Business Daily #1302 May 24, 2017

Trial of South Korean ex-President begins Corruption Page 12

Wednesday, May 24 2017 Year VI Nr. 1302 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Legal

Macau Lawyers Association requests info regarding alleged abuses of power by officers of PSP and PJ, says lawyer Page 3

Safety

Nuclear safety co-operation agreement under discussion with Guangdong authorities, says Secretary for Security Page 3

www.macaubusinessdaily.com Reserves

Gov’t fiscal reserves reach MOP471.4 bln as at end-Q1 Page 3

Markets

Margin lending shrinks in Mainland as stock market correction continues Page 8

Superbridge Investigation HKZM Bridge

ICAC - the anti-corruption watchdog of Hong Kong - have made 21 arrests. Calling into question the stability of the Hong Kong-Zhuhai-Macau Bridge.

Potentially falsified tests on concrete compression and a botched internal investigation by the contractor have emerged. Possibly leading to a complete re-evaluation of the project, originally slated for completion this year. Page 6

Row, row, row your boat

The Dragon Boat Festival races begin this Saturday. Building the spirit of unity among participating companies, says Peter Tang Tak Seng, Secretary General of the International Dragon Boat Federation. This year, 167 teams will compete in various categories.

With welcoming arms

Tourism Visitor arrivals in April saw an 11 pct increase y-o-y, at 2.74 million. Driven by the Easter holiday, which alone brought in nearly half a million visitors. Overnight visitors increased some 18 pct y-o-y while average length of stay hit 1.2 days.

Chinese visitation was up 7 pct in the month. Page 2

Under the mattress

Culture Page 4

HK Hang Seng Index May 23, 2017

25,403.15 +11.81 (+0.05%) Worst Performers

Galaxy Entertainment Group

+4.01%

China Life Insurance Co Ltd

+0.80%

China Resources Power

-1.30%

Cathay Pacific Airways Ltd

-0.86%

China Unicom Hong Kong

+3.86%

CK Hutchison Holdings Ltd

+0.65%

Lenovo Group Ltd

-1.21%

Hang Lung Properties Ltd

-0.72%

Swire Pacific Ltd

+1.85%

China Shenhua Energy Co

+0.63%

Hengan International Group

-1.07%

Kunlun Energy Co Ltd

-0.70%

China Merchants Port Hold-

+1.59%

Ping An Insurance Group Co

+0.62%

Sino Land Co Ltd

-1.05%

Sun Hung Kai Properties Ltd

-0.62%

Sands China Ltd

+1.02%

Geely Automobile Holdings

+0.52%

New World Development

-1.04%

Hong Kong Exchanges &

-0.61%

24° 28° 23° 27° 24° 26° 24° 28° 25° 29° Today

Source: Bloomberg

Best Performers

THU

FRI

I SSN 2226-8294

SAT

SUN

Source: AccuWeather

Spending A report by the Chinese Academy of Social Sciences points to stronger spending power among citizens. According to the study, Mainlanders acquisition strength could be 20 per cent higher than publicly used numbers. Page 8

2    Business Daily Wednesday, May 24 2017

Macau Tourism

Number of Hong Kong visitors rises by 25.3 pct y-o-y to 608,879 in April

Come on up The Easter holidays helped visitation numbers to the MSAR increase by 11 per cent y-o-y in April, reaching a total of 2.74 million visitors Nelson Moura nelson.moura@macaubusinessdaily.com

T

he city’s visitor arrivals in April increased 11 per cent year-on-year, reaching a total of 2.74 million, the latest data released by the Statistics and Census Service (DSEC) reveals.

Visitation numbers in April also went up 9.7 per cent month-to-month, with the DSEC justifying the overall increases on the Easter holiday having fallen in April of this year.

Just in the Easter holiday period, spanning April 14 to April 17, the number of visitors to the MSAR reached 427,900, increasing 5.6 per cent as compared to the same period last year, according to data released previously by the Macao Government Tourism Office.

The number of visitors staying overnight in April rose by 17.7 per cent yearly to 1.44 million while sameday visitors went up by 4.4 per cent year-on-year to 1.30 million.

The average length of stay

in April grew by only 0.1 percentage points yearly to 1.2 days, with the average overnight stay at 2.1 days.

Usual suspects

The largest source of visitors to the MSAR continued to be Mainland China, with numbers going up 7.1 per cent year-on-year to 1.76 million - 64.5 per cent of total visitation - while the number of Chinese tourists travelling via the Individual Visit Scheme in April went up 18.5 per cent yearly to 823,373.

Most of the Chinese tourists to the city during the month were primarily from Guangdong Province, amounting to 725,648, with the city also receiving some 87,911 and around 65,000 visitors from the provinces of Hunan and Fujian in April, respectively.

South Korean and Hong Kong tourists increasing

The number of visitors from South Korea to the MSAR in April grew by 48.7 per year-on-year to 64,924, with overnight visitation from the country rising considerably by 76.4 per cent year-on-year.

The second largest growth in visitation in April was in visitors from Hong Kong, which saw a 25.3 per cent year-on-year increase, to 608,879.

Meanwhile the number of visitors from Taiwan - the third largest source of visitors to Macau after Mainland China and Hong Kong - was the only country that saw visitation down yearly in

April, falling 2.8 per cent to 89,567.

Tourists from Japan and the United States also increased in April, by 5.2 per cent yearly to around 20,200 and by 5.4 per cent year-onyear to 17,756, respectively, while visitors from Australia and the United Kingdom increased 17.4 per cent to 10,328 and 18.3 per cent to 6,710, respectively.

Joining the months

In the first four months of this year visitors to Macau amounted to some 10.61 million, representing a yearly hike of almost 7 per cent, with overnight visitors going up 13.5 per cent yearon-year to 5.37 million and same-day visitors going up by almost 1 per cent yearly to 5.24 million.

Business Daily Wednesday, May 24 2017 3

Macau Crime

Lawyers building a case against obstructive cops An increase of complaints by local lawyers against PSP and PJ officers for abuse of power has led the Macau Lawyers Association to prepare a joint complaint to the government Nelson Moura nelson.moura@macaubusinessdaily.com

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n increase in complaints by local lawyers against the Public Security Police Force (PSP) and Judiciary Police (PJ) for abuse of power by its officers is what has led the Macau Lawyers Association (AAM) to prepare a joint complaint to deliver to the government, local sources told Business Daily.

“Lawyers have been complaining of not being able to defend their clients’ rights properly [because of] security officers - by some PJ officers, but mainly by PSP officers.

They complain of police officers not

Nuclear energy

allowing them to have access to or talk to their clients, blocking them from filing legal requests and making processes that should be simple and direct extremely hard,” a local lawyer anonymously told Business Daily.

According to the lawyer, complaints of this nature have increased in recent months and could be the reason for the AAM choosing to issue a release to lawyers in Macau requesting they direct any complaint of abuse of power they have to the organisation.

In the release sent on May 4, the organisation stated that ‘several complaints of misconduct by security officers’ had led the organisation to request lawyers send information of any witnessed cases of abuse of

power or infringement of residents’ and non-residents’ rights to the AAM

by May 16.

According to lawyer Oriana Inácio Pun, a member of the AAM management, the Association has received “reports of conflicts between some lawyers and police authorities” with the release being a way of collecting

information on these kinds of incidents to later tackle the government on the issue.

“I can’t say exactly how many or if any complaints have been sent after the release was sent. The AAM has yet to discuss the issue, what the complaints are and if they’re valid,” Mr. Pun told Business Daily, adding that an AAM general assembly is slated to take place today.

Business Daily contacted the PSP and the PJ for comment on the alleged complaints of abuse of power by its officers but no response had been received by the time this newspaper went to print.

First reactor unit of Taishan nuclear power plant expected to be completed in second half of year

Staying safe The MSAR Government is still in talks with the Guangdong Nuclear Accident Emergency Committee to establish a nuclear security information exchange agreement Nelson Moura nelson.moura@macaubusinessdaily.com

Secretary for Security Wong Sio Chak said a nuclear safety co-operation agreement is currently being discussed by the MSAR Government and the Guangdong Nuclear Accident Emergency Committee, a release by the Office of the Secretary for Security announced yesterday.

According to Secretary Wong, on May 18 the Commissioner General of

the Unitary Police Services (SPU), Ma Io Kun, went to the city of Taishan to meet with the Guangdong Nuclear Accident Emergency Committee and present Macau’s proposals for a co-operation agreement.

After confirming a final version of the agreement, the Guangdong Provincial Government will present it to the Chinese Central Government for approval, after which the agreement can officially be signed.

Secretary Wong stated he hoped the agreement can be signed as quickly as possible in order to create a protocol for nuclear security information exchange, but that no information had been received by his department that the nuclear power plant under construction had ‘any problems’.

He also added that with the Security Forces Co-ordination Office being integrated with the SPU after May 25, nuclear security information exchange would fall under the jurisdiction of the SPU’s Commissioner General, with nuclear security to be one of the main functions of the newly created Civil Protection

Reserves

Fiscal reserves hit MOP471.4 bln Macau SAR fiscal reserves amounted to MOP471.37 billion (US$58.77 billion) at the end of the first quarter, according to data released by the Monetary Authority of Macau (AMCM) yesterday.

Of the total, MOP272.84 billion constituted deposits and current accounts, with MOP149.66 billion credit.

During the period the reserve saw an annualised rate of return of 3.9 per cent, reaching MOP4.4 billion, notes the data, with assets divided between global bonds (at about 32 per cent), global equities (about 11 per cent) and money market instruments (about 57 per cent).

Investments in fixed income markets attracted income amounting to MOP1.3 billion during the quarter, due to the ‘prudent asset allocation mix and continuous risk control measures’ noted the Authority.

Operational Centre.

Jointly run by China General Nuclear Power (CGN) and Electricité de France (EDF), the Taishan nuclear power plant comprises two reactor units, with Unit 1 set to start operation in the second half of this year and Unit 2 to open in the first half of 2018, as reported previously by Business Daily.

Upon opening, the Taishan nuclear

power plant will be the first operational European Pressurised Reactor (EPR) - a nuclear reactor developed

by French companies EDF, Areva NP and German company Siemens - in the world.

The new reactor technology was described by the European Nuclear Society as having a high level of security and of being highly resistant to external incidents.

