data showed. The Tangshan government

announced new curbs to cool the market yesterday. But analysts stuck to the view that the sizzling property market has peaked, leaving the question of when it would come down. “April’s data shows prices are still relatively steady. But as sales have dropped a lot in April, it will cool eventually,” said Rosealea Yao, property analyst at Gavekal Dragonomics. Data released on Monday by the NBS had shown the area of property sold in April grew by the slowest rate since December 2015. Prices in China’s smaller cities, or known as tier-3 cities, rose 0.9 per cent in April from a month ago, while growth in tier-2 cities remained flat at 0.6 per cent, Yan Yuejin, an analyst with E-House China R&D Institute, said after analysing the official data. But in China’s biggest cities, the rate

of increase halved to 0.3 per cent, he said. China’s financial hub Shanghai, and Nanjing both announced earlier this month the introduction of a lottery system for new home sales to correct market irregularities. Prices for new units in Beijing in April grew at a slower pace on a monthly basis, while Shanghai prices dropped 0.1 per cent. Shenzhen prices stayed unchanged in April. A state think tank said on Monday that Beijing was the most expensive city in April with a median price of RMB63,647 (US$9,231) per square metre, or US$858 per square feet, followed by Shanghai, Shenzhen and coastal city Xiamen.

Key Points April new home prices +0.7 pct m/m vs +0.6 pct in March Monthly growth fastest since October 2016 Accelerated price gains supported by demand in smaller cities But more cities saw prices fall or growth slowing - NBS If the government’s curbs were relaxed, home prices in the biggest cities would likely resume their rise, a senior official from China’s top economic planner warned late last month. Beijing’s concern over social and economic consequences of runaway real estate market has prompted policymakers to repeatedly pledge intentions for a “long-term mechanism” to stabilise prices. Experts are uncertain what that will entail, but it is expected to include tax and land reforms, though China announced in March it has no plans to implement a nationwide property tax this year. Reuters

Strategy

Jack Ma’s Ant Financial eyes more deals in global expansion Over the past two years, Ant Financial has unveiled investments in countries including India, Thailand, South Korea and France Ant Financial, China’s largest provider of internet financial services, will continue investing in mobile-payment providers around the world to boost offshore revenue and buttress itself from rising competition and tighter regulation at home. Controlled by billionaire Jack Ma, the Hangzhou-based firm will announce more “partnerships” this year with a focus on Asia and is also “actively assessing” other markets, Douglas Feagin, the head of its international operations, said in a phone interview yesterday. Since 2004, Ant Financial’s Alipay platform has built itself into an online giant that controls more than half of China’s US$5.5 trillion mobile-payments market. Still, it has lost ground over the past year to Tencent Holdings Ltd. and the prospect of increased regulation on internet finance has the firm looking outside its home turf for growth. Over the past two years, Ant

Financial has unveiled investments in countries including India, Thailand, South Korea and France, and is currently negotiating to acquire MoneyGram International Inc. “It’s a very clear and determined strategy that we want to extend the range of services we have,” said Feagin. “We look to make further announcements and deals on partnership over the course of 2017.” A former banker at Goldman Sachs Group Inc., Feagin declined to identify specific investment targets.

less than US$3 billion by issuing debt to fund its acquisitions, including the MoneyGram purchase, people familiar with the matter said in February. The Chinese firm raised its bid for MoneyGram in April, outbidding Euronet Worldwide Inc. While the acquisition faces potential obstacles, Feagin said he still expected the deal to close in the second half of the year. Formally known as Zhejiang Ant Small & Micro Financial Services Group Co., Ant Financial is Alibaba Group Holding Ltd.’s finance affiliate. In 2015, Ant Financial and Alibaba bought a 40 per cent stake in a

Higher bid

“In terms of funding that, we have a strong position given the scale and position of our business in China and around the world to fund these businesses,” he said. “We have strong cash flows from our existing franchise and services. And we have access to markets as needed to add to these capabilities.” Ant Financial is seeking to raise

Billionaire Jack Ma controls Ant Financial

company that owns almost half of India’s Paytm Payments Bank Ltd., which is pushing to sign up more than a third of the country’s 1.3 billion people as customers.

Lower share

Paytm is “a very attractive business and the most important contributor so far in terms of our international expansion,” Feagin said. “The other countries, Thailand, Philippines are at a very early stage, but on a very nice growth trajectory.” In China, Ant Financial’s Alipay held 55 per cent of China’s mobile payments market in 2016, down from 68 per cent the previous year, according to IResearch data. Meanwhile, Tencent’s share had risen to 37 per cent from 21 per cent, and the firm leads in offline payments via QR codes, according to the research firm. The market-share loss contributed to Ant Financial delaying its initial public offering plans as it seeks to focus on improve its performance, people with knowledge of the matter said this week. Ant Financial has been valued at US$75 billion by CLSA Ltd. analysts and had been expected to list as soon as this year. Bloomberg News

Business Daily Friday, May 19 2017 11

Greater china In Brief Report

Online retail market thrives in 2016 China’s online retail market volume hit a record high in 2016, with a year-on-year growth of 39.1 per cent to RMB5.3 trillion (US$770 billion), according to a report released by China’s e-commerce research centre. The online retail market accounted for 14.9 per cent of total retail sales of consumer goods, a year-onyear increase of 2.2 percentage points, according to the report. A total of 500 million people engaged in online shopping in 2016, up by 8.6 per cent from 2015, the report said. Notably, the online shopping volume in China’s rural areas jumped 36.6 per cent to RMB480 billion yuan in 2016. Banking

Monetary policy

PBOC trying to keep it simple with spotlight on two rates Zeroing in on two rates helps clarify policy intentions on the road to a more market-based toolkit

hen Federal Reserve Chair Janet Yellen wants to change the cost of borrowing, investors have one main rate to watch. Her Chinese counterpart Zhou Xiaochuan, who’s been juggling multiple policy levers, is trying to focus market attention on just two. The People’s Bank of China (PBOC) said late last week that it will now mainly use seven-day reverse-repo operations and the one-year midterm lending facility for short- and medium-term liquidity demand. It also indicated a range it deems as stable for the seven-day interbank interest rates -- between 2.6 per cent and 2.9 per cent -- a band much narrower than the broader rates corridor implies.

