Business Daily #1402 October 13, 2017 by Business Daily

New York café culture arrives in Macau, piling up treat upon treat Consigliere Page 9

Friday, October 13 2017 Year VI Nr. 1402 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Disposal

Transportation

Asahi considering selling stake in Tsingtao Brewery

Telco

Bus fare hike designed to minimise gov’t subsidies Page 4

Page 13

www.macaubusiness.com

CTM reduces international calls tariff Page 3

Courts

Samsung's Jay Y. Lee’s court date first public appearance since August Page 12

Legislation mooted for vulnerable

Legislation

A legislative proposal to strengthen official help for workers with disabilities. The plan offers to incentivise local companies hiring such workers. Whilst seeking to improve protection for the elderly in a rapidly ageing population. Page 3

Fund clarifies aid conditions

New Year’s wish

MGM China CEO Grant Bowie hints at possible reasons for weaker Golden Week performance. With observations on the sector. Plus confirmation of opening of Cotai property.

Financing A seminar was held yesterday to promote Chinese-Portuguese Speaking Countries Co-operation and Development Fund. Representatives elaborated upon conditions to obtain its help. Page 6

Property magnate rules rich list

MGM Page 2

HK Hang Seng Index September 21, 2017

28,459.03 +69.46 (+0.24%) Worst Performers

Galaxy Entertainment Group

+2.46%

Geely Automobile Holdings

+0.83%

New World Development

-3.50%

Wharf Holdings Ltd/The

-1.29%

Sands China Ltd

+1.28%

CNOOC Ltd

+0.74%

AAC Technologies Holdings

-2.02%

Swire Pacific Ltd

-1.21%

Hengan International Group

+1.01%

Hang Seng Bank Ltd

+0.71%

CK Asset Holdings Ltd

-2.01%

CITIC Ltd

-1.18%

+0.51%

China Merchants Port Hold-

-1.69%

China Resources Power

-1.12%

Hang Lung Properties Ltd

-1.50%

China Resources Land Ltd

-1.11%

WH Group Ltd

+0.89%

Industrial & Commercial

China Unicom Hong Kong

+0.87%

Bank of China Ltd

+0.50%

25° 31° 23° 28° 22° 26° 22° 27° 23° 28° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Wealth Hurun Report ranks China’s rich and famous. Topped this time round by property magnate Xu Jiayin, chairman of Evergrande. Valued at US$43 bln and beating out both Jack Ma and Pony Ma. Page 10

2 Business Daily Friday, October 13 2017

Macau

L-R MGM China CEO Grant Bowie, MGTO Director Maria Helena de Senna Fernandes, Deputy Commissioner of the Office of the Commissioner of the Ministry of Foreign Affairs of the PRC Yuan Hengge, Director of MGM China Holdings Limited Pansy Ho, Secretary for Social Affairs and Culture Alexis Tam, Director-General of the Economic Affairs Department of the Liaison Office Liu Bin, Consul General of Germany in Hong Kong and Macau Dieter Lamlé and Chairman of the German Macau Business Association Tony Un MGM China

Confident despite challenges Cotai is a “new market” but MGM China ready to “climb whatever mountain we have put in front of us,” says CEO Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

hinese visitors potentially going further abroad to long-haul destinations could have been one of the reasons for visitation being “slightly down” during the Golden Week super holiday, according to MGM China CEO Grant Bowie. Despite the change, Bowie stated that more “normalised business operations” - in which there is “constant demand rather than really high highs” - is healthier for the company overall. The CEO reaffirmed the opening date of MGM Cotai of January 29 2018 in statements made at the opening of the 9th edition of Oktoberfest Macau at MGM 2017, held on the group’s Peninsula property, noting that “we

were hoping that we would actually have it [Oktoberfest] in Cotai this year, but because of the typhoon and those delays unfortunately you have to wait one more year”.

Cotai

“We all understand that Cotai is a new market for us,” said Bowie regarding the group’s arrival in the Cotai Strip and potential changes to its strategy, explaining that the company is currently best positioned for the upper premium marketplace but that its diversification and new entertainment offerings are “going to attract a greater number of leisure and tourist visitors”, adding the Cotai property is “perfectly positioned to achieve our goals.” The MGM China head also stated that it would have “nearly all of the significant operators that we all

know” in the property - regarding junkets, but that “we certainly will be opening only with mass tables”, only adding junkets “as we build out the property”. The delay in opening the property has also resulted in more costs, explained the CEO, noting the two-fold affect of the typhoon and “the need for us to get approvals” at a time when “services in Macau are heavily taxed” in the wake of Hato. The shutdown of the border gate’s shuttle bus terminal was also regarded as a real challenge, noted the CEO, adding “obviously we were not expecting such a dislocation as a result of the typhoon but we all have to work together and we just have to find solutions”. “We're given challenges and we find solutions and that’s a very

positive attribute about us,” he said, lauding the “very strong local team” MGM China has and that “we're prepared to climb whatever mountain we have put in front of us.”

Tragedy

Bowie lamented the shooting in Las Vegas, conducted from the Mandalay Bay - a property under the wing of MGM Resorts - noting that the group’s thoughts go out to those affected and their families, the public and “our friends and colleagues in Las Vegas”. “I think any organisation anywhere around the world learns lessons from those sorts of tragedies,” said Bowie, “and we've certainly done that. We continue to ensure that we provide a safe and secure environment for our team members and for our customers.”

inner harbour

Pump station location for flooding selected The Civic and Municipal Affairs Bureau (IACM) has chosen Ponte 25 and 26 in the Inner Harbour area as the location for the water pump station, as revealed during a meeting held by the Central Community Service Advisory Committee on Wednesday, local broadcaster

TDM Radio News has reported. The design and plan of the construction of the pumping station has already been completed and is currently awaiting approval. IACM believes construction can start in the second half of next year. IACM is planning to improve the

facilities of the current pumping station including the addition of backup power generator and remote alarm system with video surveillance. Previously, due to ongoing judicial proceedings as well as the historical value of the building, Ponte 23 was

abandoned as a location for the pumping station. The Meteorological and Geophysical Bureau will study suggestions for improving the wind speed checking system from hourly checks to every 10 minutes. C.U. advertisement

Smart City

Big Data Centre for Zhuhai by 2020 The Big Data Centre of the neighbouring Chinese city of Zhuhai will be operational before the end of 2020, Chinese media Southern Daily has reported. Propelled by the strategy to build a national Big Data pilot zone on the Pearl River Delta, the Chinese city is striving to transform itself into a Smart City by introducing a Big Data system to nine areas covering administration, commerce and daily usage for residents. The city is also hoping to support start-ups and encourage start-up business by implementing a Big Data system, in addition to creating a public technical platform, experience halls and other facilities. Apart from the introduction of a Big Data Centre, the city is investing effort in other smart developments

such as Cloud computing. By 2020 yearend, the city is to introduce and cultivate three to five corporations relating to Big Data business and will create eight to ten innovative firms from the use of the Big Data system.