4 Business Daily Wednesday, May 24 2017

Macau

Cultural

Digging in for the Dragon Boat races With the Dragon Boat Festival falling next Tuesday, the city is preparing to hold another edition of the International Dragon Boat Races, set to kick off Saturday. Business Daily delves into the history and current development of this cultural phenomenon Cecilia U cecilia.u@macaubusinessdaily.com

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eter Tang Tak Seng, Secre­ tary General of the Interna­ tional Dragon Boat Federation, remembers Macau launching its first official races in 2000, and him dipping a toe in the event as a rower with the Macau China Dragon Boat Association in 2005.

Compared to past editions of the Festival, Mr. Tang points out that the races in Macau are improving in both number and participants from different social sectors including students, private company employees and civil servants.

“Today, the sport has permeated different social sectors,” says Mr. Tung.

Its primary attraction, according to Mr. Tung, is the spirit attached to the sport itself.

To move the boat at high speed, crewmembers are required to row at the same punishing speed in total synchronisation.

The Chinese saying of all in one heart describes the exact spirit of rowing a dragon boat, with all crewmembers having the same goal of going forward, he notes.

Nevertheless, Mr. Tang says that effort is needed in order to co-ordinate the crew’s efforts, and this can train members’ willpower, positively influencing the rowers.

In recent years, gaming operators have also set up their own teams to join the annual traditional event, seeing the potential positive impact upon

their workers.

“It’s because of the spirit of unity, and so these companies also wish to motivate, raise morale and connect with co-workers [who] can be workers from all departments and ranks,” said Tung.

Like most Dragon Boat rowers, Mr. Tung is a businessman.

He disclosed that even those representing Macau in international Dragon Boat competitions are amateurs.

“As far as I’m aware, there are no professional full-time sports athletes in Macau” asserts Mr. Tung, explaining that unlike countries like the United States or the United Kingdom, Macau has little commercial demand for sports players.

Hit the drum and row!

Two different boats are used in the races - small and standard Dragon Boats.

Generally, there are 18 to 20 paddlers per standard size Dragon Boat and eight to 10 rowers in the small boat, plus a drummer and a helmsman.

Races feature an open category, as well as competitions for youths, adults and seniors, as well as males, females and mixed groups.

The races this coming weekend, according to the Sports Bureau (ID), will assemble 167 local and overseas teams.

Because of the numerous categories and groups of races, Mr. Tung remarked: “We have very limited time for the international races . . . we also need time to undergo procedures like assemblies, checking documents

Peter Tang Tak Seng, Secretary General of the International Dragon Boat Federation

and equipment. So we can’t perform many races in only one day.”

Reaching out

Mr. Tung has been the Secretary General of the IDBF for four years, with the Federation itself having been established in 1991.

According to Mr. Tung, foreign teams from Indonesia, Thailand, Singapore, the Philippines, Mainland China and even the United States and Canada have traditionally come to Macau to participate in the Dragon Boat Races, with this year’s race no exception.

The International Dragon Boat Race is organised by the Sports Bureau, together with the IDBF, and takes place this weekend and next Tuesday.

Local races will take up the weekends with international races on Tuesday only, when the Dragon Boat Festival is officially celebrated.

An organising committee in charge of the events selects which foreign teams join the races.

“We pick new teams every year so as to make the races improve the reputation of the event and to promote Macau, as well as to act as exchange experiences,” says Mr. Tang, adding that teams from Macau also participate in world championship races in other regions. “Chinese from different

The legend of Qu Yuan

“[Dragon Boat Racing] has to be related to the legend of Qu Yuan,” says Peter Tang Tak Seng, Secretary General of the International Dragon Boat Federation (IDBF).

The sport itself started 2,000 years ago, he says, when a Chinese poet and Minister named Qu Yuan, who lived during the Warring States of ancient China, had advised the emperor on the politics of an ongoing conflict, resulting in him being framed by other court members and causing

Asian regions have deep feelings and attachment to the sport and so the races definitely have an impact on the city, including helping the city’s tourism development.”

In terms of popularity among spectators, Mr. Tung recalls that the venue of the event was only fixed at Nam Van Lake after the East Asian Games were held in Macau in 2005, when the race was an official event.

“With a fixed venue and more seats provided at the Nam Van Lake, more spectators are definitely attracted to watch the racing,” says Mr. Tung, adding that the racing is widely enjoyed by both locals and tourists.

According to the Sports Bureau, some 26,000 spectators were recorded at last year’s event.

Meanwhile, in order to attract more residents to enjoy the racing, the ID has organised cultural displays such as dancing, music, magic and acrobatics as well as Dragon Boat exhibitions, food stalls and stalls selling cultural and creative products.

Tung expresses the hope that future promotion of the sport focuses on younger generations, and secondary school students in particular, in order to “allow them to know more about the culture, to build up the spirit of being united and to develop positively.”

him to jump into a river to commit ritual suicide.

Nearby villagers tried to save the poet, paddling out to where he drowned.

According to legend, his death was honoured every year by villagers paddling out to the river, playing drums and throwing food into the river to feed the fish. The food was later developed into zongzi, a traditional Chinese food made of glutinous rice stuffed with different fillings and wrapped in bamboo, reeds or large flat leaves.

Business Daily Wednesday, May 24 2017 5

Macau Prices

Inflation stable Beverage and tobacco prices rose over 12 per cent during the year ended March 2017 Sheyla Zandonai sheyla.zandonai@macaubusiness.com

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he Composite Consumer Price Index in April posted a marginal increase of 0.8 per cent yearon-year, slightly higher than the preceding month, when inflation was up 0.72 per cent, according to the latest data released by the city’s Statistics and Census Services (DSEC) yesterday.

DSEC noted that the minor increment observed was mainly attributable to ‘higher charges for eating out and outpatient services, as well as increase in tuition fees and

rising gasoline prices.’

Prices for alcoholic beverages and tobacco have increased 8.44 per cent while those for education hit a 7.42 increase year-on-year.

Food and non-alcoholic beverages, which accounted for the largest share of household expenditure, also went up slightly by 0.69 per cent.

Among the prices for services and goods that registered a decrease are communications, down 5.57 per cent, housing (i.e.) actual and imputed rental, maintenance and repair, and fuels, down 1.41 per cent year-on-year.

The Composite CPI is calculated to reflect the impact of price changes on the general households in Macau.

According to DSEC, households are divided into two groups: the CPI-A, which refers to nearly 50 per cent of the households in the city, with an average monthly expenditure of MOP10,000 to MOP29,999, and the CPI-B, which relates to some 30 per cent of local households, with an average monthly expenditure of MOP30,000 to MOP54,999.

The CPI-A and CPI-B rose 0.77 per cent and 1.05 per cent, respectively, year-on-year.

Month-to-month breakdown

Source: DSEC

On a monthly basis, the Composite CPI remained stable in April 2017, recording a minimal increase of 0.1 per cent. The DSEC noted that slightly increased charges for package tours and the new arrival of Summer clothing

pushed up price indices for recreation and culture as well as for clothing and footwear, up 1.74 per cent and 1.70 per cent, respectively, month-to-month.

Whereas prices for food and non-alcoholic beverages also increased slightly from the previous month, up 0.1 per cent, the service noted that prices have retreated for various goods and services including communications (down 3.64 per cent), as well as alcoholic beverages and tobacco (down 0.24 per cent), housing and fuel (down 0.14 per cent) plus transport (down 0.1 per cent). Prices of food such as fresh fish, fresh pork, vegetables and fruits have also receded.

When compared to the previous month, the CPI increase for households with an average monthly expenditure of MOP30,000 to MOP54,999 (CPI-B), at 0.18 per cent, was higher than that for

households with an average monthly expenditure of up to MOP29,999 (CPI-A), which rose 0.09 per cent.

Year comparison

For the twelve months ended April 2017, the average Composite CPI rose 1.51 per cent from the previous period. The increase in price indices was driven by higher charges for beverages and tobacco, up 12.65 per cent, education, up 7.87 per cent, and transport, which posted an increase of 6.58 per cent.

The average CPI-A and CPI-B rose 1.40 per cent and 2.42 per cent, respectively, when compared to the previous period.

Overall, the recent history of consumer price variation in Macau shows that annual inflation rates have gradually fallen since 2012, when the annual inflation rate was estimated at 6.11 per cent. It reached 5.50 per cent in 2013, 6.05 per cent in 2014, 4.56 per cent in 2015, and 2.37 in 2016.

6 Business Daily Wednesday, May 24 2017

Macau Opinion

HKZM Bridge

José I. Duarte*

Arrests call into question HKZM Bridge stability

Legal acumen

ICAC arrests 21 for ‘alleged corruption’ relating to falsified concrete compression tests

We should always be confident that public services strive to keep their actions legal, and when they do not there will be effective mechanisms to deal with the situation. More frequently than we might wish, that does not appear to be the case. A prominent member of our polity has recently protested that many in charge of public services have little legal know-how.

Others have made similar remarks before. It is possible that illegal practices are not just the outcome of mere legal ignorance, however generalized it might be. We should ask ourselves if there are not other causes.

There are two main ways, to put it simply, whereby actions by the public services may be questionable. I will not delve into the specific meaning some words used herewith can acquire in a strictly legal sense. A common sense understanding will suffice – or so I hope.

In some cases, the decisions or rules set by the Administration may have failed some necessary procedural steps. Their contents will not violate other applicable norms or principles; but that formal irregularity, so to speak, will put their legality into jeopardy. In other cases, the contents themselves may be at odds with other laws or obligations. In extreme cases, they may be legally inexistent or void.

Surely, a good understanding of the pertinent legal rules may help to prevent such situations. But putative ignorance by those in charge of the various departments and services alone, even if it exists and is widespread, cannot explain everything.

They have advisors and, in particular, legal advisors.

There are enough of them, without a shadow of a doubt, to ensure that proper advice on procedural and substantial matters is at hand.

So other factors must be at play.

Just look at the reports produced over several years by the audit and the anti-corruption commissions! They reveal that irregular or illegal practices are quite common.

But they do not seem to trigger meaningful operational or disciplinary actions. The discussion must then go well beyond the legal skills of those in charge, or the remit of their legal advisers. Such ‘tolerance’ raises questions about authority, responsibility and management styles, for a start. However, these issues are seldom, if ever, addressed.