“The PBOC wants to simplify the way it provides funds and promote a sense of certainty in markets” Wang Yifeng, analyst at China Minsheng Banking Corp.

Zeroing in on two rates helps clarify policy intentions on the road to a more market-based toolkit and could prove vital in constructing a yield curve for securities and loans that’s understood and trusted by investors. If all goes to plan, that should give the economy a more transparent yardstick against which to price risk as the traditional one-year lending and deposit benchmarks are consigned to history. “The PBOC wants to simplify the way it provides funds and promote a sense of certainty in markets,” said Wang Yifeng, an analyst at China Minsheng Banking Corp.’s research department in Beijing. With a clearer message about the price and maturity of its tools, the PBOC can “reduce the difficulties for commercial banks to manage liquidity and stabilize shortterm market rates,” he said. PBOC Governor Zhou for years has

been leading a drive to give markets more of a role in the economy, moving away from a model where the central bank decides the amount and price of credit to one where investors determine money flows and steer borrowing costs. The shift is high on an agenda endorsed by top leaders including President Xi Jinping at the Communist Party’s third plenum in 2013, and is seen as a potential catalyst for broader reforms including to the nation’s bloated state-owned firms. The new focus shows the PBOC is becoming more confident about its monetary policy framework, said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong.

Mixed signals

“The central bank used to control too many points on the yield curve, sending mixed signals to markets,” Ding said. “The PBOC seems to have found two most effective ones, and it’ll test if the two have the potential to develop into the new policy rates.” Meanwhile the old rates -- the oneyear lending and deposit benchmarks -- have been held at record lows since late 2015 to help cushion the economy’s slowdown. When capital was gushing out of the country last year, the PBOC was reluctant to cut

those further for fear of exacerbating outflows. More recently, it has eschewed hiking, preferring to cool the housing market and crimp financial leverage with its plethora of liquidity and lending tools. “There’s a learning process, since nobody has tried price-based management before - neither the central bank, nor the markets,” 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. Both markets and the PBOC are trying to make policy evolve “toward a direction in line with international convention,” he said. The PBOC has been building an interest-rate corridor, with the rate for the standing lending facility as the ceiling and the interest on excess bank reserves as the floor. PBOC chief economist Ma Jun in 2015 suggested a target band could be positioned within that broader corridor by using open-market operations. “The PBOC is giving tacit admission to a preferred range for short-term interest rates” as it points out the range between 2.6 per cent to 2.9 per cent as being seen as stable, said Ming Ming, a former PBOC official and now head of fixed-income research at Citic Securities Co. in Beijing. “The PBOC will inject or withdraw funds accordingly if the rate moves beyond that range for a relatively long time, as it seeks to ensure interbank market stability.” Huarong Securities’ Wu said it’s still too early to say if short-term rates will definitely stay in the band, since economic and financial conditions can change at any time. Yet the central bank is “moving toward that goal, toward a corridor in which a pivot sits in the middle”, he said. Bloomberg News

AIIB awards global custody mandate to BNP Paribas The Asian Infrastructure Investment Bank (AIIB) has awarded a global custodian mandate to BNP Paribas Securities Services, as the Beijing-based bank seeks to establish internal financial infrastructure for liquidity investment. BNP Paribas is expected to have global custody of up to US$20 billion of AIIB assets and will be providing a list of custody services, AIIB said in a statement. “As a new multilateral financial institution, we are focused on building our trading capabilities to deliver infrastructure projects that will improve Asia’s development,” said Thierry de Longuemar, AIIB vice president and CFO. Development

Beijing approves general city plan Beijing authorities have approved the general plan for the capital city’s development from 2016 to 2030. The Beijing municipal committee of the Communist Party of China (CPC) discussed the plan at a plenary session Wednesday, and agreed to submit it to the CPC Central Committee and the State Council, China’s Cabinet, for approval. The plan centres on the subjects of “what kind of capital should Beijing be built into” and “how to build the capital city.” It lays out a basic development structure, goals and tasks, policies, measures, as well as plans to achieve sustainable development for the city. Diplomacy

Pledge to strengthen bilateral ties with Argentina Chinese President Xi Jinping Wednesday held talks with his Argentine counterpart Mauricio Macri, with the two sides agreeing to expand mutually beneficial cooperation in all areas and further promote bilateral ties. Xi called for dovetailing the Belt and Road Initiative with Argentina’s development strategy, expanding cooperation in industries such as infrastructure, energy, agriculture, mining and manufacturing, and implementing existing major cooperation projects such as in hydro-power and railway fields. Hailing Argentina’s support and participation in the Belt and Road Initiative, Xi stressed that Latin America is the natural extension of the 21st Century Maritime Silk Road.