Business Daily Friday, October 13 2017 3

Macau Law proposals

Positive discrimination, with the right connotation The MSAR Government is proposing two laws to improve the life conditions of senior citizens and people with disabilities, providing fiscal benefits for companies warranting its efforts Sheyla Zandonai sheyla.zandonai@macaubusiness.com

he Macau SAR Government expects to reward local firms that recruit people with disabilities with MOP5,000 per worker per year to be deducted from the companies’ complementary income tax. The plan was presented at Government Headquarters yesterday as the framework for a law proposal to be submitted to the Legislative Assembly (AL) for evaluation. “We would like it to be discussed at AL as soon as possible,” said government spokesperson Leung Hing Teng. Companies would enjoy the fiscal benefit retroactively, starting from 2016. Mr. Leung confirmed that there is no type of tax exemption presently available for local companies on the grounds of the positive discrimination foreseen by the proposal. Currently, some 12,000 people with disabilities in the city are registered with the government, according to official information. “There are 325 people with disabilities working today in 78 companies,” said Mr. Leung. He added he did not have the data on hand about the

number of people in that category working for the government. The framework presented during the session stipulates that people with disabilities hired by local firms should work, at least and cumulatively, 128 hours per month.

Aging population, more rights

In another law proposal also presented yesterday, the government is seeking to enhance guarantees regarding the rights and interests of senior residents. “Given the continuous

increase of the aging population, we foresee that the percentage of elderly people in the MSAR will reach 20.7 per cent of the total population by 2036,” said Mr. Leung. The proposal content was summarised in seven strands “based on principles [advocated] by the United Nations,” and emerged as “the result of a long process of public consultation,” the government spokesperson explained. The execution of policies to be implemented in relation to the matter will be co-ordinated by the Institute of Social Action (IAS). Overall, the main guidelines of the bill proposal comprise the reinforcement of legal mechanisms available for protecting senior citizens against offenders, mainly from family members and institutions in charge of their care, and the promotion of increased social participation of seniors. The proposal further suggests enhancing mechanisms of co-operation between public and private entities as well as establishing a role for IAS to intervene in litigation cases between the elderly and their families, involving matters such as food provision and property, through mediation. Speaking to the press, the

President of IAS, Vong Yim Mui, said the government currently mobilises “different resources to give more support to the elderly,” including subsidies and pensions, arguing that the measures proposed in the framework “are quite new.” “The law would be a mechanism to provide additional support through a system of social protection,” she said. The government proposes the law, once approved, be effective 90 days after publication in the Official Gazette.

Vehicle circulation tax

Effective November 1, MSAR citizens will be able to print their motor vehicle road tax registration disc on designated government automatic services kiosks, following the revision of an administrative regulation presented yesterday. The motor vehicle road registration tax is paid between January and March every year through the Transport Bureau (DSAT). In addition to the abovementioned kiosks, DSAT makes the service available at its three service areas, the Financial Services Bureau (DSF), the Macao Post and Telecommunication Bureaus (CTT) plus several branches of nine banks operating in the city.

Telecommunications

IDD tariff charges reduced to favour national strategic connections CTM has also announced a cheaper roaming service in Mainland China For users to send SMS and data usage in Mainland China, the charge would be MOP0.9 per SMS and MB (megabyte), respectively. As such, the new arrangement would result in a 20 per cent to 92 per cent decrease. Concurrently, CTM has already launched the Greater China Share Data Plan for frequent travellers to the Four Places of the Cross Strait. Replying to press enquiries, Cham said CTM is striving to make a reduction arrangement review for both international and local private lines by the first half of next year.

Cecilia U cecilia.u@macaubusinessdaily.com

Yesterday, Companhia de Telecomunicaçōes de Macau (CTM) announced a reduction scheme for its IDD (International Direct Dialing) service to deepen civic and commercial connections between Macau and regions included in the ‘One Belt, One Road’ initiative as well as Portuguese-speaking countries. The new reduction scheme, which will be implemented on December 8, will offer an average reduction rate of up to 45 per cent to a total of 232 countries and destinations, explained Ebel Cham Pou I, the Commercial Vice-president of CTM, during the press conference yesterday. Some regions will even enjoy a reduction of as much as 86 per cent. Further introduced by Jacob Iu, CTM’s Director of Marketing, the scheme simplifies charges with categories of different price zones based upon the IDD regions and countries; namely, ‘1 dollar, 2 dollars, 3 dollars, 5 dollars and 9 dollars’ price zones. CTM provides 99 per cent coverage of the overall IDD traffic that are 1 dollar and 2 dollars zones. Most of the popular IDD destinations such as Mainland China, Hong Kong, Taiwan, Australia, America, Canada, England, Portugal and the Philippines are within the 1 and 2

Falling IDD users A moment of the press conference yesterday

dollars zones. Meanwhile, the majority of the Portuguese-speaking and ‘Belt and Road’ countries lie in zones that are under 5 dollars. In addition, a 30 per cent discount is to be applied to the IDD050 service. Cham said the scheme is awaiting the final approval of the government. “But since there were previously already several press reports about the scheme, we decided to officially announce and explain the details to the press at an earlier time,” said Cham.

Integrated charges for Mainland coverage

As well as the reduction of IDD charges, CTM announced the reduction of roaming services to Mainland China that will be implemented for mobile service subscribers. To be implemented on October 31, the scheme for the Mainland coverage will have integrated charges, with MOP1.9 per minute for all conditions, namely local calls on the Mainland, call back to Macau from Mainland China and receiving incoming calls on the Mainland.

Meanwhile, Cham said the number of both landline and mobile IDD users is constantly dropping, while adding that the decline for commercial IDD users is slower by comparison. “We believe that via the new scheme [...] the level of competition for commercial firms [for those that are related to the Belt and Road and Portuguese-speaking countries] to be more competitive,” commented Cham. Prior to the announcement of the new scheme, CTM had already rolled out the tariff reduction for Internet, local and international leased line circuit in the fourth quarter of last year.