The outcome is that in practice, intentionally or not, disregard for the law is tolerated and becomes, somehow, ‘acceptable,’ if not ‘normal practice.’ *Economist and permanent contributor to this newspaper.

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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series of 21 arrests conducted by the Independent Commission Against Corruption (ICAC) of Hong Kong have called into question whether the Hong Kong-Zhuhai-Macau Bridge may need to be rebuilt.

According to a press release by the anti-graft authority of the HKSAR, the arrests were made ‘for alleged corruption in relation to their submission of false concrete compression test reports’.

In question are two senior executives and 19 staff members of a contractor working for the Civil Engineering and Development Department, which has yet to release an official response to the arrests on its website. The ICAC notes that the government body ‘has rendered full assistance to the ICAC during its investigation’.

The 21 individuals arrested have since been released on bail, while the anti-graft authority notes that ‘enquiries are continuing’.

The CEDD has been working with the contractor, so far unnamed by the ICAC, since 2013, having ‘engaged the contractor to conduct compression tests on samples of concrete from the Hong Kong-Zhuhai-Macau Bridge Product’.

The group notes that the ‘test for each sample was required to be conducted within a set time frame and

all concrete samples (in cube form) were required to pass the test’.

The results of the enquiry found that the contractor in question could have ‘adjusted the times on the testing machines to cover up irregularities’ resulting from not conducting the tests ‘within the set time frame’.

In addition, the samples themselves could have been replaced ‘by using a metal calibration cylinder and/or high strength concrete cubes to falsify the tests, so that the tests would appear to have been conducted properly’, notes the information released by the ICAC. In addition, the enquiries by the ICAC found that ‘the two senior site laboratory technicians had certified the false test reports. It was suspected

that they might have corruptly connived int the submission of the false reports to the CEDD.’ The anti-graft body notes that it suspects ‘the malpractice might have started in early 2015’, and that a corruption complaint referred by the CEDD led to the investigation.

An internal investigation, conducted by the contractor upon CEDD’s request found that ‘the use of metal calibration cylinder and/or high strength concrete cubes to falsify tests’ was not included in the investigation report by the contractor submitted to the CEDD. The ICAC notes that it suspects the contractor might have submitted the ‘misleading investigation report to the CEDD to defraud the department’.

Previous reports have affirmed the bridge would be finished by the end of this year. Business Daily contacted the CEDD for comment and awaits a response.

Acquisition

Completion of Macau Life Insurance Company sale postponed The deadline for the acquisition of Macau Life Insurance Company Limited, settled nearly a year ago on June 2, 2016, has been pushed back a further three months from the original date defined in the share sale deal, to September 2, following an agreement between the parts filed

with the Hong Kong Stock Exchange on Monday.

Dah Sing Financial Holdings is the holding company for the group’s life and general insurance business in Macau and in Hong Kong.

Pursuant to the sale agreement, Dah Sing and Macau Insurance Company

Social Housing

IH to consider regular social housing applications With the high demand for social housing units in the city, the Housing Bureau stated that the government is considering including regular social housing applications in the new system, but added that the new arrangement can only be made after completion of legislation of the Social Housing Law. Meanwhile, the Bureau affirmed that the Social Housing Law bill has already entered legislative proceedings, stating that the legal affairs department is currently working on

the legal analysis and verification.

Legislator Ella Lei Cheung I questioned the government about its schedule for the next round of social housing applications, saying the last application was opened in 2013.

Given the time required for the completion of the bill, the legislator enquired whether any policy was being set up to handle emergent needs.

The Housing Bureau replied that residents who are facing social, physical or mental crisis are qualified to apply for social housing. C.U.

Limited (MIC) had agreed to sell their insurance businesses to Hong Kongbased Everwin Enterprise Limited, a subsidiary of Fujian Thai Hot Investment Company Limited, a Chinese conglomerate.

In addition to the sale of Macau Life Insurance Company Limited for HK$217 million (HK$210.68 million/ US$27.05 million), the deal defined the acquisition of Dah Sing Life Assurance Company (DSLA) and Dah Sing Insurance Services Limited (DSIS) for a total amount of HK$7.78 billion in cash, according to a previous filing by the company.

Dah Sing Banking Group Limited, another Hong Kong-listed company under the Dah Sing group, is also the parent company of Banco Comercial de Macau. S.Z.

Business Daily Wednesday, May 24 2017 7

Macau

Results

Growing up Analysts are predicting gross gaming revenue growth of between 14 pct and 20 pct for May, y-o-y

A

nalysts are predicting a gross gaming revenue increase in the MSAR for the month of May of between 14 and 20 per cent year-on-year, while pointing out that the territory ‘continues to warrant cautious optimism’, in particular for U.S.-based operators.

According to analysts at Wells Fargo, expectations are for a pickup of between 14 per cent and 18 per cent year-on-year, based on implied daily revenues of MOP675 million to MOP700 million. The group notes this is in line with a five-year average of

4 per cent month-on-month growth in May. Analysts at Aegis Capital Corp. predict higher year-on-year increases for the month, given that Golden Week and the Labour Day holiday fell at the beginning of the month, and have raised their initial 15 to 19 per cent estimate to 17 per cent to 20 per cent, year-on-year.

Analysts David Bain points out that, according to sources, the daily table gross gaming revenue saw a 4 per cent uptick when compared to the previous week, pointing out the ‘short-term softness’ resulting

from the visit of the Chairman of the Standing Committee of the National People’s Congress, Zhang Dejiang.

During his visit, the NPC Chairman urged the MSAR to diversify its economy, co-operate on developing Hengqin and nurture talent, while allegedly telling local delegates that “profound issues” regarding land and transportation need to be addressed.

Coming to Cotai

Analysts at Wells Fargo point out that hotel occupancy continued to pick up during the third month of the year, despite same-store rates in the market down 12 per cent in the first quarter, which it notes is ‘consistent’ with the past few weeks.

Meanwhile analysts at Telsey Advisory Group say the city warrants ‘cautious optimism’ but points out that in relation to Cotai that the ‘market context for the opening’ of

MGM China’s new property there ‘is expected to remain stable’. The property is expected to open in the fourth quarter of this year, making it the only new property to open this year; analysts predict that the opening of the Grand Lisboa Palace property in Cotai only take place in the second half of next year.

The Wells Fargo analyst said that the opening ‘should be in a stable to positive market context’, stating that ‘our impression is the company and the board of directors [of MGM Resorts International] have been skittish about share repurchases given the financial pressures MGM faced in the downturn’, although opining that ‘as capital structure permits, share repurchases would be well received by the market’.

Given the group’s results this year, ‘there should be ample case for returns to shareholders’. K.W.

8 Business Daily Wednesday, May 24 2017

Greater China Investors

Mainlanders curtail margin trading as stock market falls Current margin trading levels are 60 per cent lower than their peaks two years ago Luoyan Liu and John Ruwitch

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hina’s month-long stock market correction has suppressed investor appetite for risk and pushed margin lending to its lowest level in three months, as players tread cautiously amid concerns about economic growth and policy tightening.

Margin lending, wherein investors can multiply their investible funds by using their securities as collateral, dropped 6 per cent between mid-April and mid-May in line with a decline of a similar magnitude in China’s main stock indices.

Current margin trading levels are 60 per cent lower than their peaks two years ago.

Investors said the decline in such margin trading was driven both by expectations that the stock markets will stay weak as well as China’s on-going tightening of monetary policy to rein in excessive borrowing and speculative investment.

Analysts also reckon that China’s regulatory push since the market crash of 2015 has rooted out illegal and excessive margin financing, and thus the decline in such financing wouldn’t be a cause for alarm.

“Margin lending usually is seen as a barometer of risk appetite and sentiment, because it’s used more by aggressive investors,” said Yan

Kaiwen, an analyst with China Fortune Securities.

Yan added that the decline in margin lending was highly correlated with the drop in the major indexes.

Margin lending stood at RMB932.4 billion (US$135.31 billion) in midApril, which was when Chinese stocks began sliding, according to data from the China Securities Finance Corporation Limited.

Key Points Margin lending falls 6 pct to 3-month low Investors cautious on economic concerns, tighter policies Margin trading levels 60 pct lower than mid-2015 peak As of Monday, the benchmark Shanghai Composite Index was down 5.6 per cent, the CSI300 Index was 2.1 per cent lower and the value of the margin loans had fallen 6 per cent to RMB876 billion, the lowest level in three months.

Best to stay cautious

It was not clear how long the sluggishness would last, but investors said it was best to remain cautious.

“For now, I would not like to

place more bets by using margin, as the market is still weak,” said a Shenzhen-based investor surnamed Wang.

China’s securities regulator allowed margin financing business for stock purchases in early 2010, and the practice reached a peak of RMB2.26 trillion in mid-2015 before the market’s spectacular crash.

Only institutional investors and retail investors with RMB500,000 or more in their share trading accounts can trade shares on margin.

Margin financing collapsed in the aftermath of the stock market crash of mid-2015, during which the Shanghai stock index lost 40 per cent of

its value in three months, when the government cracked down on risky financing.

It has since recovered slowly, with declines a rare event. Notable exceptions were in January 2016 and January 2017, when financing tumbled along with stocks.

Yang Weixiao, an analyst with Founder Securities, said margin lending could pick up again as investor confidence and market momentum pick up. But that wasn’t happening yet.

“Given the still tight liquidity conditions and regulations, investors are expected to be very cautious for now,” he said. Reuters

Consumption

Shoppers are flush with hidden income and ready to spend Chinese consumers may have a lot more cash at their disposal than previously thought -- and they’re ready to flash it That’s the upshot of two items throwing fresh light on the outlook for consumer spending, a key metric in China’s much-vaunted shift from an investment- and export-led economy to one more based on people buying things like holidays, clothing and cell-phones.

Official survey-based disposable income data could have underestimated citizens’ true spending power by as much as 20 per cent, according to research by the government-backed Chinese Academy of Social Sciences (CASS) in Beijing, That’s because the official sampling isn’t good enough to reflect the affluence households have gained through investment returns, CASS says.

“We’re richer than the data suggests, and the potential for spending is bigger than it looks” Zhao Wen, a labour economics analyst leading the Chinese Academy of Social Sciences research And households are the most optimistic they’ve been in more than two years, a private consumer confidence report released Tuesday showed.