12 Business Daily Friday, May 19 2017

Asia Growth

Japan’s economy expands at fastest pace in a year It marked the fifth straight quarter of expansion Leika Kihara and Minami Funakoshi

apan’s economy grew in the first quarter at its fastest pace in a year to mark the longest period of expansion in a decade, thanks to robust exports and a helpful boost from private consumption. Positive data issued yesterday should offer some relief to Bank of Japan policymakers, who hope the economy is now gathering enough momentum to drive up inflation that remains stubbornly below their 2 per cent target. Driven by robust exports and firming domestic consumption, Japan’s economy expanded an annualised

2.2 per cent in January-March, exceeding a median market forecast for a 1.7 per cent rise to post the fastest growth rate since January-March 2016, Cabinet Office data showed. It marked the fifth straight quarter of expansion, the longest growth run since a six-quarter streak through 2006, when the Bank of Japan (BOJ) was exiting from its previous quantitative easing programme on signs of strength in the economy. “The economy is enjoying comfortable growth driven by both domestic and external demand,” said Kyohei Morita, chief economist at Credit Agricole. “Consumer spending remains

relatively soft and it has room to improve. But the economy passed the grade both in terms of the pace of growth and the quality of the expansion.” Japan’s economic growth in January-March outpaced an annualised 1.8 per cent expansion in the euro zone and a 0.7 per cent increase in the United States.

Deflationary pressure persists

Japan’s economy has shown signs of life with exports and factory output benefiting from a pick-up in overseas demand. But consumer prices are barely rising as firms remain wary of increasing wages, keeping the BOJ under pressure to maintain its massive stimulus despite improvements in

the economy. Nominal GDP, or GDP at current market prices, fell 0.1 per cent in the first quarter to mark the first contraction in five quarters, as relatively weak demand prevented many firms from passing on rising import costs to households, underscoring the challenges of eradicating Japan’s sticky deflationary mind-set. Private consumption, which accounts for roughly 60 per cent of gross domestic product (GDP), increased 0.4 per cent in the first quarter on solid demand for smartphones and clothing, posting its fifth straight quarter of increases. But wage earners’ total remuneration fell 0.2 per cent in nominal terms from the previous quarter, a

Key Points Q1 GDP expands annualised 2.2 pct vs f’cast +1.7 pct Q1 GDP rises 0.5 pct qtr-qtr - govt data Consumption up 0.4 pct Q1 vs f’cast +0.4 pct Capex rises 0.2 pct Q1 vs f’cast -0.4 pct

sign companies remain reluctant to share much of their profits with employees. Offshore demand added 0.1 per centage point to growth as exports rose 2.1 per cent on rising shipments to Asia and Europe, a sign that improvements in overseas economies underpinned Japan’s recovery. Capital expenditure gained 0.2 per cent in the first quarter, confounding market expectations for a 0.4 per cent fall. “The Japanese economy probably won’t grow dramatically, but it’s not about to shrink either. The global economy is solid and there aren’t many domestic downside risks,” said Norio Miyagawa, senior economist at Mizuho securities. “I think the economic recovery will eventually push up wages and prices, but the pace will be slow.” Reuters

A glimpse of hectic Tokyo

Monetary policy

Indonesia’s central bank stands pat Bank Indonesia said it expects second quarter growth of around 5.1 per cent Nilufar Rizki and Gayatri Suroyo

Indonesia’s central bank, wary of risks including a “big chance” U.S. interest rates will rise in June, yesterday kept its benchmark where it has been since October and its monetary policy neutral. Bank Indonesia (BI) held the 7-day reverse repurchase rate steady at 4.75 per cent, as predicted by 19 of 20 analysts in a Reuters poll. The central bank also kept the deposit facility and lending facility rates, the floor and ceiling of the overnight interbank money market, unchanged at 4.00 per cent and 5.50 per cent, respectively. BI Governor Agus Martowardojo said the central bank still eyes for a chance to cut the benchmark, although its current focus is on inflation management and monitoring global risks, including Federal Reserve hikes and tension in the Korean peninsula. Annual inflation, which reached 4.17 per cent last month, is “manageable” and inside its target for the year of 3-5 per cent, Martowardojo said.

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He also said there’s a “big chance” of a Fed hike next month and a probability the U.S. central bank will hike again in September.

An easy decision

Yesterday’s decision by BI to stand pat “was an easy one”, said Trinh Nguyen, senior Asia economist of

Natixis Asia in Hong Kong. “Although exports are improving, domestic demand remains weak. With inflation higher and the Fed hiking rates soon, BI is likely to maintain the current stance to shelter the greenshoots of the economy,” she said. Capital Economics said that despite the economy’s “poor outlook”, a rate cut is “unlikely this year”, partly because of anticipated hikes by the Fed and the possibility Indonesian

inflation - at a 13-month high in April - will go higher. In the first quarter, Southeast Asia’s largest economy grew 5.01 per cent from a year earlier. That was broadly in line with market expectation and a touch stronger than the previous quarter, but showed authorities are struggling to get growth rates to significantly rebound. Some analysts say exports, the main driver behind the first quarter’s slightly higher growth, may not be able to generate further gains, given uncertainty about commodity prices and demand from trading partners.