4 Business Daily Friday, October 13 2017

Macau Opinion

Pedro Cortés*

Negative discrimination The ultimate measure under discussion in Macau is the enlightened proposal which may discriminate between residents and non-residents for the purpose of bus fares. The proposal made by the Traffic Department (DSAT) seems to have been welcomed by our Secretary for Public Works and Transportation. A supporter of the Secretary in many of his measures, I am free to say that in this case I am shocked at the support proffered by DSAT for such a totally unfounded proposal which not only reeks of a third world environment but totally contravenes the Basic Law of Macau. Article 43 of our mini-constitution states: ‘Persons in the Macao Special Administrative Region other than Macao residents shall, in accordance with law, enjoy the rights and freedoms of Macao residents prescribed in this Chapter [Fundamental Rights]’. Hence, all Macau citizens (residents and non-residents) must have the same fundamental rights, in which is included the right to free movement within Macau and to not be discriminated against in such a basic service. Those non-resident workers who may, under this proposal, pay more to take a bus than residents, are the same who have helped clean Macau in the aftermath of Hato. Some of them also saved the lives of Macau residents. And all of them pay professional tax at the same rate as Macau residents. Not all of them have the same monthly salary as Macau residents who, because they have a green and white Macau Identification Card, have better salaries and other conditions. Some of them are even hired just because of the said magic card. Unlike the privileged Macau residents, whose families in most of cases were not born in Macau, non-resident workers are far from home in a place they love. Unlike residents, who just because of that condition consider they have all rights and no duties, non-residents have a daily sword above their heads – if they are fired, they have a few days to leave Macau. So, please, once and for all, stop proposing this type of measure otherwise you may be pledging the future of our beloved Region. Instead of that, what should be proposed is a true policy of future transportation where all of us - residents, non-residents and tourists - would not have to think twice before going to the streets or waving our hand to get a taxi. Macau is not the exclusive right of its residents. Macau has always been a welcoming place for all cultures, origins, creeds. A place where a human being can feel comfortable among equals. Do not contribute to the end of the dream so many of us share.

*lawyer and frequent contributor to this newspaper.

Transportation

Correct change, please Recent proposals by the MSAR Government to increase bus tariffs are to facilitate reducing annual financial support to bus operators from MOP1 billion to at most MOP700 million Nelson Moura nelson.moura@macaubusinessdaily.com

n the first eight months of the year the three bus operators in Macau posted MOP250 million (US$3.1 million) in revenues while receiving MOP630 million in financial assistance from the government, according to information provided by the Transport Bureau (DSAT) to Portuguese newspaper Tribuna de Macau. Bus services in Macau are provided by three public bus companies: Transmac – Transportes Urbanos de Macau, S.A.R.L.; TCM – Sociedade de Transportes Colectivos de Macau,

S.A.R.; and New Era – Macau New Era Public Bus Company Limited. According to the response the government currently provides an average of MOP4.6 for every passenger to the bus companies, and that the recently announced increase in bus tariffs was to reduce the need for this level of financial support using public funds. Recently, DSAT proposed that fares be increased from MOP2 to MOP3 for Macau Pass holders who take normal bus routes while the express route would increase fares to MOP4. ‘Reduced financial support will allow the number and frequency of bus routes to increase and the

Heavyweight division

DSAT also told Tribuna de Macau that currently “some public buses crossing the Governor Nobre de Carvalho Bridge don’t fill the weight requirements for the bridge”. Currently, vehicles over 15 tonnes are not allowed to cross with the department contacting the relevant operators to adjust bus routes or replace vehicle types to guarantee bridge safety. These involved the replacement or adjustment of bus route numbers 50, 73, MT1, MT2, 22 and 52 with DSAT stating the last two bus routes transported more than 15,000 passengers daily.

introduction of sustainable energy buses,’ the DSAT response added. Meanwhile, Secretary for Transport and Public Works Raimundo Arrais do Rosário stated on Wednesday that the amount in revenue made by bus companies was lower than “one third of the companies’ expenses” and that without government support bus tariffs per person would reach MOP6.6. The Secretary also said that the MSAR Government grants around MOP1 billion in support to bus companies per year and that after the tariff readjustment that amount should be reduced to between MOP700 million and MOP800 million.

No smoking stops

The Health Bureau announced yesterday that starting from January 1 2018 smoking within 10 metres of a bus stop will be prohibited. The decision is part of the recent approved revision of the smoking law and intends to protect residents from secondhand smoking at bus stops, with fines for infractions increased to MOP1,500. The Bureau also announced that since this law for preventing and controlling smoking was enforced in 2012 a total of 43,279 people had been charged for smoking infractions, with 2,326 charged for infractions at bus and taxi stops.

Meat exports

U.S. beef appealing to China via Macau The U.S. Meat Export Federation (USMEF) told Business Daily that it anticipates a small increase in the demand for American beef in Macau as well as in Mainland China via the city. “As U.S. beef becomes familiar and popular with more people in China, including the many tourists from China who visit Macau, we could see an uptick in demand, especially in Macau’s hospitality sector,” said Joe Schuele, USMEF Vice President of Communications. Mr. Schuele added that beef in provenance from the U.S. is mainly available in Macau “through the hotel and

restaurant sector,” explaining that the lifting of a 13-year ban on beef products from the U.S. at the end of 2016 is thus not affecting Macau. A member of the Federation’s Executive Committee and Perkins County Nebraska rancher Steve Hanson will visit Macau in the first week of November to attend a marketing event.

On the plate, meat

The annual barbecue event featuring Nebraska meat – bow in its sixth year’s edition – is ‘an opportunity to showcase U.S. beef for customers and prospective customers in Macau,’ said Schuele.

Mr. Hanson will be in Macau to participate in the event, meet some of the customers who purchase and distribute U.S. beef, and get a firsthand look at how Nebraska Beef Council support is used to promote U.S. beef. ‘We also find that buyers in international markets benefit from … [getting] firsthand insights into how animals are raised on America’s family farm and ranch operations,’ suggested Mr. Schuele. The Nebraska Beef Council, supported by Nebraska cattle producers, helps fund USMEF promotional activities. S.Z.

Japan IR bid

Nomura betting on Yokohama for first Japan IR The real estate branch of Japanese banking group, Nomura Real Estate Development Co. Ltd., claims the new cruise terminal it plans to build in the port of Yokohama would be a ‘perfect site’ for establishing an Integrated Resort (IR), Casinopedia reported. The Yokohama project - informally referred to as Yokohama Pier9 - is set to comprise five storeys and 28,600 cubic metres of floor space, signalling there would be ample space to accommodate a casino in the future.

Yet, the authorisation for the project by Nomura may be delayed as Japan’s Prime Minister, Shinzo Abe, called for a snap election by the end of September. ‘The dissolution of the lower house and general election mean that debate on the legislation and the selection of regions for Integrated Resorts is now more likely to be delayed,’ said Nomura in a statement. The real estate company added it is working on the project with seven local companies, and that it is slated

to open in 2019. Nomura also identified Osaka as a potential location for hosting Japan’s first IR. The location has been previously suggested by Japan experts as one of the frontrunner locations, according to previous reports by this newspaper. According to Nomura, one key indicator that the first IRs could be approved in Yokohama or Osaka is the potential of both cities to increase the influx of Chinese visitors. S.Z.