“We’re richer than the data suggests, and the potential for spending is

bigger than it looks,” said Zhao Wen, a labour economics analyst leading the research. “Consumption will continue to be an important driver for economic expansion in the future.”

The shift is reflected by the new champions of the nation’s economy: not industrial giants but retail and services innovators. Tencent Holdings Ltd and Alibaba Group Holding Ltd have become China’s largest corporations in the past year.

Consumption spending, including government outlays, accounted for more than three quarters of economic expansion in the first three months of 2017, as growth accelerated for the second straight quarter. The challenge for policy makers led by President Xi Jinping now is to keep disposable

income rising -- as they’ve pledged to do -- even while they’re trying to deflate property-market bubbles and crimp the amount of leverage during the longer-term slowdown of the world’s second-largest economy.

Wage growth

Success isn’t automatic. As China faces stiffer wage competition from its neighbours, wage growth is moderating. Growth of median per-capita disposable income decelerated to 6.7 per cent in the first quarter, down from 8.3 per cent last year and slower than GDP expansion for the first time since the National Bureau of Statistics began releasing a gauge covering both rural and urban households in March 2014.

The NBS pays a rotating sample of around 160,000 households across the nation to report their daily income and spending habits, generating quarterly data on how much they can spend. Yet persuading people to

be honest about their wealth is no easy task, and it’s almost impossible to track how much people earn through investment of stocks and properties.

“Poorer people, such as those depending on a living allowance, need to let others know they’re short of money, while those in possession of properties, savings and securities are reluctant to reveal the size of their wealth,” Zhao said.

At CASS, Zhao creates an estimate of disposable income using not survey data, but accounts that follow the flow of money within the sectors of the economy, such as salary data, or the interest and investment returns offered to retail investors. That creates a significantly different picture to what the surveyed households say about their own finances.

Willing to spend

And households already report a bullish outlook. Based on their view of their own finances, job prospects and their willingness to spend, Nielsen Holdings Plc’s Consumer Confidence Index rose to 110 in the first quarter of 2017, up from 108 in the fourth quarter last year, and the highest reading since the third quarter of 2014. The willingness to spend component is at its highest level since at least 2009.

For now, positive growth data, rising property prices and expanding credit volumes are fuelling the urge to part with cash.

“People are aiming at purchasing high-end goods and services, and this trend will further stimulate spending intentions,” said Vishal Bali, managing director of Nielsen China in Shanghai. Even though the economy is slowing down, the growth of the consumer as a powerful force on the world stage “shows little sign of abating,” he said. Bloomberg News

Business Daily Wednesday, May 24 2017 9

Greater China Agriculture

Rain brings relief to parched grain fields The country’s agriculture ministry on Monday said it had sent a “working group” to areas stricken by dry weather Heavy rains this week have brought relief to parched fields in China’s major grain producing regions, breaking a months-long dry spell that had slowed corn planting and hit winter wheat crops.

The rain will dampen farmer worries about output in the world’s top consumer of grains, potentially dragging on global prices for corn and wheat.

“Dry weather had affected corn acreage in some areas. Planting had slowed,” said Meng Jinhui, an analyst with Shengda Futures.

“But the timely rain has significantly eased the situation. There will be more rain in coming days (in some areas), enough for the new crops.”

Corn is usually planted in China

from April to late May, with the process stymied this year in the northeastern grain belt by the prolonged dry spell that began in March.

In the region’s Liaoning province, the planted area for all crops was down by nearly 1,000 hectares from the same period last year, state media Xinhua news reported on Monday. Around 3 million hectares were planted with grain in Liaoning in 2015.

The country’s agriculture ministry on Monday said it had sent a “working group” to areas stricken by dry weather, providing technical support to farmers.

The slowdown in corn planting came as acreage was already expected to drop as part of a government push

to whittle massive state reserves by shifting some production to soybeans.

The rain has also helped winter wheat crops in Henan, Hebei and Shandong provinces, which China’s National Meteorological Center said were hit by a dry hot wind last week.

The crops are currently in their flowering period, a key growth stage before harvesting in less than a month.

Despite the timely rainfall, China’s winter wheat is still vulnerable.

“The coming month is key for wheat output. A couple days of rain is good. But if the rain lasts 4-5 days, it will be terrible. And definitely we don’t want continuous rains during harvest,” said an analyst with an official think tank. He declined to be named as he was not authorised to speak with media.

Forecasts for the next few days show further rain in some grain producing areas, although the wet weather is seen ending in Liaoning.

Reuters

In Brief Risk prevention

Regulator says solvency concerns at five insurers Only five China insurers out of 170 surveyed were near regulatory red lines in the first quarter, the country’s insurance regulator said yesterday. The data shines a brighter light on China’s insurance industry, which the government is considering shaking-up and tightening regulations for smaller, riskier insurers.

According to China’s regulatory regime, insurance firms are required to maintain solvency ratios above 100 per cent, or be subject to penalties on the scope of their business and financing activities. The comprehensive solvency ratio for the industry reached 238 per cent at the end of the first quarter.

Energy

Beijing says to “adjust” prices on major power grid

New economy

Hong Kong police arrest 21 Uber drivers A court in March had found five Uber drivers guilty and fined them HK$10,000 each Venus Wu and Sijia Jiang

Hong Kong police yesterday arrested 21 Uber drivers for illegal car-hiring as part of a clamp down against Uber Technologies Inc’s operations in the Asian financial city.

The arrests marked the latest upset for the San Francisco-based technology company, which in March said it would help five convicted Uber drivers to appeal their court case in Hong Kong.

Police said they began an undercover operation in May and yesterday arrested 20 men and one woman between the ages of 21 and 59 for illegally driving a car for hire and driving without third-party risk insurance.

“I would like to stress that our law enforcement action is on-going and we do not rule out further arrests,” said Lau Tat-fai, a chief inspector of police in the Kowloon West district.

“We would like to say to the operator of the mobile phone application, as a responsible organization, you need to ensure cars for hire are equipped with a permit as required

by Hong Kong laws. This is a basic responsibility to passengers and (shows) respect for Hong Kong laws,” Lau said.

He said those who assist or instigate drivers might also have to bear legal responsibility.

A Uber spokesman said the company was “extremely disappointed” by the police action.

“We stand together with the twenty-one driver partners and their families, and will continue to provide assistance, including legal support, during this difficult time,” the spokesman said.

Uber said it has a ridesharing insurance policy of up to HK$100 million per trip for riders and third-parties, which complies with local laws including Hong Kong’s insurance regulations.

“Ridesharing should not be a crime.

Hong Kong is an international city known for its embrace of global economic trends and new technologies, but current transportation regulations have failed to keep up with innovation,” Uber said in an emailed statement.

Uber said it is committed to working with Hong Kong authorities, especially the incoming administration, to resolve the matter.

A court in March had found five Uber drivers guilty and fined them HK$10,000 (US$1,287.91) each. It also revoked their driving licenses for a year, but that punishment was suspended upon the drivers’ appeal.

“Ridesharing should not be a crime.

Hong Kong is an international city known for its embrace of global economic trends and new technologies, but current transportation regulations have failed to keep up with innovation” Uber statement Uber began a fierce publicity campaign following the verdict, posting advertisements on newspaper front pages and giving out plane tickets and Manchester United football jerseys to a few passengers.

The embattled technology company pulled out of Taiwan this year over mounting fines from regulators, but said last month it would resume services. Reuters

China said on Tuesday it would “adjust” power prices on a major grid connecting utilities in the west of the country and consumers in the east as part of on-going reform in its mammoth energy sector. The state planner did not give details on price changes, but said the step would lower power costs for companies. The state planner also said on its website that prices would be adjusted on a grid connecting the western Ningxia region to south China’s Zhejiang and Hunan provinces, as well as on an intrastate grid in Hainan province.

New economy

Authorities seek safe steering of bike-sharing boom China has published draft guidelines to regulate the booming bicycle-sharing industry whose firms have raised hundreds of millions in dollars in funding but have cluttered up sidewalks with bikes. The rules aim to address congestion and illegal parking as well as safety concerns over users’ deposits and personal information, according to the statement published by the Ministry of Transport. The rules are the first national attempt to strengthen oversight over the sector, which now has more than 30 bike-sharing services that allow users to find, unlock and pay to rent traceable bikes through smartphone apps.

Local industry

Ethanol exports soar China’s ethanol exports soared in April and imports slowed to a trickle, data showed yesterday, the latest sign that Beijing’s push to ramp up local production is upending trade flows in the world’s fastest-growing biofuel market. China exported 13,540 cubic metres of ethanol in April, up over 1,000 per cent from a year earlier and 18 per cent higher than the month before, data from the General Administration of Customs showed. China imported just 23 cubic metres of ethanol last month, as a big hike in taxes at the end of 2016 hit overseas purchases.

10 Business Daily Wednesday, May 24 2017

Greater China Green card

Selling investor visa scheme in Mainland a hard grind for U.S. mill The EB-5 programme has come under fire from politicians who point to fraud and abuse Elias Glenn

A

s a controversial U.S. investment visa scheme comes under fresh criticism, Sam Walls of Little Rock, Arkansas, faces a different problem as he courts wealthy Chinese.

Walls and his team at Pine State Regional Center are looking to raise US$200 million through the EB-5 investor visa programme for a steel mill in the southern state of Arkansas - just the kind of project the scheme was set up to help.

But persuading a class of investors more accustomed to being pitched luxury high-rises in cities such as Los Angeles or Miami to buy into a heavy industry project in one of America’s poorest states is proving a hard sell.

“It’s a grind,” Walls said in an interview outside the EB-5

‘Agents and developers expect changes to the EB-5 programme, such as an increase in minimum investment levels or a tightening of oversight’ and Investment Immigration Expo in Beijing, a gathering of U.S. representatives of EB-5 projects and local agencies that promote them to Chinese investors and was closed to the media.

Walls, who is 47 and does not speak Mandarin, spent three months in China last year promoting the project, often travelling by highspeed rail between Beijing and Shanghai. He was once woken by an attendant and, thinking he had arrived in Shanghai, got off the train - four hours short of his destination.

Walls’ challenge is compounded by the fact that he is trying to sell a new steel plant in a country with about 400 million tonnes of excess steel production capacity,

with plans to shut down 50 million tonnes of capacity this year.