Key Points Key rate kept at 4.75 pct, its level since October C.bank says inflation level remains manageable Governor see ‘big chance’ Fed will hike US rates in June BI said it expects second quarter growth of around 5.1 per cent, and 2017 full-year growth at the midpoint of its 5.0-5.4 per cent target range. Between January and October 2016, the central bank cut the benchmark rate six times, by a total 1.5 per centage points, to try to lift growth. Reuters Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Friday, May 19 2017 13

Asia Conglomerates

In Brief

South Korea lowers hopes for drastic reform of chaebol Chaebol are top family-run conglomerates that include technology giant Samsung Group, Hyundai Motor Group, SK Group and Lotte Group Hyunjoo Jin and Joyce Lee

South Korea’s prospective antitrust chief yesterday said there no hurry to unravel the complex and opaque structures behind the powerful family-run conglomerates that dominate Asia’s fourth-largest economy. In a blow to reformers who hoped new liberal President Moon Jae-in would take a tough line on “chaebol” business empires, the man Moon nominated on Wednesday to head the Korea Fair Trade Commission (KFTC) said sweeping change was not on the cards. “Chaebol reform is never about destroying or disbanding chaebols. Chaebol reform is about helping and inducing them to grow into important assets in the South Korean economy through rules,” he said at a news conference. Unravelling cross-shareholdings among group affiliates that cement family control was “not an urgent matter”, as big businesses like Lotte Group had made progress in addressing the issue themselves, he said. South Korea’s top family-run conglomerates include technology giant Samsung Group, Hyundai Motor Group, SK Group and Lotte Group. Their lack of transparency has long

worried investors but the issue came to a head in February with the arrest of Samsung Group chief Jay Y. Lee over his alleged role in a corruption scandal that rocked the political and business establishment. Prosecutors allege Lee, the 48-yearold scion of the country’s richest family, bribed a close friend of then president Park Geun-hye to gain government favours related to leadership succession at the conglomerate. He denies any wrongdoing. Park’s subsequent ouster and Moon’s election in May raised hopes among some investors that the new liberal president would crack down on the chaebol, but such expectations were lowered with Kim’s comments on Thursday.

“His news conference shows there is little commitment from the government to reform chaebols,” said Park Sang-in, a professor at Seoul National University. Kim, who was known as “chaebol sniper” for his shareholder activist campaigns against the business empires, is unopposed for the role of KFTC chief and his appointment is seen as a matter of course.

Hyundai hopes

Kim said seven conglomerates currently had 90 cross-shareholding ties, sharply down from about 98,000 chains at 14 companies five years ago. Hyundai Motor Group is the only major company where the complex structure was key to management control and succession, he said, prompting some investors to buy the stock on expectation of leadership changes. “Hyundai Motor Group chief is 80 years old, and the market expectation is that the succession may be imminent,” Lee Sang-hyun, an analyst at IBK Investment & Securities. “But that is just speculation and may be short-lived.” Reuters

GDP

Philippine growth weakest in a year, but rate rise on cards Exports grew 20.3 per cent in the first quarter from a year earlier and domestic consumption rose 5.7 per cent Neil Jerome Morales

The Philippine economy grew at its slowest pace in more than a year in the first quarter on weaker government spending, but strong exports and domestic consumption suggest the Southeast Asian country remains poised to raise rates this year. Gross domestic product grew 6.4 per cent in January-March from a year earlier, below forecasts for 6.8 per cent growth and the slowest since the last quarter of 2015. The Philippine Statistics Authority revised growth in October-December 2015 to 6.3 per cent from 6.7 per cent. But the Philippines remains one of the fastest growing economies in Asia with robust consumption, which fuelled last year’s growth, continuing

to bolster economic activity as exports pick up. “Moving forward, the domestic economy is poised to maintain its growth momentum with the recovery of external trade and the private sector’s steadfast optimism,” Economic Planning Secretary Ernesto Pernia said, adding growth was broadly in line with the 6.5-7.5 pct target for this year. Pernia said the slowdown could be explained by the absence of election spending, which boosted growth a year earlier.

Rate hike seen

Strong exports and consumer spending, however, should put the central bank on course to raise interest rates this year, economists said.

“With robust growth and rising inflation, the space for the central bank to maintain its policy stance is closing,” said ANZ economist Eugenia Victorino who expects a 50-basis-point hike in rates this year. Exports grew 20.3 per cent in the first quarter from a year earlier and domestic consumption rose 5.7 per cent. But government consumption growth eased to 0.2 per cent from 4.5 per cent in the previous quarter and 11.8 per cent a year ago in the absence of election spending. “Given the government’s aggressive fiscal plan this year, it remains to be seen if spending may accelerate going forward, which will definitely be a big boost to GDP growth momentum,” said Gundy Cahyadi, economist at DBS Bank. Cahyadi expects full-year growth to come in at 6.4 per cent.

Key Points Q1 GDP +6.4 pct y/y vs +6.6 pct in Q4 Seasonally adjusted quarterly pace also eases to +1.1 pct Q1 economic growth broadly in line with 2017 target - minister Central bank still likely to raise rates - economists

It was the slowest economic expansion since President Rodrigo Duterte took office nearly a year ago

The economy grew a seasonally adjusted 1.1 per cent from the previous three months, also less than the 1.5 per cent forecast in a Reuters poll and the slowest in eight quarters. To sustain the economy’s growth momentum and ensure its effects are more broadly felt, Duterte has promised to spend up to $180 billion over six years to build and modernise railways, airports, seaports and roads. The stimulus would help offset the impact of protectionist U.S. policies on remittances from overseas Filipinos and on American investment in business process outsourcing to the Philippines, a vital sector for the economy. Reuters

Trade

New Zealand optimistic of reviving TPP New Zealand is increasingly optimistic that the 11 remaining countries of the TransPacific Partnership (TPP) will move ahead with the trade deal despite the withdrawal of the United States, Trade Minister Todd McClay said. Alongside Japan, New Zealand will be trying to win over other members this weekend when TPP ministers get together in Hanoi on the side-lines of an Asia-Pacific Economic Cooperation (APEC) meeting. “I don’t think we should expect any big decision from that ministerial meeting, but certainly I would hope for a very clear direction as far as the process is concerned,” McClay told Reuters. Reserves