Business Daily Friday, October 13 2017 5

Macau

Luxury

Gimme that fancy feeling As the sales of luxury goods continue to increase in the MSAR and in the Greater China area a recent report by Bernstein indicates Chinese consumers are already increasing their share of the sector Nelson Moura nelson.moura@macaubusinessdaily.com

hinese consumers currently represent 30 per cent of worldwide luxury goods purchases, with that share expected to increase to between 35 per cent to 44 per cent by 2025, reveals a report released yesterday by brokerage firm Sanford C. Bernstein. According to the report this growth will be driven by an increase in the total spending of current Chinese luxury goods consumers and by the growth of average Chinese income. With ‘quality/craftsmanship' and ‘fashionableness and on-trendness’ the main factors motivating Chinese luxury consumers, the report advised luxury producers to establish

a good balance between evergreen and seasonable products. The report primarily focused on luxury leather products, watches and jewellery and indicated that Chinese consumption of luxury goods has ‘yet to enter the high-growth phase’ with Chinese luxury spending expected to grow at a compound annual rate of 7.5 per cent in the next 10 years. ‘On average, households earning more than between RMB20-25,000 per month (equivalent to US$3,0003,800) purchased Luxury Goods 3.2 times in the past 12 months, and this increases to 3.8 times for households earning more than RMB50,000 (equivalent to US$7,500) per month’ the report found. According to the most recent data released by the Statistics and Census Service (DSEC) retail sales for

leather goods in Macau increased in the first half of this year by 20.2 per cent year-on-year to almost MOP3.7 billion (US$460 million) while sales for watches, clocks, and jewellery rose 21.8 per cent yearly to reach MOP6.9 billion.

Luxury region

Meanwhile, Italian fashion house Prada stated in its interim report for the first half of the year that while markets in Asia Pacific have recorded a decline in generated net sales, Greater China region net sales went up by 5.2 per cent at constant exchange rates to 301.9 million euros (MOP2.9 billion/US$357.9 million). Overall Prada sales in the Asia Pacific market - excluding Japan - reported a yearly growth of 0.6 per cent at constant exchange rates to reach 462.9 million euros in the

first half of the year, with sales of clothing and leather goods in the region increasing but with footwear sales down. ‘The Asia Pacific region reported sales in line with those of the same period of last year whereas the other regions had lower sales,’ reads the interim report. The Italian luxury products company currently sells its products in the four DFS Group T Galleria retail stores in City of Dreams, Shoppes at Four Seasons, Studio City and Galaxy Macau. This growth coincides with the recent statement by French luxury goods producer LVMH Moet Hennessy Louis Vuitton SE that Hong Kong-based retail subsidiary DFS Group is ‘experiencing sustained growth, particularly in Hong Kong and Macau’. advertisement

6 Business Daily Friday, October 13 2017

Macau

Family picture of the first promotion session of the Chinese-Portuguese Speaking Countries Co-operation and Development Fund Sino-Luso

Cape Verde resort financing options shrinking Due to policy changes in Mainland China and its gambling elements, it is unlikely that the ChinesePortuguese Speaking Countries Co-operation and Development Fund will provide financing to Macau Legend’s integrated resort project in Cape Verde Nelson Moura nelson.moura@macaubusinessdaily.com

ccording to statements made to Business Daily by Song Yunsong, the Managing Director of the Chinese-Portuguese Speaking Countries Co-operation and Development Fund (CPD Fund), there were very “slim chances” for the Integrated Resort project by local gaming operator Macau Legend Development Ltd. in Cape Verde to get financial support from the Fund. In January of this year a Fund representative stated that the CPD Fund was analysing a possible US$20 million investment by local businessman David Chow’s Integrated Resort project in the Lusophone African country. At the time it was said most steps for the financing had been finalised and that final authorisation from the Chinese government was pending, an authorisation Mr. Song now says will probably not be granted. According to the CPD Fund Managing Director “policy changes in Mainland China” and the “gambling nature” of the project reduced the probability of a financial investment. The 250 million euros (MOP2.4 million/US$300.1 million) integrated resort project is being developed

in the Cape Verdean capital, Praia, is slated to include a resort, casino, office buildings and a museum. “However, we will continue to incentivise and support local companies to develop projects in Portuguese-speaking countries,” Mr. Song told Business Daily. The statements were made on the sidelines of the first session held in Macau to promote the US$1 billion fund to local businessman and companies since it changed its headquarters from Beijing to the MSAR in June of this year.

Partnering the big boys

During the seminar Fund representatives suggested Macau companies partner larger Chinese state-owned enterprises in order to increase their chances of receiving financing from the Fund and reduce their risks in embarking upon investments in Lusophone and African countries. “We will provide information and our experience to analyse the singularities of each country and company. We’re exploring many new opportunities and looking to spread this information to Macau companies so they can now [see] those opportunities exist, and share the risks and obstacles they might face during the investment process,” Mr. Song stated.

The CPD Fund Managing Director also addressed the lack of a government export insurance system that could protect local export-import companies reduce their risk in overseas deals, stating the Fund would seek to connect local companies with Mainland insurance groups such as China Pacific Insurance.

Equity support

In its first phase the Fund will have US$125 million, with the China Development Bank Capital Corporation Ltd. granting US$75 million and the Fund for Industrial Development and Commercialisation (FDIC) of Macau providing US$50 million. The Fund provides equity investment of US$5 million to US$50 million in companies or projects involving Mainland China and Portuguese-speaking countries. “However, if we verify that the returns might be larger we can adjust it. Our investment won’t exceed more than 15 per cent of the project in order to protect the shareholders. We won’t put all our eggs in the same basket; we also want to divide our risk,” Mr. Song stated in the event. The Fund generally focuses on infrastructure, agriculture, energy and industry, and also provides consultancy and networking services for direct investment

in Mainland China or Portuguese-speaking countries. According to Mr. Song generally the evaluation process for investment in a project would take “a few months to half a year” with the Fund considering the return on investment, risk profile, timing and completion of the investment. The CPD Fund representative was adamant that the Fund support was not a “loan” but should be seen as a “special stock purchase” with the period of investment lasting between four to six years. Since it was created in 2013 the Fund has approved finance for three investment projects in Portuguese-speaking countries; namely, a US$20 million investment in a Canadian solar power project in Brazil, a US$5 million investment for an electricity grid project in Angola, and a US$2 million investment in an agriculture park project in Mozambique. “The total amount of investment [in projects in the last four years] is about US$650 million […] Macau is playing its role as a platform with its unique cultural and language advantages. With its integration into the Greater Bay Area the city’s development and investment will probably increase,” the Senior Managing Director of the China-Africa Development Fund, Jin Guangze, said yesterday.

Finance

Huanrong’s Macau branch posts MOP200 million profit Th e M aca u o ffi c e o f M ai n land-based China Huarong Asset Management Co., Ltd. has posted a profit of MOP200 million (US24.87 million) in less than one year, local Chinese newspaper Macao Daily reported. Lai Xiaomin, Chairman of China

Huarong, said the branch in Macau has total assets valued at MOP7.3 billion. He perceived that Macau possesses positive opportunities for development, while also indicating that Macau’s role in the ‘Belt and Road’ and Greater Bay Area initiatives would act as a springboard for

China Huarong to enter the international market. With close ties to eight Portuguese-speaking countries, China Huarong is going to expand co-operation with Macau by applying for a financial licence to develop the finance leasing business.