“About the time we came to market you couldn’t open the paper in China and not read an article about the demise of the Chinese steel industry,” said Walls, 47, who is raising funds to refinance the US$1.67 billion Big River Steel plant, which opened in February in Osceola, Arkansas.

The EB-5 programme grants foreigners a U.S. green card - making them legal permanent residents - in exchange for investing US$500,000 or more in a qualified project. The vast majority of such investment comes from China.

But the EB-5 programme, which is up for U.S. congressional review in September, has come under fire from politicians who point to fraud and abuse, and to the fact that a scheme originally intended to bring jobs to high-unemployment areas has often been used to fund projects in wealthy neighbourhoods.

The industry drew negative publicity earlier this month when the sister of Jared Kushner, a senior White House advisor and the sonin-law of President Donald Trump, held a marketing road show in China for a New Jersey luxury apartment complex developed by her family’s company.

While Jared Kushner sold his stake in Kushner Companies to a family trust early this year, the episode raised questions of potential conflict of interest. After a flurry of news stories following her appearance at marketing events in Beijing in Shanghai, Nicole Kushner Meyer, Jared’s sister, cancelled appearances at two investor meetings planned in southern China.

“I’m sure they’re sitting around in hindsight thinking, yeah, we probably could have thought that one through better,” said Walls.

Changes loom

In a sector where investors are wary of failing projects and policy changes that would jeopardize their visas, some Chinese migration agencies look to reassure potential investors their EB-5 projects will be successful, industry executives say.

U.S. securities law prohibits making false claims or failing to ensure clients are aware their funds are at risk.

“The one word that scares you - and I heard it here today - is the word ‘guarantee’,” said Walls. “Unfortunately that word gets thrown around a lot.”

Individual tickets for the one-day conference were available for US$3,000 at the door, while a booth cost US$30,000, one developer said.

Agents and developers expect changes to the EB-5 programme, such as an increase in minimum investment levels or a tightening of oversight over the projects that

qualify, although most who spoke with Reuters outside the event in Beijing last week said it was unlikely the programme would be cancelled.

None besides Walls agreed to speak on the record.

“It’s supposed to encourage investment in the rural and highly distressed urban areas. But due to some broad definitions, everyone (meets these criteria),” said Walls, declining to say how much EB-5 funding Big River Steel had raised since it started investor outreach.

In March, Walls testified

before Congress about “pervasive manipulation” in the investor visa programme, and has been a proponent of reform as he says most EB-5 investments have gone to a handful of major cities.

“The vast preponderance of EB-5 investments have gone to arguably a handful of major gateway cities ... If you’re the other 45-47 states you have not enjoyed much or any of the benefits of the programme. You don’t necessarily build high-rise skyscrapers in Arkansas or Kansas.” Reuters

Business Daily Wednesday, May 24 2017 11

Asia Investment

Rush of Australian securitised home loans tempts yield-starved Japanese With near zero or even negative yields paid

by Japanese government bonds, returns of 2.5 per cent to 3 per cent paid by triple A Australian RMBS are drawing interest

A

ustralia has become the world’s most active market for securitised home loans, with sales at their highest in a decade as lenders seek to take advantage of surging demand from yield-starved Japanese investors.

‘Even at the peak of the global credit crisis, there has never been an Australian RMBS default’ Issues of residential mortgage-backed securities (RMBS) total A$67 billion, with A$12 billion (US$9 billion) sold so far this year.

The strong overseas demand comes amid warnings over the country

Home prices in Australia’s two biggest cities of Sydney (pictured) and Melbourne have doubled since 2009

frothy property market from regulators, the central bank and the International Monetary Fund.

Home prices in Australia’s two biggest cities of Sydney and Melbourne have doubled since 2009.

Offshore buying accounts for as much as half of certain Australian bond offers, estimated Will Mortimer, head of securitised products at Citibank Australia. International investors had completely vanished after the 2008-2009 global financial crisis.

While demand from Europe, the United States and Asia has been growing, Japan is the clear stand out.

“We’ve seen the biggest increase coming from Japan,” said James Austin, chief financial officer of nonbank lender FirstMac in Brisbane who sold a large RMBS issue earlier this year. He said around 10 Japanese investors, from banks to life insurers

and financial services, are actively engaging with FirstMac. Industry players said a Japanese institution recently bought a A$1.5 billion parcel in an Australian RMBS offer.

With near zero or even negative yields paid by Japanese government bonds, returns of 2.5 per cent to 3 per cent paid by triple A Australian RMBS are drawing interest.

Undeterred by risks that home prices could collapse, investors say ample protection is provided by robust RMBS structures and strict lending standards.

“Australia is a well regulated market,” said Tim Ledingham, treasurer at regional lender Bank of Queensland which sold A$120 million of RMBS to Japanese accounts earlier this year.

Only a fraction of home loans are

securitised and around 2 per cent of Australian RMBS are in arrears by 30 days, well below Spain’s 6 per cent and Italy’s 5 per cent.

Even at the peak of the global credit crisis, there has never been an Australian RMBS default, unlike the United States where investors lost billions of dollars in similar debt.

“We’ve done a lot of analysis on the potential downside risk but we think it is a securitisation market with a long history, and even if a crisis happened of the magnitude of the Lehman Brothers shock we would not expect a loss there,” said a Japanese investor in Tokyo.

He asked not to be named for sensitivity reasons.

Unlike the United States, investors have full loan recourse meaning a homeowner defaulting on his debt obligations cannot walk away. Reuters

Monetary drive

S. Korea’s central bank on hold at first policy meeting under new presidency Finance minister Kim Dong-yeon said he will work with the National Assembly to draft a supplementary budget to tackle soaring youth unemployment Cynthia Kim

South Korea’s central bank is expected to keep its base rate unchanged at 1.25 per cent on Thursday, facing soaring household debt and taking a cautious approach in its first policy review since President Moon Jae-in’s inauguration.

The Bank of Korea’s (BOK) assessment of the economy will be the focus of attention in the first policy meeting for the board’s seven members to express their views since President Moon took office on May 10.

All 19 economists surveyed by Reuters predicted the BOK would leave its key policy rate at a record-low 1.25 per cent, which has been on hold since a 25 basis point cut in June 2016.

Nine of them foresaw a rate hike next year as the bank’s next move, while the remainder said the BOK board would not adjust policy rates for some time.

Even with rebounding exports and stronger inflation, incoming finance minister Kim Dong-yeon said he will

work with the National Assembly to draft a supplementary budget to tackle soaring youth unemployment.

What Governor Lee Ju-yeol says on the need for economic stimulus might also give a clue to the bank’s next policy move, after the bank upgraded this year’s growth outlook to 2.6 per cent from its earlier estimate of 2.5 per cent in April.

‘All 19 economists surveyed see base rate kept at record low of 1.25 pct on May 25’ “An important pledge by the new president during the election campaign was fiscal policy expansion.

If implemented, an expansionary fiscal policy would boost both GDP growth and inflation next year, which

strengthens the case for the BOK to begin to normalise interest rates,” said Ma Tie-ying, an economist at DBS Bank.

Some respondents, including Stephen Lee at Meritz Securities, maintained that mounting household debt in South Korea and tightening monetary policy in the U.S. would keep the BOK in a tight spot.

“It will be a hold for a while, as household debt growth continues

to be sharp when uncertainties related to U.S. policy rates persist,” Lee said.

Of the bank’s seven board members, Senior Deputy Governor Jang Byung-wha’s three-year term ends June 2017, while Governor Lee will finish his term in March 2018.

The central bank is an independent body in terms of policy decisions, although its board is appointed by the president. Reuters

12 Business Daily Wednesday, May 24 2017

Asia Trial

Prosecutor tells court S.Korea’s ex-leader abused power to gain bribes Park has denied any wrongdoing and pleaded not guilty at the trial Christine Kim

S

outh Korea’s former leader Park Geun-hye abused her power and pressured companies to pay her tens of millions of dollars in bribes, a prosecutor told a Seoul court at the start of her corruption trial yesterday.

If found guilty of taking bribes from business leaders including Samsung Group scion Jay Y. Lee, one of the key accusations that led to her impeachment, Park faces more than 10 years in jail.

Park, the country’s first democratically elected leader to be removed from office, is charged with taking bribes worth about 29.8 billion won (US$26.65 million) from Lee alone.

“The accused Park Geun-Hye, in collusion with her friend Choi Soon-Sil...abused power and pressured business companies to provide bribes, thus taking private gains,” senior prosecutor Lee Won-Seok told the court.

“The accused deny even the most basic facts but the charges are fully supported by material evidence and testimonies.”

Park has denied any wrongdoing and pleaded not guilty at the trial.

Her lawyers rejected the 18 charges against her in pre-trial proceedings. Lee has also rejected charges he bribed Park in return for favours for Samsung.

“There was no reason for president Park to force companies to donate money which she was unable to use for herself,” Park’s lawyer Yoo Yeong-Ha told the court.

“There were no monetary gains she could have had personally from the establishment of the two foundations, as no individuals could freely take funds from the foundations,”

Former South Korean President Park Geun-hye (L) and her now-jailed confidante Choi Soon-sil (R) sit in a courtroom in the Seoul Central District Court in Seoul yesterday. Lusa

said Yoo, referring to two sporting foundations formed to support Park’s policies.

Park grim faced, Choi tearful

Park’s court appearance is the first time she has been seen in public since her arrest in March. She arrived at court handcuffed and wearing a navy pantsuit, her hair held back in a haphazard bun and her face showing little sign of make-up.

In the courtroom she sat grim faced, her eyes puffy and looking straight ahead, next to a lawyer sitting with Choi Soon-sil, the friend accused of colluding with Park to take bribes.

The two, who are being reunited for the first time since the scandal erupted in public in late October, did not acknowledge each other or exchange words as they entered the courtroom.

Media reported Park said she did not want a jury trial. Defendants have the right to be tried by a jury although its decision is not binding and can be changed by the presiding judge.

Park said little during the first day

of her trial, conferring quietly with her lawyer Yoo. In contrast, Choi was tearful when she addressed the court.

“I have been serving president Park for the past four decades. I feel very sorry for causing president Park to stand trial like this,” she told the court, half sobbing, adding Park is “not a person who can be lured by bribes”.