Sri Lanka c.bank aims to buy US$1.2 bln Sri Lanka’s central bank has set a target of US$1.2 billion in direct market purchases of dollars to boost the island nation’s reserves this year, the monetary authority’s chief Indrajit Coomaraswamy said yesterday. The move comes after Sri Lanka missed its end-December reserves target agreed with the International Monetary Fund (IMF) for a US$1.5 billion, 36-month loan. “That’s our target,” central bank Governor Coomaraswamy told a forum of the Foreign Correspondents’ Association of Sri Lanka. “Now we are beginning to see the reserves build up. All in all, we are projecting US$7.2 billion by the end of the year.” Lenders

Indonesia’s loan growth accelerates Loans extended by Indonesian banks grew 9.2 per cent in March from a year earlier, accelerating from February’s 8.6 per cent pace, the central bank said yesterday. The banking industry’s ratio of non-performing loans fell in March to 3.00 per cent of outstanding credits from 3.2 per cent the previous month, Bank Indonesia (BI) said. BI Governor Agus Martowardojo described the acceleration as still not optimal considering the central bank’s past monetary easing, which includes six benchmark rate cuts by a total of 150 basis points in 2016. Government

Indian minister’s death could delay GM crop decision India’s environment minister died yesterday, depriving Prime Minister Narendra Modi’s government of a key figure as it considers whether to approve the country’s first genetically modified food crop. Anil Madhav Dave, 60, died in hospital after complaining of feeling unwell, a day after attending a cabinet meeting. The two-term lawmaker from Modi’s Bharatiya Janata Party, a veteran of Hindu-nationalist umbrella group the Rashtriya Swayamsevak Sangh, was named last year as minister for the environment, forest and climate change. Dave had been due to take a final decision on an application for an indigenously developed GM crop of mustard.

14 Business Daily Friday, May 19 2017

International In Brief Budget

Russian government approves lower deficit Russia’s government has approved lowering this year’s planned budget deficit to 2.1 per cent of gross domestic product, as proposed by the finance ministry, Finance Minister Anton Siluanov said yesterday. The finance ministry on Wednesday suggested cutting the 2017 budget deficit by 829 billion roubles (US$14.34 billion) to 1.92 trillion roubles because it now expects higher budget revenues than it had previously. Russia had initially targeted a 2017 deficit of 2.75 trillion roubles, or 3.2 per cent of GDP. But the finance ministry now expects oil prices to average more this year than the US$40 a barrel it used for its initial calculations. Oil industry

Nigeria’s NNPC finalising oil-for-product swaps Nigeria’s state oil company is in the final stage of signing US$6 billion worth of deals to exchange more than 300,000 barrels per day (bpd) of crude oil for imported gasoline and diesel, sources with direct knowledge of the process told Reuters. The contracts, which come three months later than expected, include three more pairs of companies than last year, reflecting Nigeria’s increased reliance on NNPC for fuel imports. A lack of local refining capacity means Nigeria is reliant on imported gasoline, kerosene and other petroleum products.

Employment

U.S. jobless claims fall Claims have now been below 300,000, a threshold associated with a healthy labour market Lucia Mutikani

ew applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls tumbled to a 28-1/2-year low, pointing to rapidly shrinking labour market slack. The economy’s brightening prospects were further boosted by other data on Thursday showing a sharp acceleration in factory activity in the mid-Atlantic region this month. While the raft of upbeat economic data support an interest rate hike next month, the Federal Reserve’s decision will also hinge on the state of financial markets, which have been rattled in recent days by Trump administration scandals. Initial claims for state unemployment benefits decreased 4,000 to a seasonally adjusted 232,000 for the week ended May 13, the Labor Department said. That pushed claims close to levels last seen in 1973. Claims have now decreased for three consecutive weeks. Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 240,000. Claims have now been below 300,000, a threshold associated with a healthy labour market, for 115 straight weeks. That is the longest

such stretch since 1970, when the labour market was smaller. The labour market is close to full employment, with the unemployment rate at a 10-year low of 4.4 per cent. The number of people still receiving benefits after an initial week of aid dropped 22,000 to 1.90 million in the week ended May 6, the lowest level since November 1988. Last week’s claims data covered the survey week for May’s nonfarm payrolls. Claims fell 11,000 between the April and May survey periods suggesting further job gains this month. The economy created 211,000 jobs in April after adding only 79,000 positions in March.

Rate hike odds fall

Labour market strength and tightening could allow the Fed to raise rates at its June 13-14 policy meeting. The U.S. central bank raised rates in March and has signalled two more rate hikes in 2017. Data such as retail sales and industrial production, which suggested economic growth picked up early in the second quarter after rising at an anaemic 0.7 per cent annualized rate in the first quarter, also have supported expectations of a rate hike. But a stock market sell-off amid uncertainty over President Donald Trump’s political future could

jeopardize further monetary policy tightening. Financial markets are pricing in a 60 per cent chance of a 25-basis-point hike at the Fed’s June meeting, down from 78.5 per cent on Tuesday, according to CME Group’s FedWatch program. In a separate report the Philadelphia Fed said its index for current manufacturing activity in the mid-Atlantic region jumped to a reading of 38.8 this month from 22.0 in April. The index recovered some of the declines of the previous two months.