Lai also expressed the hope that the MSAR Government could be more proactive in attracting firms and institutions, including providing a stronger legal system to support the development of the city’s financial industry. C.U.

Business Daily Friday, October 13 2017 7

macau Gambling

A slower end Morgan Stanley analysts believe yearly growth of local EBITDA registered in the third quarter of this year should ‘slow down’ to 16 per cent since the same period of last year saw the opening of two new Integrated Resorts Frederik Balfour

organ Stanley analysts predict the yearly growth of Macau’s EBITDA (earnings before interest, taxation, depreciation and amortisation) will ‘slow down’ from 28 per cent in the second quarter of this year to 16 per cent in the third quarter, a note revealed yesterday. That note stated that the slowdown in growth was mainly due to a harsher comparison with the third quarter of last year, which saw the openings of two new properties in Cotai, The Parisian Macao and Wynn Palace.

Meanwhile, gross gaming revenues in the third quarter were expected to increase 6.5 per cent quarter-to-quarter due to an expected 9 per cent quarterly rise in VIP market revenues, with mass market results growth stable at 4 per cent. Morgan Stanley previously stated that daily gross gaming revenues registered in Macau during this year’s Golden Week holiday period were ‘weaker than expected’ with an increase of ‘only 9 per cent year-onyear’ in gross gaming revenue, to reach MOP1.06 billion (US$131.87 million). The finance services firm did not consider third-quarter assessment

damages from Typhoon Hato since it beliebes that damage would be ‘partly covered by insurance’ and that ‘investors should look beyond that event,’ stated the analysts. In terms of the remainder of the year, Morgan Stanley added that

‘concerns include slowing mass growth (single digits for Golden Week), risk of premium mass, and macro slowdown in China . . . Together with base effect, these suggest continued deceleration in year-on-year growth.’ N.M.

Poker

Tour tailored to Japanese calendar

Asian Poker Tour has announced it will host its APT Macau Championships 2018 from April 25 to May 6 of next year in order to coincide with the Japan Golden Week period Nelson Moura nelson.moura@macaubusinessdaily.com

As part of its five-year partnership agreement with local poker tournament promoter Macau Billionaire Poker (MBP), Singapore based Asian Poker Tour (APT) has announced it will host its APT Macau Championships 2018 from April 25 to May 6 of next year. The 12-day event will take place at

the Macau Legend Development Ltd. property of Babylon Casino in Macau Fisherman’s Wharf, and is scheduled to coincide with the Japanese Golden Week period. “I would say Japanese poker players are quite an important part of the Asian Poker Tour […] We will be the hosts and in the tradition of APT the tournament won’t have a guaranteed prize pool,” the CEO of MBP told Business Daily.

According to APT Executive Tournament Director Lloyd Fontillas players could expect “record-breaking fields in each and every event with a schedule made to cater to all types of bankrolls” due to the early announcement coupled with the period the event is scheduled for. The Japanese Golden Week holiday period usually falls between April 29 and May 6, starting with the Japanese Emperor’s Birthday holiday and finishes

with the Children’s Day holiday. The local poker tournament will provide APT with its 40-table capacity venue at Babylon Casino, which will also host the APT Finale Macau Championships 2017 from November 29 to December 10 of this year. Founded in 2008, APT is a poker event tour that specialises in events in the Asia Pacific region, having so far organised eight tournaments in the MSAR. advertisement

Jeju Island

Landing In’t: Not ruling out Macau investment The developer of Jeju Shinhwa World, Landing International Development Limited, is not ruling out the possibility of creating a theme park in the MSAR, revealed the Senior Vice-president of the company, David Hoon, during a press conference on Wednesday. Reported by Hong Kong-based media Apple Daily, he said the company is planning to seek out opportunities to build amusement parks in other Asian countries including the Philippines. With the amusement park unveiled last month, Hoon indicated that some 7,000 to 8,000 visitors patronised

the park on the first day, while the number of visitors remained over a thousand in later days. Hoon reported that the first phase of the Integrated Resort, in which a total of US$1.4 billion (MOP11.26 billion) was invested for construction, will be operational by the end of the year, with the second phase slated at the latest by 2020. The company says it is not targeting Chinese tourists but, rather, domestic customers. According to Hoon, 80 per cent of customers are locals, with the company expecting that this percentage would remain the same. C.U.

Caesars Palace resort

8 Business Daily Friday, October 13 2017

gaming Las Vegas shooting

MGM faces questions over speed of response A revised timeline of events is raising questions about how MGM Resorts International and Las Vegas police responded to the mass shooting on Oct. 1 that left 58 people dead and hundreds more injured Christopher Palmeri

he Las Vegas Metropolitan Police Department on Tuesday gave a new outline, saying that a security guard at MGM’s Mandalay Bay resort had been shot six minutes before Stephen Paddock opened fire from a hotel room onto attendees at a concert below. Authorities previously said the guard, Jesus Campos, was wounded after Paddock began firing at concertgoers. Paddock later shot himself, police said. MGM Resorts, in a statement Tuesday night, said the events around the shooting are murky and that the official account may change as the investigation progresses. “We cannot be certain about the most recent timeline that has been communicated publicly, and we believe what is currently being expressed may not be accurate,” Debra DeShong, a spokeswoman for the casino operator, said in the statement. The company declined to comment further. Las Vegas Sheriff Joe Lombardo said in an interview Wednesday with TV station KLAS that the differences in the timeline could be due to how a radio operator entered a time stamp after Campos was shot. Campos was unarmed, Lombardo said. “I think it’s important for people to understand that no matter what that timeline is, the response was as quick as possible and I don’t think the response could have been any faster,” the sheriff said.

Lawsuit Filed

MGM Resorts, the largest owner of casinos on the Las Vegas Strip, has been named in at least one lawsuit from a victim of the shooting, who alleges the company didn’t provide enough security for guests at the concert. The company had no immediate

“I think it’s important for people to understand that no matter what that timeline is, the response was as quick as possible and I don’t think the response could have been any faster” Joe Lombardo, Las Vegas Sheriff comment on the lawsuit. The suit said the hotel should have observed Paddock bringing weapons to his room and should have responded in a more timely fashion to the security guard being wounded. Live Nation Entertainment Inc., the concert’s promoter, was also named

in the suit. A spokeswoman for that company said she couldn’t comment on pending litigation. In an interview on NBC’s “Today” show Wednesday, Stephen Schuck, an engineer at the Mandalay Bay resort, said he was responding to a call about a fire exit door that wouldn’t open on the 32nd floor when bullets began flying down the hallway. “It was kind of relentless,” Schuck said. Schuck added that he “called it over the radio so we can get police

there as soon as possible.” He said the police arrived and that he later used his supervisor’s master key to turn off elevator access to the area. MGM on Wednesday confirmed that Paddock had been escorted twice in the freight elevator with his baggage. “It is not a special perk and guests do request to remain with their bags, and they may be taken to their room via the service elevator,” DeShong, MGM’s spokeswoman, said in an email. Bloomberg News