The court adjourned around midday, with the next trial day scheduled for Thursday, May 25.

Park supporters demand freedom

Many Park supporters were seen on the court grounds when Park arrived and at the entrance of the holding correctional facility where Park has been held, waving the national flag and demanding her release.

The first day of the trial comes two weeks after the election of President Moon Jae-in, who has promised to get tough on chaebol bosses who commit crimes.

Park was arrested on March 31,

three weeks after she was removed from office by a Constitutional Court ruling and after a warrant judge decided she posed a flight risk and was likely to tamper with evidence.

Media reports said she spent her time in her prison cell awaiting trial reading the English dictionary and keeping away from the news available for inmates.

A lottery last week for 68 public seats available for the trial drew more than 500 people, most of them young people in their 20s and 30s.

Heo Go-eun, a 22-year-old university music major said she had cut her classes that day to enter the lottery.

“This will remain a page in history and I wanted to see for myself Park on trial,” said Heo, adding she had participated in the candlelight rallies last year that drew millions of South Koreans to the street in peaceful protests.

“So many people are just happy Park has been impeached, that she has already paid the price for her crimes but this is just the beginning.”

Reuters

Markets

Singapore Exchange nearing deal with regulator for IPOs Stock exchanges around the world are competing for IPOs as the fight for global capital intensifies Andrea Tan and Joyce Koh

Singapore Exchange Ltd. is nearing a deal with the city’s technology regulator to develop a system designed to encourage local startups to list on the bourse, according to people familiar with the matter.

Under the agreement, the bourse operator would help pair technology companies with investors with the aim of securing their listing in the city-state, the people said. SGX and the Infocomm Media Development Authority are close to finalizing the accord, said the people, who asked not to be identified because the talks are private.

Stock exchanges around the world are competing for IPOs as the fight for global capital intensifies. SGX’s tie-up with the regulator will deepen the exchange’s so-called sector approach, with four industries, including technology, the focus of its listings strategy. The move also comes

Business Daily is a product of De Ficção – Multimedia Projects

as companies with Singapore roots including Razer Inc. and Sea Ltd., Southeast Asia’s most valuable startup formerly known as Garena, are said to be considering listing in Hong Kong or the U.S. An SGX spokeswoman declined

to comment. An IMDA representative didn’t reply to an email seeking comment.

The deal with IMDA will allow the exchange operator to be engaged with tech-related firms earlier, the people said. SGX will work with advisers from the securities industry to pair the firms with potential investors, they said. The bourse in March signed separate agreements with a

crowdfunding platform and PricewaterhouseCoopers LLP’s Venture Hub to facilitate capital access for start-ups.

‘The move also comes as companies with Singapore roots are said to be considering listing in Hong Kong or the U.S.’ IMDA oversees the technology, telecommunications and media sectors in Singapore. The regulator has been tasked with creating a globally competitive tech industry in the city by 2025. Singapore, where there’s more mobile phones than people, was ranked first in the World Economic Forum’s Global Information Technology Report 2016. Bloomberg News

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 Wednesday, May 24 2017 13

Asia In Brief Inflation

Singapore’s CPI falls

Oil industry

India moving beyond oil, seeks alternatives to OPEC The country now imports 86 per cent of its oil needs from OPEC states to meet its 4.6 million barrels per day refining capacity Dmitry Zhdannikov, Ernest Scheyder and Nidhi Verma

OPEC production cuts and the prospect of more expensive oil are pushing India to consider U.S. and Canadian suppliers, as well as encouraging it to turn to renewable energy, the country’s petroleum and natural gas minister said on Monday.

Dharmendra Pradhan made the comments in Vienna ahead of OPEC’s meeting this Thursday when members will decide whether to extend production cuts to ease the global oil glut that has grown in tandem with rising North American output.

Pradhan said India, the world’s

third biggest consumer, would act in its national interest to secure inexpensive crude, expand its use of natural gas as it seeks to honour the Paris climate change agreement and is keen to explore biodiesel and other renewable fuels.

“I want to protect my consumers’ interests,” Pradhan, who assumed his role in 2014, said in an interview.

“India’s leadership is very focused on energy security for all its citizens.”

The Organization of the Petroleum Exporting Countries had sought to undermine the North American oil boom for several years by raising output, which pushed prices too low for costly shale producers. But low prices

also hurt OPEC states, encouraging them to change tack and limit output.

Pradhan acknowledged that OPEC’s production cuts are an attempt to stem the crude price slide, but said he was worried that it could result in under-investment in the energy sector and push prices up in the long run.

“Gone are the days of market stability for consumers,” he said. “Now, producers seek market stability.”

India has been in touch with oil suppliers it had not traditionally used and said Indian refiners were “working out details of the strategy to buy cargos, including from the USA and Canada, which happens to be becoming very competitive.

“We know shale used to be competitive only at prices above $60 (per barrel). Now we know that is $40.”

India now imports 86 per cent of its oil needs from OPEC states to meet its 4.6 million barrels per day (bpd) refining capacity. Pradhan said India planned to raise refining capacity to 6.2 million bpd by 2023.

Pradhan also said OPEC producers should work towards a “responsible price” for oil and Asia should be treated on a equal footing with Western consumers.

“India is very price sensitive. We want to be competitive in our domestic market. We want to source our crude oil from a competitive market, from every part of the world,” he said, adding that India was expanding its use of renewable energy, such as solar and wind, and encouraging electric vehicles.

“India’s leadership is very focused on energy security for all its citizens” Dharmendra Pradhan, India’s petroleum and natural gas minister “We need to realise that the oil industry is at a delicate crossroad and higher crude prices will give a further push to renewables,” he said.

Pradhan also said he is intrigued by biodiesel, referring to it as a “green hydrocarbon” that could be produced domestically by processing the national’s vast supply of agricultural waste.

“The dynamics of oil transportation are changing,” Pradhan said.

“I personally see a lot of potential (in biodiesel). It’s a non-fossil fuel hydrocarbon.”

OPEC Secretary General Mohammad Sanusi Barkindo said after meeting Pradhan on Monday that OPEC estimated Indian oil demand would rise by more than 150 per cent by 2040 to about to 10.1 million bpd, accounting for 9 per cent of global demand from 4 per cent now.

India’s per capita energy consumption was 0.55 tonnes of oil equivalent, far below the global average of 1.9 tonnes of oil equivalent, Pradhan said, adding energy consumption was expected to almost double by 2035. Reuters

Singapore’s Consumer Price Index (CPI) moderated to 0.4 per cent in April as cost of accommodation recorded larger decline, the Ministry of Trade and Industry and the Monetary Authority of Singapore (MAS) said in a joint release yesterday.

CPI-All Items inflation moderated to 0.4 per cent in April, from 0.7 per cent in the preceding month, due to 6.7 per cent decline in the cost of accommodation, compared to the 4.0 per cent fall in March, according to the joint release. The joint release said private road transport cost increased to 7.0 per cent from 6.9 per cent in March, owing to the faster pace of increase in car and petrol prices.

S.Korea

High-speed household debt growth slows South Korea’s rapid household debt growth slowed slightly in the March quarter versus a year earlier as some mortgage rates rose, the central bank said yesterday. Household debt during the first quarter of this year, including loans and other debt owed by South Korean households rose 11.1 per cent from a year earlier to 1,359.7 trillion won (US$1.22 trillion), preliminary data from the Bank of Korea showed, after soaring 11.6 per cent in the fourth quarter of last year. Quarter-on-quarter debt growth slowed to 1.3 per cent after expanding 3.6 per cent over the October to December period.

Pharmacy bill

Japan to bring forward target for increased generic use Japan will bring forward a target to boost the use of generic drugs by six months to September 2020, two government sources with direct knowledge of the matter said yesterday.

The rapidly ageing nation is aiming to lift the use of generics to more than 80 per cent from around 56 per cent currently - a move that would save the government hundreds of billions of yen a year, the sources said. The government will set the target early next month as part of its annual key economic and fiscal policy guidelines, the sources added, declining to be identified as they were not authorised to speak to the media.

International summit

Myanmar to host ASEM meeting

Myanmar will host the 13th Asia-Europe Meeting (ASEM) of Foreign Ministers and its related meetings in Nay Pyi Taw from Nov. 20 to 21 this year, an announcement of the Foreign Ministry said late on Monday. State Counselor and Foreign Minister Aung San Suu Kyi chaired a meeting of the central committee for hosting the ASEM earlier in the day, calling for preparation for the international event.

The 12th ASEM foreign ministers meeting was held in Luxembourg in 2015.

14 Business Daily Wednesday, May 24 2017

International In Brief Graft

Brazil’s ex-president Lula faces new corruption charges Brazil’s former president Luiz Inacio Lula da Silva has been charged by prosecutors who said the leftist politician was the mastermind behind the country’s biggest bribery scheme. Lula, a founder of the Workers Party is already facing five separate trials on corruption charges with a ruling in the first expected

by July. Under Brazilian law, it is now up to a federal judge to decide if Lula will stand trial for the latest charges.

Prosecutors accused Lula of leading a scheme in which politicians and executives at state-run oil company Petrobras received bribes from companies seeking contracts for public projects.

Portugal

Prime Minister ‘not candidate’ for Eurogroup job Portugal’s prime minister, António Costa, has said that the country is not a candidate to chair the Eurogroup of euro-zone finance ministers, but that if its finance minister, Mário Centeno, is tapped as the next president then the government will deal with what would be “a great honour” for Portugal. The prime minister made his remarks at a news conference at his official residence in Lisbon, after being questioned about the fact that media reports were once more suggesting that Centeno might be asked to take over from Jeroem Dijsselbloem of the Netherlands, whose party lost out in the recent general election there.

Executives rewards

Morgan Stanley shareholders approve compensation plan Executive compensation plan received the support of over 90 percent of its shareholders at the bank’s annual meeting in its Purchase, New York wealth management headquarters on Monday. Morgan Stanley avoided protests that dominated other Wall Street firm’s annual meetings this year. JPMorgan Chase & Co CEO Jamie Dimon faced activists during the bank’s annual meeting last week who demanded answers about his role on a White House business council. Morgan Stanley awarded Chief Executive James Gorman US$22.5 million in 2016, up 7 percent from the year ago period.