Key Points Weekly jobless claims fall 4,000 Four-week average of claims decreases 2,750 Continuing claims drop 22,000 Philadelphia Fed factory activity index jumps in May The current new orders and shipments indexes remained at high readings, the survey showed. Both the delivery times and unfilled orders indexes were positive for the seventh straight month, suggesting longer delivery times and increases in unfilled orders. Firms reported an increase in manufacturing employment this month, though the current employment index fell three points. Reuters

Turkey

Erdogan expected to streamline economic team Turkish President Tayyip Erdogan aims to streamline his economic team after he resumes leadership of the ruling AK Party on Sunday in an effort to speed up decisions and reassure markets that ministers are working to the same plan, sources said. Erdogan is returning to leadership of the party after last month’s referendum lifted a barrier to the president belonging to a political party. The referendum also granted him sweeping powers, which the government said would allow it to accelerate law-making and roll out long-awaited tax and investment reforms. Technology

Zurich Insurance using robots to decide claims Zurich Insurance is deploying artificial intelligence in deciding personal injury claims after trials cut the processing time from an hour to just seconds, its chairman said. “We recently introduced AI claims handling ... and saved 40,000 work hours, while speeding up the claim processing time to five seconds,” Tom de Swaan told Reuters, after the insurer started using machines in March to review paperwork, such as medical reports. “We absolutely plan to expand the use of this type of AI (artificial intelligence),” he said.

EU reference

Foreign investment in Germany stagnates It created at least 29,000 new jobs Foreign investment in Germany stayed at the same level year-onyear in 2016, Germany’s trade and investment agency said yesterday, despite the economy growing at its fastest rate for five years. The value of projects was stable at 6.2 billion euros (US$6.9 billion) after having nearly doubled in the previous year to reach the highest level on record, according to the survey by government agency Germany Trade & Invest (GTAI). The agency said foreign investment created at least 29,000 new jobs in Germany and the number of foreign investors rose 2 per cent, with 1,944 new projects started during the year. Germany’s economy - the biggest in Europe - grew 1.9 per cent last year, driven by higher household and state

spending, and picked up speed in the first quarter of 2017, expanding 0.6 per cent from 0.4 per cent in the last three months of 2016. “Germany is highly attractive for foreign investors. They want to benefit from the economic upswing or secure technology,” GTAI official Thomas Bozoyan said.

‘China was the largest single investor for a third straight year with 281 new projects’ China was the largest single investor for a third straight year with 281 new projects, followed by the United

States with 242, Switzerland with 194 and Britain with 125. The figures exclude foreign-led mergers and acquisitions, which last year account more than quadrupled to reach 1,707 in 2016 compared with the previous year, according to the survey. Those were dominated by companies from the United States and Britain. Chinese takeovers accounted for less than 3 per cent of the foreign-led M&A deals. “But their transaction volume is relatively high. Chinese investors spent a lot of money to buy into German companies,” Bozoyan said. Home appliance maker Midea’s acquisition of robot-maker Kuka was just one deal from China last year, with the total value of Chinese-led deals at more than US$10 billion, about 40 times as much as in 2015, according to Thomson Reuters data. Reuters

Business Daily Friday, May 19 2017 15

Opinion

Insurance monster China created comes back to bite Nisha Gopalan a Bloomberg Gadfly columnist

s Beijing about to find out what it’s like to be held hostage by a monster it helped create? For the last several years, China has allowed smaller insurance companies to flourish in the interests of creating competition for industry heavyweights such as China Life Insurance Co. and Ping An Insurance Co. Authorities wanted to shake-up the population’s save at all costs mentality and at the same time, encourage investment in areas other than the nation’s oftentimes volatile stock market. Sales of universal life products -- shortterm, high-yielding investments that include a s m a l l i n s u ra n c e billion RMB component -Anbang Q1 insurance boomed, with newer policies market entrants like Anbang Insurance Group Co., Huaxia Life Insurance Co. and Foresea Life Insurance Co. the main issuers. To fulfil the heady returns promised, those firms embarked on highly leveraged acquisitions, from hotels in New York to insurance assets in South Korea and Belgium. Debt levels spiralled and before long, Beijing started to take steps to rectify the situation. In February, the China Insurance Regulatory Commission banned the chairman of Foresea Life from the industry for a decade, two months after it barred the company from selling all universal life products, indefinitely. It then prohibited Foresea Life from applying to sell new policies of any kind for three months. Now, Foresea Life is warning of mass defaults and social unrest unless the nation’s insurance regulator lifts that new-policy sale ban, according to a letter seen by the Financial Times. The unit of conglomerate Baoneng Group said it expects RMB60 billion (US$8.7 billion) in redemptions this year and might not be able to meet pay-outs unless it can sell fresh policies. Foresea Life said in a statement on its website that cash flow is stable and business relations with customers are good. It also said its debt-coverage ratios are higher than what the regulator requires. It’s difficult to see how that’s true. According to Bloomberg Intelligence analyst Steven Lam, Foresea Life’s market share slid to 0.9 percent in the first quarter, based on premiums and investment funds received, from about 2.9 percent as of March 31, 2016. And bondholders aren’t buying it either: Whatever the case, Foresea Life’s nowpublic complaint shines a spotlight on how China’s tamping down on high-risk insurance products could hurt Beijing’s much-prized focus on social stability above all else. If Anbang and Huaxia Life add their voices to the fray, Beijing may discover the real cost of its anti-leverage campaign. Bloomberg Gadfly