Negotiation

Union presses post-bankruptcy Caesars on benefits, worker protections With the casino group on firmer financial footing, Unite Here union said it wants to establish a new working relationship with the company fundraisin Tracy Rucinski

A union representing casino workers on Wednesday asked Caesars Entertainment Corp's new board of directors to consider safety, protections against discrimination and other concerns during contract negotiations set to kick off next year. Caesars' main operating unit last week exited a three-year, US$18

billion bankruptcy. The company owns the Caesars Palace, Harrah's and Horseshoe brands with locations across the country but earns the majority of its operating profit in Las Vegas, where contracts expire on May 31, Unite Here said in a letter to the board seen by Reuters on Wednesday. Unite Here represents 20,000 union members who cook, clean and serve at Caesars' hotels and

casinos, including almost 14,000 Las Vegas workers. Employees' ability to provide for their families was eroded following the 2008 leveraged buyout of Caesars and protracted bankruptcy proceedings, the union said. A Caesars spokesman said he had not yet seen the letter. The union in its letter also asked Caesars to come to the bargaining table with proposals on issues such

Caesars Palace resort

as health care, training, retirement and safety. The union also urged Caesars to provide additional protections against discrimination based on sexual orientation, gender identity and immigration status. U.S. President Donald Trump ended the Deferred Action for Childhood Arrivals program last month that protected those brought to the country illegally as children and is considering ending the Temporary Protected Status (TPS) program, which applies to more than 300,000 people. Unite Here said hundreds of employees on the Las Vegas Strip have TPS status, which allows nationals of certain countries already in the United States to remain and work there. Last August, billionaire investor Carl Icahn shut the Trump Taj Mahal casino after a bitter strike with Unite Here's Atlantic City chapter. The casino had already been struggling amid a broader gambling slowdown in the New Jersey beach resort. Caesars last week appointed a new board of directors to lead the reorganized company and is targeting expansion in the United States and abroad, though analysts have said it may be too late to catch up with rivals that spent years investing in high-growth markets in Asia. Reuters

Business Daily Friday, October 13 2017 9

Consigliere

Be a New Yorker

ew York City is well known as a modern city with a chic lifestyle. No matter whether you have been there or not you must have imagined the city with its buzzing streets, towering buildings, and people wearing stylish outfits reading newspapers in coffee shops, with a hint of aroma wafting on a fresh breeze. The Big Apple’s most famous café, Dean & Deluca Café, opened its first ever shop in Macau this week. Dean & Deluca Café was founded by Joel Dean and Giorgio DeLuca in September 1977 in SoHo, a lower Manhattan district of New York. Over the years the founders have curated an assortment of the best and most innovative food products from around the globe, earning themselves into the bargain the reputation of an icon of New York City culture and lifestyle. The interior design of the 26-seat Dean & Deluca Café located in The Promenade Shops, Galaxy Macau retains the brand’s distinctive grey and white subway tiles and sumptuous Carrara marble. To fulfil the New Yorker’s

experience, Dean & Deluca Café brings everything from Uncle Sam to here, including countless desserts, delicious coffee, a mouth-watering all-day menu plus premium quality products at the retail corner.

as the stomach. Apart from this, you can also find the signature New York Cheesecake and Red Velvet Cake, Hong Kong Milk Tea Berliner and Yuzu Meringue Tart as well as customised ice cream with an array of toppings.

Ladies mustn’t miss the Rainbow Layer Cake here! This gorgeous sponge cake has six layers in different colours. The moist cake and smooth cream just melts in the mouth, and definitely satisfies the eye as well

Gentlemen need not be disappointed. In addition to desserts, the café provides a large range of food. Starting from breakfast, wide selection of pastries are freshly showcased daily. Gourmands can enjoy the signature

Roast Beef and Caramelized Pumpkin Multi-Grain Sandwich made of layers of slow roasted Angus beef, combined with thyme infused pumpkin. Spicy Prawns & Guacamole with Squid Ink Bun adds a touch of creativity to traditional ingredients by using black ink bun to enhance the intense seafood flavour. Especially created for Macau, you can find a fusion here that combines African Chicken with Focaccia Croquette. A good café can’t exist without high quality coffee. Undoubtedly, coffee lovers won’t be disappointed after visiting The Expresso Bar here. Enjoy the brand’s famous organic Manhattan-blend coffee, teas, frappes, and premium bottled drinks. From traditional Americano to Cappuccino, The Espresso Bar serves up custom-made specialty drinks like Burnt Custard Frappe, which is a seasonal and uniquely flavoured drink inspired by the local flavour of Portuguese egg tarts. Make the experience good to the last drop – and remember: you can shop the confectionary, cookies, coffee beans, teas, honey, classic tote bags, mugs and tumblers at the retail corner before leaving!apple, sheep’s yogurt and dill dessert? Edwina Liu, Essential Macau Editor

Future leisure Oscar Guijarro oscar.g@macaubusinessdaily.com

iving in the world capital of casinos produces the apparent feeling of being at the forefront of each and every existing leisure option. And yet Macau is at the opposite pole to such a sentiment. Macau perhaps has greater experience in betting. The excitement generated by betting is certainly strong but younger generations have a different perception of how to use their leisure time. And there is an ongoing change in the profile of gamblers. Reports reveal a certain disaffection with the old betand-enjoy approach. Young gamblers are mostly players instead. Born in the shadow of the new technologies they find new gaming experiences more attractive than the traditional ways. Of course, money also plays an important role in the process, but in a very different way. That said, the home entertainment offer might be a challenge to the old habits.

Origins

By the end of the seventies videogames began to appear in the United States and Japan. Simple game consoles connected to TV sets emulated physical sports like tennis, basketball or hockey. With the emergence of the first advanced consoles, especially the Atari (pictured) and Nintendo, and their

trends indicate that young people prefer interactivity and decision-making experiences versus the implicit passivity that traditional television offers. And TV makers know that this change of habit could impact sales if they don’t adapt to the new trends. Which is why TV sets have been incorporating elements of consoles and computers.

Content, content, content proliferation in the following decade, electronic games became more and more sophisticated. Not just in thematic terms but in graphic and gameplay aspects, these games captivated the imagination of a whole generation of players who have yet to abandon the habit. Also in the 80s began to appear the first generation of computers whose main task was playing: ZX Spectrum, Amstrad and Commodore sold millions of units worldwide, and the games, in tape format or 3.5-inch discs filled the shelves of their owners. LCD handheld devices also became pervasive among kids that used to populate arcade venues. The technological improvements in the next years produced the consolidation of two trends in domestic videogames: consoles and personal computers. Nowadays, however, the differences between the two platforms are subtle and the

“The emergence of smartphones is provoking a change in the way people access entertainment” boundaries between both are blurred.