Evasion

Nigeria raises interest on unpaid taxes Nigeria will increase the interest rate on unpaid taxes to discourage companies and individuals from paying late and racking up a larger debt, the finance ministry said yesterday. The ministry said the measure will take effect on July 1 and that the rate would be five percent over a central bank rate known as the Minimum Rediscount Rate, a benchmark lending rate. “The review of the interest rates on unpaid taxes was one of the necessary measures adopted by the Federal Government to enhance tax compliance, minimize tax evasion and deter late payments,” the finance ministry said in a statement.

Ifo poll

Macron makes German business morale hit all-time-high A sector breakdown of the figures showed the main boost came from improved sentiment in manufacturing Michael Nienaber

G

erman business morale brightened more than expected in May to hit its highest level on record since 1991, a survey showed yesterday, with the election of Emmanuel Macron as French president viewed as a major relief for Europe’s largest economy.

Key Points German business morale improves more than expected France election result viewed as major relief Ifo says German economy to grow by 0.6 pct in Q2

current business situation and their outlook for the coming six months both improved markedly, the survey showed.

Ifo economist Klaus Wohlrabe pointed to Macron’s victory.

“This positive news has provided a tailwind. It is a signal that the European Union is not under acute pressure, as it was a year ago,” Wohlrabe said.

He added neither the prospect of Brexit nor the policies of U.S. President Donald Trump had yet had concrete effects on the German economy.

A sector breakdown of the Ifo figures showed the main boost came from improved sentiment in manufacturing. Optimism in wholesaling and construction also edged up but deteriorated in retailing.

“Today’s strong German data add to the evidence that, not only the German economy, but the entire euro zone economy could become the positive growth surprise of 2017,” ING bank economist Carsten Brzeski said.

“With political risks now ebbing away, economics have quickly taken over,” he added.

The German economy picked up steam in the first quarter and grew by 0.6 per cent on the quarter, helped by strong exports, booming construction and higher household and state spending, data released earlier on Tuesday showed.

This will likely help to burnish Chancellor Angela Merkel’s economic credentials as she gears up for national elections.

In another positive sign, Germany’s DIHK Chambers of Industry and Commerce raised its 2017 growth forecast for the German economy to 1.8 per cent from its previous estimate of 1.6 per cent. Reuters

France is Germany’s second-most important single trading partner after China and the defeat of France’s farright, euro-sceptic Marine Le Pen by the centrist and pro-European reformer Macron has boosted confidence across the euro zone.

The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of some 7,000 firms, rose to 114.6 from an upwardly revised 113.0 in April.

The May reading came in stronger than a consensus forecast of 113.1 in a Reuters poll.

“Economic activity in Germany remains very brisk,” Ifo chief Clemens Fuest said in a statement. He added that the surge in the Ifo index combined with other key economic indicators pointed to economic growth of 0.6 per cent in the second quarter.

Managers’ assessments of the

Wall Street

Trump budget calls for regulators to face restructuring In July 2015, the SEC’s inspector general predicted that a cancellation of the fund would stall IT modernization and harm the agency Sarah N. Lynch

Two Wall Street financial regulators would face cuts or major structural changes under President Donald Trump’s fiscal 2018 budget proposal According to an Office of Management and Budget document on Monday, the U.S. Consumer Financial Protection Bureau (CFPB), which was created by the 2010 Dodd-Frank reform law to protect borrowers from predatory lending, would undergo a “restructure.” This would reduce the federal deficit by US$145 million in the 2018 fiscal year, it said.

The Securities and Exchange Commission, which polices securities markets, would have its reserve fund, established under Dodd-Frank, used to supplement its budget.

In recent years, the fund has been used to overhaul the SEC’s information technology, including upgrades to the filing system for public companies and initiatives to help police fraud and track equities trading patterns.

The White House document said the elimination of the fund would reduce the deficit by US$50 million a year, which is the maximum

amount the SEC is allowed to deposit annually.

Currently, both the SEC and CFPB budgets do not impact the federal deficit.

The CFPB’s US$605.9 million budget is funded by the Federal Reserve, which is not subject to congressional appropriations.

Congress does decide the SEC’s US$1.6 billion budget, but it is deficit neutral because the fees it collects from Wall Street firms are matched by the amount Congress sets aside.

The reserve fund, which is separate from the rest of the SEC’s general budget, is funded through registration fees.

An OMB spokeswoman did not respond to requests for comment about how a restructuring of the CFPB or the elimination of the SEC’s reserve fund would reduce the federal deficit.

The CFPB’s structure has been under political fire for years.

Republicans complain it is not held accountable because it is led by a single director who cannot be fired by the president at will, and it falls outside of congressional budget control.

Last year, a U.S. appeals court found the CFPB’s structure violated the U.S.

Constitution. The bureau is slated to fight that decision today, when the full panel of appellate judges will reconsider the ruling.

Legislation proposed recently by House Republicans would subject the CFPB to appropriations. A report by the Congressional Budget Office estimated that such a change could help reduce direct spending by US$6.9 billion between 2018-2027.

The SEC’s reserve fund has long been a target of congressional Republicans, who have led efforts to prevent the SEC from using portions of the money.

‘U.S. Consumer Financial Protection Bureau, which was created by the 2010 Dodd-Frank reform law to protect borrowers from predatory lending, would undergo a “restructure”’ In July 2015, the SEC’s inspector general predicted that a cancellation of the fund would stall IT modernization and harm the agency. Reuters

Business Daily Wednesday, May 24 2017 15

Opinion

Awash in liquidity, Hong Kong just makes splashing sound

How to be an open economy

Nisha Gopalan a Bloomberg Gadfly columnist

P

roperty prices in Hong Kong are looking increasingly precarious.

But while the central bank’s squeeze on lenders is to be applauded, it doesn’t mean real estate will become more affordable any time soon.

The Hong Kong Monetary Authority raised the risk-weight floor for banks for new mortgages from 15 per cent to 25 per cent over the weekend. That’s significant, considering home credit as a percentage of the city’s gross domestic product is 47 per cent.

According to Morgan Stanley, it could mean a decline of at least 15 percentage points in banks’ return on equity for all incremental mortgages from 35 per cent to 20 per cent.

Enough to give some of the world’s most lucrative lenders cause for pause.

Borrowers will also feel some pain. Under the new rules, second-time home buyers purchasing a property valued at HK$10 million (US$1.3 million) or above can only borrow up to 40 per cent of its value, down from 50 per cent previously. For real estate under HK$10 million, the loan-tovalue requirements have been cut to 50 per cent, from 60 per cent.

In addition, debt servicing limits will be trimmed by 10 percentage points for people whose income is derived mainly from outside of Hong Kong. In other words, foreigners will have their monthly mortgage payments capped at 40 per cent of their income, versus 50 per cent for locals.

The moves came a week after the HKMA went after developers via the banks, placing restrictions on borrowing for construction and buying land. That will impact mainland Chinese firms the most, because they tend to have higher debt levels than their Hong Kong counterparts. It should also dissuade developers from acting as lenders by topping up bank mortgages with loans from finance companies they own.

The problem is, Hong Kong is awash in liquidity. Banks haven’t even passed on the interest rate rises made by the U.S. Federal Reserve yet. Two-thirds of all residential stock in Hong Kong is mortgage free, and many first-time home buyers are millennials whose parents are chipping in. Most of the recent tightening measures have been aimed at foreigners or second-time home buyers.

Combined, that group made up only 11 per cent of purchasers in the first four months of 2017, according to Morgan Stanley analyst Praveen Choudhary.

Banks will inevitably become less aggressive, but they’re still sitting on plenty of deposits and mortgage rates are comparatively low.

Ultimately, there’s just too much demand for housing in Hong Kong.

It will take a significant increase in supply, or interest rates, for that liquidity to drain.

The HKMA making a lot of splashing sounds won’t do it. Bloomberg Gadfly

‘Loan-to-value ratios for borrowers with other mortgages cut by 10 percentage points’

T

he word “openness” has two related but distinct connotations. It can mean that something is unrestricted, accessible, and possibly vulnerable; or it can mean that something, such as a person or institution, is transparent, as opposed to secretive.

The first meaning is often applied to trade, investment, and technology (though most definitions do not match opportunity with vulnerability), which have always driven structural economic changes, especially with respect to employment. Structural change can be simultaneously beneficial and disruptive. And policymakers have long had to strike a balance between the abstract principle of openness and concrete measures to limit the worst effects of change.

Fortunately, academic research and historical perspective can help policymakers respond to this challenge intelligently. Consider the experience of Northern Europe’s small developed countries, which tend to be open, and for good reason: if they were not, they would have to over-diversify the tradable parts of their economies to meet domestic demand. That would impose high costs, because the small size of the domestic market would prevent them from achieving economies of scale in technology, product development, and manufacturing.

But these countries’ openness has increased the economic and political salience of investments in human capital and a strong social safety net. Social-security policies are doubly important for small, specialized economies, because an external shock to one tradable sector can affect the entire economy.

It wasn’t always so. Small- and medium-size economies such as Canada, Australia, and New Zealand used to have protectionist policies that over-diversified their tradable sectors.

But with increased international trade and specialization, the cost of domestically produced goods – such as cars – relative to imports became too high for consumers to bear. In the 1980s and 1990s, these three countries began to open up, and experienced difficult structural transitions that nonetheless boosted productivity and provided broadbased benefits to citizens and consumers.

Still, striking the right balance is never easy. Canada, Australia, and New Zealand are all resource-rich countries that are susceptible to the “Dutch disease” – when one strong, capital-intensive sector hurts other sectors by pushing up the value of the currency. This has given rise to continuing concerns about underdiversification, which would make them vulnerable to volatility in global commodity markets and pose challenges for employment.

We tend to associate structural adjustments with international trade and investment. But industrial activity changes within countries all the time, and creates local- and regional-level challenges. For example, US textile production, once heavily concentrated in New England, shifted mainly to the South (before relocating to Asia and other lower-cost locales).

In 1954, then-Senator John F. Kennedy wrote a long, fascinating article in The Atlantic in which he attributed this undesirable dislocation in New England to tax subsidies in southern states. Such practices, he argued, would lead to inefficiently high levels of industrial mobility, because corporations would pursue profits wherever they could, regardless of the impact on individual communities. To prevent this race to the bottom, Kennedy called not for free trade, but for regulations to make trade more fair and efficient.