189

Restoring competition in the digital economy

he digital economy is carving out new divides between capital and labour, by allowing one firm, or a small number of firms, to capture an increasingly large market share. With “superstar” companies operating globally, and dominating markets in multiple countries simultaneously, market concentration throughout the Group of 20 developed and major emerging economies has increased considerably in just the past 15 years. To address this phenomenon, the G20 should create a World Competition Network to restore competition and address income inequality between capital and labour. As a larger share of total income shifts to capital across many G20 countries, the World Competition Network would seek to reverse the decline in labour’s share of GDP. During the period after World War II, 70 per cent of national GDP went to labour income, and the remaining 30 per cent to capital income. John Maynard Keynes described the stability of the labour share as something of a “miracle.” But the rule has since broken down. Between the mid-1980’s and today, labour’s share of world GDP declined to 58 per cent, while capital’s share rose to 42 per cent. Two forces in today’s digital economy are driving the global decline in labour’s share of total income. The first is digital technology itself, which is generally biased toward capital. Advances in robotics, artificial intelligence, and machine learning have accelerated the rate at which automation is displacing workers. The second force is the digital economy’s “winnertakes-most” markets, which give dominant firms excessive power to raise prices without losing many customers. Today’s superstar companies owe their privileged position to digital technology’s network effects, whereby a product becomes even more desirable as more people use it. And although software platforms and online services can be costly to launch, expanding them is relatively inexpensive. Consequently, firms that are already established can keep growing with far fewer workers than they would have needed in the past. These factors help to explain why the digital economy has given rise to large firms that have a reduced need for labour. And, once these firms are established and dominate their chosen market, the new economy allows them to pursue anticompetitive measures that prevent actual and potential rivals from challenging their position. And, as the economists David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, and John Van Reenen show, the U.S. industries with the fastest-growing market concentration have also seen the largest drop in labour’s share of income. This increased market concentration is widening

“

Dalia Marin Chair of International Economics at the University of Munich and a senior research fellow at Breugel, the Brussels-based economic think tank

the gap between the firms that own the robots (capital) and the workers whom the robots are replacing (labour). But confronting it will require us to reinvent antitrust for the digital age. As it stands, national competition authorities in G20 countries are inadequately equipped to regulate corporations that operate globally. Moreover, the G20 cannot simply trust that global competition will correct on its own the tendency toward increased market concentration. As Andrew Bernard has shown for the United States and Thierry Mayer and Gianmarco Ottaviano have demonstrated for Europe, international trade favors large superstar firms. Indeed, globalization may provide advantages to the largest and most productive firms in each industry, causing them to expand – and forcing smaller and less productive firms to exit. As a result, industries become increasingly dominated by superstar firms with a low share of labour in value added. The U.S. is a case in point. It is host to many of today’s superstar firms, and yet U.S. antitrust regulators have not been able to restrain those firms’ market power. As the G20 looks for ways to address the problem of market concentration, it should take lessons from the U.S. experience, and look for ways to improve upon the U.S.’s failures. Rather than starting from scratch, we will need to build on national-level competition authorities’ institutional knowledge, and include experienced personnel in the process. The European Competition Network can serve as a blueprint for a G20-level network. The objective of a world competition network is to build an effective legal framework to enforce competition law against companies engaging in cross-border business practices that restrict competition. The network may coordinate investigations and enforcement decisions and develop new guidelines for how to monitor market power and collusive practices in a digital economy. In the past, the G20 has focused on ensuring that multinational firms are not able to take advantage of jurisdictional differences to avoid paying taxes. But the G20 now needs to expand its scope, by recognizing that digital technologies are creating market outcomes that, if unchecked by a new World Competition Network, will continue to favour multinational firms at the expense of workers. Project Syndicate

The G20 cannot simply trust that global competition will correct on its own the tendency toward increased market concentration

”

16 Business Daily Friday, May 19 2017

Closing Hedge funds managers

Finance elite in Vegas: Long live Trump! Or Pence. Whichever The general indifference to Trump’s travails here says much about the financial industry’s view of the young administration Max Abelson, Katia Porzecanski and Nabila Ahmed

s Donald Trump’s ballooning scandals sent stocks tumbling Wednesday, hedge fund managers gathered at the Bellagio in Las Vegas for one of the industry’s most popular conferences. First on the day’s agenda: pedalling exercise bikes, visiting a spa and trying a beauty service called GlamSquad. The mood was relaxed. The SALT conference was founded by Anthony Scaramucci, a fund management executive-turned-Trump booster, and was the first big fundraising stop last year for campaign finance chief Steven Mnuchin, who’s now Treasury secretary. Many attendees this year stand to profit if Trump fulfils his promise to slash taxes and Wall Street regulation. So why weren’t they freaking out over chatter of potential impeachment? “We all feel comfortable with Mike Pence leading,”

said Anna Stone, a marketing and investor relations consultant whose clients include family offices and hedge funds. “Some people would be happier.” The general indifference to Trump’s travails here says much about the financial industry’s view of the young administration. For many on Wall Street, deregulation and tax reform matter more than a border wall or travel ban. Even if Trump succumbs to crisis, the thinking goes, Republicans and Pence can press on. The vice president has taken steps to begin building his own political war chest. The scene at the conference, where a white McLaren was parked indoors for guests to ogle, contrasted with the uproar in markets, where the S&P 500 Index fell the most since September and Goldman Sachs Group Inc. shares slid the most in almost a year.

Ignoring news

On a quiet, shaded patio at the hotel, attendees sipped coffee and networked. Down

below, Bank of America Corp. and competing prime brokerages lured clients to poolside bungalows. David Rubenstein huddled at a corner table at the Palio Cafe, where a cold-pressed juice costs US$12.50. Fellow billionaire Marc Lasry took calls. Some attendees confessed they hadn’t tuned in yet to the scandal’s latest developments, with a few saying they were more interested in finding that night’s parties. Others simply brushed off allegations that Trump asked the head of the FBI to drop an investigation into former national security adviser Michael Flynn, and reports that the president disclosed sensitive intelligence to Russian officials. Trump has denied wrongdoing. By evening, the Justice Department had named a special counsel. Billionaire real estate investor Sam Zell said he dislikes the “cacophony” around the president, and that none of the revelations this week suggest Trump should be removed.