Evolution

Consoles were originally focused exclusively on playing videogames and contained specialised hardware for improved graphic performance and interaction. However, with the increase of processing power they have now evolved into entertainment centres reigning in our living rooms. Internet connectivity has added the ability to turn them into e-commerce platforms where you can buy

movies, music and games that can be played on several media. In addition they allow access to a multitude of services that before were just exclusive to the computers. In parallel, personal computers have been equipped with better components to match the performance of consoles and the performance of TV sets. And in the same way, games and franchises of games that were previously exclusive of certain consoles are gradually accepting different systems. The emergence of smartphones is also provoking a change in the way people access entertainment. And obviously, there is also the evolution of our TV sets. If they were formerly receivers of airwaves today they go much further. It should be noted that one of the most significant phenomena that indicates a change in the habits of entertainment consumption is seen in TV users. Current

It all comes down to this word. Content is that which gives shape to home entertainment. There is content to enjoy with the family and content to enjoy in solitude. There are movies, music, TV programs, courses, e-commerce, games, news and anything else you can wish for. It is necessary to take into account that we are still in a period of maturation of the technology, but possibly in a few years it will be less important which device we access to content than the platform providing it. Options such as virtual reality glasses that would lead to extreme personalisation of leisure habits are still far from materialising, but they will probably be part of the future that we will see within the next ten years. Local industry needs to closely follow all of these trends and seek opportunities to provide experiences that can attract a new generation. It’s all about entertainment.

10 Business Daily Friday, October 13 2017

Greater China

Wealth

Evergrande property magnate seizes top spot on Mainland rich list Close behind Evergrande's Xu were China's top tech titans - Alibaba's Jack Ma and Tencent Holdings Ltd's Pony Ma Adam Jourdan

hina has a new richest man, according to the annual Hurun rich list of the country's top movers and shakers. Xu Jiayin, the chairman of developer China Evergrande Group , has seized top spot - beating out more familiar faces such as Alibaba Group Holding Ltd's Jack Ma and rival property magnate Wang Jianlin of Dalian Wanda Group. Xu's reported US$43 billion wealth - a gain of around US$30 billion against last year - comes on the back of a surge in Evergrande's shares, up over 450 per cent so far this year amid plans to cut debt and focus on profit over scale. The Hurun Report, established in 1999, is the leading China-based

organization ranking the wealth of the country's rich and famous, and its list gives a temperature check on the winners and losers in China. Growth in China stabilised this year, but while the world's second largest economy averted a hard landing, some major corporations have buckled under the weight of their debt or been sanctioned by authorities over risky investments overseas. Wanda's Wang - who took top spot for the last two years - dropped to fifth in the list after Wanda sold off much of the firm's hotel and theme park assets to rivals in July, after coming under regulatory scrutiny over its high leverage. Close behind Evergrande's Xu were China's top tech titans - Alibaba's Jack Ma and Tencent Holdings Ltd's Pony Ma, who has seen his firm's value

rise on the popularity of its WeChat messaging app and its popular online games. The list also underlined those who have fallen from grace in corporate China. Jia Yueting, founder of sprawling conglomerate LeEco that once looked to rival both Tesla Inc and Netflix, dropped to 1,978th place from 31st last year. Yang Kai, chairman of embattled Huishan Dairy - 66th last year dropped off the list entirely as his firm fights off creditors amid billions of dollars of unpaid debt. On the up was Wuxi Pharma Tech's Li Ge and his wife, propelled by China's push towards drug innovation, Zhang Lei of fast-growing online news portal Toutiao and Li Shufu of carmaker Geely Automobile

Holdings Ltd. "It has been a good year for manufacturing, cars, education, TMT and healthcare," Hurun founder Rupert Hoogewerf said. While many of those on the 2,000-strong list were members of the National People's Congress and Chinese People's Political Consultative Conference, only a few were delegates at the upcoming five-yearly Party Congress that begins next week. These included corn magnate Li Denghai, alcohol billionaire Wu Shaoxun and Pan Gang of dairy giant Yili. The list, with a combined wealth of US$2.6 trillion, saw average wealth rising 12.5 per cent - faster than broader economic growth - pointing to the growing financial muscle of China's super-rich elite. Reuters

Crackdown

HNA shadow banking use in spotlight as Beijing signals clampdown Prudence Ho and Venus Feng

China took fresh steps to clamp down on HNA Group Co. by banning it from conducting some financial transactions with an insurance unit for a half year, potentially drying up a source of funding for the debt-saddled conglomerate. HNA’s Bohai Life Insurance Corp. failed to report some related-party transactions, made some untimely disclosures and had a compensation system that didn’t meet regulatory requirements, the China Insurance Regulatory Commission said on its website late Wednesday. That led the regulator to order the insurer to stop direct and indirect transactions -- including loans and financial aid -with HNA companies for six months. HNA and Bohai Life representatives didn’t respond to requests for comment. The CIRC didn’t immediately reply to a fax seeking further details about which related-party transactions were not reported by Bohai. Corporate filings seen by Bloomberg show Bohai Life has been a source of financing for HNA, which has been raising billions of dollars through shadow-banking products that are more expensive than traditional forms of borrowings but also less

regulated.

Setbacks

It’s the latest setback for HNA, which has been under mounting scrutiny this year after a debt-fuelled shopping binge made it stand out as one of the country’s top buyers of global assets, putting the company in the crosshairs of a government that’s clamping down on capital outflows. The company has also faced questions from overseas regulators about its ownership amid allegations -- repeatedly

denied by HNA -- that it’s tied to powerful Communist Party officials. HNA, which has announced more than US$45 billion in acquisitions since 2015 including large stakes in Deutsche Bank AG and Hilton Worldwide Holdings Inc., is showing signs that its debt-fuelled expansion is catching up with the company. The group’s interest expenses more than doubled during the first half to about US$2.4 billion, more than any company outside of the U.S. and Brazil, according to data compiled by

Bloomberg as of Thursday. HNA’s Bohai Financial Investment Holding Co., the biggest shareholder of closely held Bohai Life, fell as much as 1 per cent in Shenzhen trading on Thursday. One example of Bohai Life’s dealings with the group involved combined investments of RMB1 billion (US$152 million) in 2016 and 2017 into trust products -- offering annual returns of 8.8 per cent -- linked to an affiliate called Changjiang Leasing, with the proceeds going to HNA Capital to pay back loans, according to Bohai Life’s website. The CIRC, which also disclosed temporary bans to other local insurers on Wednesday, has been tightening scrutiny of the industry this year, seeking to prevent the eruption of any systemic risk as officials crack down on investments they deem hazardous. Anbang Insurance Group Co. Chairman Wu Xiaohui has been detailed by Chinese authorities since June. HNA has also been under scrutiny from outside of China. Last month, the Swiss Takeover Board asked the conglomerate to explain its ownership changes, while U.S. officials are examining its proposed purchase of Anthony Scaramucci’s SkyBridge Capital. Bloomberg

Business Daily Friday, October 13 2017 11

Greater China In Brief

Export

BMW Said to make Mini brand outside Europe in new China tie-up

Debt

Mainland says debt risks in centrally-owned firms overall under control Reforms have involved the restructuring of SOEs through reorganizations and mergers, reductions in excess capacity and the relocation of workers Debt risks in China's centrally-owned enterprises are under control overall, the state asset regulator said yesterday, adding that authorities will rein in corporate debt risks and strengthen management of company investment and capital expenditure. China is trying to streamline and modernize its bloated and debt-ridden state-owned sector and create conglomerates capable of competing globally, without risking mass layoffs or a blow to economic growth. The reforms have involved the restructuring of SOEs through reorganizations and mergers, reductions in excess capacity and the relocation of workers, though some analysts say much more needs to be done, especially to address high debt levels. "China will also step up efforts to increase direct financing at the central government-owned firms through ways such as private placement and mixed-ownership reform to push forward with deleveraging," an official from the State-owned Assets Supervision and Administration Commission (SASAC) told in a press conference in Beijing.