Indeed, structural changes are necessary to improve dynamic efficiency. But so, too, are policies to ensure that investments and economic activities are based on real

“

Michael Spence a Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business and Senior Fellow at the Hoover Institution

comparative advantages, and not on transitory “beggar thy neighbour” incentive structures. This is particularly important during periods of rapid structural change.

Because supply-side adjustments are slow, painful, and costly, they should not be made unnecessarily.

But, like closed economies that miss out on the benefits of trade altogether, open economies with significant institutional or political obstacles to structural change will underperform. This explains why many open economies today are failing to adapt to new technologies and trade patterns. Too often, policymakers want to prevent change from occurring at all. But while blocking change can protect existing industries and jobs for a while, doing so dramatically deters investment, and eventually hurts growth and employment.

A country’s economic and social-security structure can also stand in the way of change. As former Greek Finance Minister Yanis Varoufakis observes, the promise of a long-term growth dividend from structural reform is not enough to allay people’s concerns about the immediate or near-term future, especially in a semi-stagnant economy. If you replace something with nothing, you have to expect significant political and social resistance.

If structural reforms are not accompanied by social-security reforms, they are likely to fail. The “Agenda 2010” reform program initiated by former German Chancellor Gerhard Schröder in 2003 is a good example of this multiprong approach; but it proved to be politically perilous for Schröder, who was not re-elected in 2005.

How reforms are sequenced also matters. For example, incumbent workers will be much more concerned with social-security reforms in a poorly performing economy than in a booming economy. Political resistance to structural reforms – especially from older incumbent workers – will be stronger in a low-output, high-unemployment economy, because it is worse to be laid off in such conditions.

As a rule, a government should not introduce structural reforms until it has first gotten its economy moving with fiscal and investment-oriented policies. Proceeding in this order will reduce the political resistance to change.

As it happens, Europe is currently experiencing a modest but significant surge in growth. But whether policymakers will take advantage of this opportunity to pursue needed reforms is anyone’s guess.

One final lesson to bear in mind is that structural change is not just an unfortunate side effect of growth and the creation of new jobs and sectors; rather, it is an integral part of these processes.

One can see this clearly in successful developing countries, where the recipes for growth include openness, modern sectors, trade, high levels of investment, and an expanding human-capital base. These countries are not spared from structural shifts and distributional challenges. But their transitions are faster and less painful, because investments run broadly across their public and private sectors, and across tangible and intangible assets.

Developed economies are not so different in this respect.

A significant across-the-board increase in investment might not fix all of their distributional and adjustment problems. But it certainly would help to spur growth and reduce economic and political frictions in their structural adaptations. Project Syndicate

If you replace something with nothing, you have to expect significant political and social resistance

”

16 Business Daily Wednesday, May 24 2017

Closing Investment

FDI projects in Portugal reach 20-year record

“Job creation is clearly affected by a reduction of the average number of jobs created per project,” the study notes, Portugal last year attracted more new foreign direct investment projects than in adding that it was “lower than both the average before the crisis and the any other year in the past two decades, previous year”. according to figures contained in a Germany and Spain were the main survey released by consulting firm EY. In all, according to the EY Attractiveness investors in Portugal in 2016, with 14 and 10 projects respectively; German Survey, Portugal secured 59 major investments, up from 47 in 2015, although investment was mostly in manufacturing. due to the new projects’ scale or nature, France led in terms of job creation, with 900 new jobs, although it ranked fourth just 2,500 jobs were created, compared to 3,500 created by FDI projects in 2015. in number of projects, with eight. Lusa

Markets

Hong Kong’s short-seller invasion spurs unusual defence plan Bearish research firms tracked by Activist Insight have started 18 campaigns in the city during the past 12 months, the most since at least 2012 Lisa Pham and Moxy Ying

O

ne of Hong Kong’s most high-profile targets of activist short sellers has hatched an unorthodox plan to fight back.

It’s called the “anti-malicious short selling alliance.’’ The idea is for companies to band together when bearish traders pounce, sharing crisis-management advice and in some cases even offering equity investments.

Fullshare Holdings Ltd., the property company that unveiled the plan on Monday, has faced allegations from two short sellers in the last month.

The proposal highlights how ubiquitous short sellers have become in Hong Kong. Bearish research firms tracked by Activist Insight have started 18 campaigns in the city during the past 12 months, the most since at least 2012.

Short sellers including Muddy Waters and Glaucus Research dismissed Fullshare’s idea, saying it would be bad for shareholders. The stock dropped 0.6 percent to the lowest level in almost three weeks yesterday.

“The best idea is to have open and transparent reporting, which the accounts are supposed to reflect,” said Andrew Sullivan, a managing director for sales trading at Haitong International Securities Group Ltd. in Hong Kong. Still, “in a free market short sellers can circulate their reports, and companies and their allies are welcome to spend money to defend their stocks.”

Short sellers have started focusing on Hong Kong’s stock market because they’ve already targeted most of the “low-hanging fruit” among Chinese companies listed in the U.S., Paul Gillis, a professor at Peking University’s Guanghua School of Management in Beijing, said by phone last week.

“As long as there’s opportunity, such as companies not doing things correctly or misleading investors, short-seller attacks will continue,” Gillis said. “Hong Kong right now has fairly weak regulatory practices, particularly in the accounting area.”

Fullshare was targeted last month by Glaucus Research, which questioned the company’s intraday trading patterns and said the stock was “poised to crash.” A few days later, FG Alpha Management criticized Fullshare’s accounting and its controlling shareholder’s bank loans. Fullshare disputed the findings of both short sellers.

The stock has climbed since Glaucus’s report, thanks in part to a financing agreement from a state-owned Chinese bank.

In an interview with the Hong Kong Economic Journal published on Monday, Fullshare Executive Director Wang Bo said the company had held talks with other firms about an alliance. The group would create a forum to discuss legal and public relations strategies and to identify “deep value direct-investing situations” that result from short-seller campaigns against “performing” companies, Wang said in an interview with Bloomberg News.

Private poll

He emphasized that the proposal was “very preliminary,” that Fullshare has respect for “normal” short sellers and that the company intends to follow Hong Kong regulations. The alliance wouldn’t become a “lender of last resort” to targeted companies, Wang added.

Contagion risk

At least one other target of short sellers in Hong Kong has expressed interest in the idea. Credit China FinTech Holdings Ltd., which denied allegations published by short seller Anonymous Analytics in December, said in an emailed response to questions from Bloomberg News that the company would be happy to find out more details about the proposal.

The short sellers who targeted Fullshare said they were undeterred by the plan, with Glaucus’s head of research Soren Aandahl saying “only companies with something to hide” would consider it.

“These companies would be better off if they have a ‘truth’ alliance,” said Dan David, chief investment officer

Sanctions

of FG Alpha Management. “If they tell the truth about their real financial condition, they will not have to worry about critics.”

Shareholders are unlikely to approve of their company helping another firm that’s been accused of wrongdoing, according to Carson Block, the founder of Muddy Waters.

“It’s hard to think legitimate investors would be interested in funding alleged frauds or manipulations,” said Block, who targeted Hong Kong-listed China Huishan Dairy Holdings Co. in December. The stock plunged 85 percent on March 24 and has since been halted by Hong Kong’s securities regulator.

Block’s sentiment was echoed by David Webb, a Hong Kong-based private investor and a former board member of the city’s exchange.

“Companies that join such an alliance to invest in shares or debt of other companies risk contagion,” Webb said. “Companies whose boards feel they are at risk of attack should look in the mirror and ask themselves why.” Bloomberg News

IT

Eurozone economy holds at Mainland’s imports from 6-year high N.Korea sink as coal ban bites

CeBIT attracts Chinese entrepreneurs

The eurozone economy grew at its fastest pace in six years in May as job creation in Europe picked up to its highest level in a decade, a closely watched survey showed yesterday.

Data monitoring company IHS Markit said its May Composite Purchasing Managers Index came in at 56.8 points, unchanged from April which was also the best for six years.

The PMI measures companies’ willingness to invest in their business and so gives a good idea of how well the underlying economy is performing.

IHS Markit said the 19-nation eurozone economy was doing well on all fronts.

Broken down, the figures showed the services sector -- which accounts for the bulk of economic activity -- remained unchanged at 56.2 points in May. The manufacturing output PMI meanwhile rose to 58.4 points from 57.9.

IHS Markit chief business economist Chris Williamson said the May report suggested the eurozone economy would grow by about 0.6-0.7 per cent in the second quarter, on par with the first three months of the year. AFP

Australia’s Darling Harbor precinct in Sydney yesterday hosted the first day of CeBIT, the largest business technology event in the Asia Pacific region.

Chinese businesses had a large contingent at the event, which is set to attract over 15,000 visitors, with over 350 exhibitors from across the world.

Jeff Chan, international business division director at Tongding Interconnection Information Co. told Xinhua yesterday that his company was pleased with the global exhibition.

“This year we came to Australia based on the good relationship between Australia and China, we hope to find some potential customers here,” Chan said.

“It is my first time in Australia and I find that it is really good, there are a lot of good suppliers.”

Chan said that he hoped to find some other good operators and distributors at the event to connect with, and that based on what he has experienced so far, he plans to make the trip every year.

“I think Australia and China have a really good relationship and it (CeBIT) is good for business promotion.” Chan said. Xinhua

China’s imports of North Korean goods in April fell below US$100 million to the lowest in nearly three years, data showed yesterday, after China stopped buying coal from the isolated country and as calls mount for further economic sanctions.

Neighbouring China is North Korea’s biggest trade partner, and the data indicates that China’s halt of North Korean coal imports on Feb. 26 is having an impact and curbing Pyongyang’s ability to raise hard currency through exports.

The world’s second-largest economy bought goods worth US$99.3 million in April from North Korea, the lowest monthly tally since at least June 2014, according to Chinese customs data. Previous data was not available.

That compares with US$114.6 million in March and US$167.7 million a year earlier.

A fifth of the April total was iron ore imports, which hit 285,000 tonnes, their highest since August 2014.

That was up 10 per cent from a month earlier and 2-1/2 times higher than a year earlier.

U.S. President Donald Trump has been urging China to put more pressure on North Korea to step back from its nuclear and missile programmes. Reuters