Ben Bernanke, former Federal Reserve chairman

“I think the president has the competence, and all this unfit-for-office stuff is a bunch of stuff,” Zell said in an interview from the conference.

Steady hands

The elite in Las Vegas weren’t alone. In Washington, Wall Street consultant Paul Atkins said things were just fine. The former member of the Securities and Exchange Commission runs Patomak Global Partners LLC and sits on Trump’s Strategic and Policy Forum. He had just come from a meeting of the board of a mutual fund company that featured Craig Phillips, a former BlackRock Inc. executive who’s leading the Treasury’s review of banking regulation. What Atkins and his colleagues care about is that the government is on its way to rolling back rules. “You can divorce the Washington drama from the good work that the administration already is doing,” he said about deregulation. “That’s what people are focusing on.” Wall Street has been too confident about Washington before, and it doesn’t always read government tea leaves perfectly. Early in the Republican primaries, few took Trump seriously. Even after June’s Brexit vote took bankers by surprise, not many predicted the novice politician could top Hillary Clinton. This year, the White House and Capitol Hill may be too gummed up to make the major changes bankers crave. “None of us in the markets yet know what’s fake and what’s real,” said Bruce Richards, who runs distressed-debt investor Marathon Asset Management. Even though the burst of delight about Trump that fuelled the U.S. stock market is coming to an end, he said, Mnuchin and economic adviser Gary Cohn lend steady hands. He doesn’t think those

two former Goldman Sachs partners are going anywhere.

Bernanke’s warning

Cohn delighted executives when he talked about privatizing U.S. infrastructure at a meeting in Washington last month with members of the Partnership for New York City, an event co-chaired by Citigroup Inc. Chief Executive Officer Michael Corbat and Blackstone Group LP billionaire Stephen Schwarzman. On Wednesday, Kathryn Wylde, the partnership’s president, said her colleagues won’t abandon Trump because of the day’s crises. “It’s the only game in town,

“None of us in the markets yet know what’s fake and what’s real” Bruce Richards, head of distressed-debt investor Marathon Asset Management

so I think most of the financial and other leaders will stick with it until they can’t,” she said. “The focus will shift to the leadership in Congress and working with them on trying to drive these important items home.” Ben Bernanke was on the SALT schedule alongside former Vice President Joe Biden, at least five billionaires and the comedian Steve Harvey. The former Federal Reserve chairman had a warning for his calm colleagues. “Markets are very blasé about political risk until the very last moment,” Bernanke said. “They go along until something happens that pulls the rug out from under their assumptions.” Bloomberg News

Watchdog

FDI

Results

EU fines Facebook 110 mln euros over WhatsApp deal

Mainland’s foreign direct investment slips

Alibaba reveals US$6 bln share buyback as misses EPS forecast

European Union antitrust regulators fined Facebook 110 million euros (US$122 million) yesterday for giving misleading information during a vetting of its deal to acquire messaging service WhatsApp in 2014. Calling it a “proportionate and deterrent fine”, the European Commission, which acts as the EU’s competition watchdog, said Facebook had said it could not automatically match user accounts on its namesake platform and WhatsApp but two years later launched a service that did exactly that. “The Commission has found that, contrary to Facebook’s statements in the 2014 merger review process, the technical possibility of automatically matching Facebook and WhatsApp users’ identities already existed in 2014, and that Facebook staff were aware of such a possibility,” the Commission said. Facebook said in a statement the errors made in its 2014 filings were not intentional and that the Commission had confirmed they had not affected the outcome of the merger review. The fine would not reverse the Commission’s decision to clear the purchase of WhatsApp and was unrelated to separate investigations into data protection issues, it added. Reuters

Foreign direct investment into China fell 0.1 per cent to RMB286.41 billion (US$41.6 billion) in the first four months of 2017 from the same period a year earlier, the Ministry of Commerce said yesterday. Foreign investment into China slowed in April, falling 4.3 per cent from a year earlier to RMB59.91 billion, compared to 6.7 per cent growth in March. In the first three months of the year, foreign investment rose 1 per cent. The Chinese government has promised new measures to further open its economy to foreign investors this year, including easing limits on investment in banks and other financial institutions. Foreign investment into China last year rose 4.1 per cent but was less than outbound investment for the first time as capital outflows put pressure on the government to support the yuan. Outbound investment has declined sharply this year in the face of strict controls on funds leaving the country, with inbound investment for the first four months of the year surpassing outbound investment by over US$15 billion. China’s April non-financial outbound direct investment fell 71 per cent from a year earlier to US$5.82 billion, according to Reuters’ calculations. Reuters

Alibaba Group Holding Ltd said yesterday it would buy back shares worth up to US$6 billion over two years, as it beat first quarter revenue forecasts but missed income estimates. The Chinese company, which is looking to grow its business beyond e-commerce and is targeting new lines in cloud computing, big data, entertainment and offline retail, says the repurchase will replace its existing buyback program. Alibaba said strength in the Chinese e-commerce market helped its total revenue rise to RMB38.6 billion (US$5.6 billion) in the quarter to the end of March, versus an average forecast of RMB36 billion according to Thomson Reuters I/B/E/S. But Alibaba’s adjusted EPS (earnings per share) was RMB4.35 (US$0.63), versus estimates of RMB4.48. Alibaba has ramped up expansion outside of China and consolidated its Southeast Asian retail site Lazada, which it acquired last year. This included integrating the Singapore-based platform’s payment system, Hello Pay, with Alibaba’s own payment affiliate, Alipay. It has taken steps to expand its U.S. merchant base over the past quarter and said it plans to host an event next month, which 1,000 U.S. businesses are expected to attend. Reuters