Beijing is also pushing ahead with mixed ownership by allowing private capital to invest in firms while retaining the government's presence in the companies. Beijing expects such diversification of corporate structures to take off in the second half of this year. Value of debt-to-equity swaps in China's central government-owned firms have exceeded RMB440 billion (US$66.79 billion), the regulator also said. The government has vowed to tackle high leverage in the economy as it launched a sweeping campaign to crack down on riskier types of financing, but its high debt levels have led credit ratings agencies, including S&P Global Ratings, to cut the country's sovereign credit rating. S&P downgraded China's sovereign rating in September, saying its attempts to reduce debt risks are not working as quickly as expected and credit is still expanding too fast. The asset-liability ratio of centrally owned firms was at 66.5 per cent at the end of September, down 0.2

percentage point from the beginning of 2017, SASAC data showed. Profits of China's central government-owned firms rose 18.4 per cent year on year to RMB1.11 trillion (US$168.60 billion) in the first nine months this year. The 2017 annual target for steel capacity cut at centrally-owned firms has been fulfilled ahead of time and coal capacity has been cut by 23.88 million tonnes as of end-September. The world's top coal consumer and steel maker has launched a campaign to shut down substandard steel output in its war on pollution and industrial overcapacity. It pledged to cut steel capacity by 50 million tonnes and coal output by more than 150 million tonnes this year. Fixed asset investment made by centrally-owned coal firms fell 33.5 per cent on year in the first three quarters, while steel firms' investment dropped 19.3 per cent over the same periods. Fixed asset investment by centrally-owned coal-fired power plants plunged 21 per cent year on year in the January-September period. Reuters

M&A

Wheelock to sell Hong Kong building for record US$1.2 Billion It is the second-most expensive real estate deal in Asia this year Frederik Balfour

ainland Chinese company LVGEM (China) Real Estate Investment Co. will purchase a building from Wheelock & Co. for HK$9 billion (US$1.2 billion), setting a record price per square foot for a commercial building in Hong Kong’s Kwun Tong area. A sum of HK$788 million has

already been paid for the purchase, which is slated for completion by Dec. 29, according to a Wheelock statement to the Hong Kong Stock Exchange on Wednesday. A HK$4.6 billion payment will be made at the time, with the balance due in instalments to Wheelock subsidiary Wharf (Holdings) Ltd., the company said. It is the second-most expensive real estate deal in Asia this year,

after CapitaLand Commercial Trust, Singapore’s biggest office landlord, agreed to buy BlackRock Inc.’s Asia Square Tower 2 for S$2.1 billion (US$1.5 billion) in September, according to Sigrid Zialcita, managing director of research for Asia Pacific at Cushman & Wakefield Inc. The deal by LVGEM is the latest case of mainland buyers purchasing entire buildings in Hong Kong. Known as 8 Bay East, the building enjoys a harbour-front view and is adjacent to properties bought from Wheelock by Citigroup Inc. in 2014 for HK$5.4 billion, and Manulife Financial Corp. for HK$4.5 billion in 2013. The sale works out to be about US$1,900 per square foot, unprecedented for the district, according to Dorothy Chow, regional director at Jones Lang LaSalle. “This is a good price for the seller,” said Chow, who works in valuation services in Hong Kong. “This transaction is a historical high in that area.” Reuters

BMW AG is working on a deal that would bring manufacturing of the iconic Mini brand outside Europe for the first time, according to people with knowledge of the plan. The German company is discussing a possible outsourcing agreement with China’s Great Wall Motor Co. to produce the small car for export, said the people, asking not to be identified as the deliberations are private. An agreement on local production of the Mini for exports would boost the prospects of Great Wall, whose shares surged 14 per cent Wednesday following speculation of a joint venture with BMW. That prompted the Chinese maker to suspend trading the following day. LNG

Mainland buys rare Norway LNG cargo as spot deals rise ahead of winter China has bought a rare cargo of liquefied natural gas (LNG) from Norway, Reuters shipping data shows, the latest sign that the world's second-largest economy has rushed to increase spot purchases to ensure fuel supplies ahead of the coming winter. Trade flow data on Thomson Reuters Eikon shows LNG tanker Grace Cosmos, with a cargo of 143,625 cubic metres loaded in Melkoya, Norway, heading to China for delivery on Oct. 30. It is the first LNG cargo China has bought from Norway since December last year and one of only six in the past 3-1/2 years. Melkoya serves the Snohvit LNG terminal operated by Statoil. While only a small portion of the billions of cubic metres China imports each year, the deal represents a growing need as Beijing intensifies its war on the choking smog that shrouds the north of the country. Ban

Hong Kong slaps banker with ban for mobile phone, WeChat use Hong Kong’s securities watchdog banned a brokerage employee from the industry for four months for the manner in which he used his mobile phone and Tencent Holdings Ltd.’s WeChat to take orders from clients. Xu Tao, a former investment consultant of China International Capital Corporation Hong Kong Securities Ltd., can’t work in the industry again until February, the Securities and Futures Commission said in a statement on its website dated Wednesday. Xu used his mobile phone and the WeChat messaging application to accept order instructions from 13 clients between February and August 2015, in breach of the SFC’s code of conduct and his employer’s internal rules, according to the statement. Regulators around the world are grappling with how to make sure finance-industry employees meet record-keeping obligations as technology makes it easier to communicate and conduct business on private platforms. Earlier this year, a former Jefferies Group LLC banker was fined in the UK for sharing confidential data on WhatsApp.

12 Business Daily Friday, October 13 2017

Asia Court

Samsung scion fights back as legal appeal begins Lee's presence marked his first public appearance since the August ruling on some charges, said the court's decision to not acknowledge explicit solicitation for Park's help from Samsung despite the evidence found "did not make sense".

Joyce Lee

he heir to South Korea's Samsung Group, convicted of bribing the country's former president, appeared in a packed court yesterday for the first day of arguments in the appeal of his five-year jail term for corruption. The 49-year-old Jay Y. Lee was convicted by a lower court in August of bribing Park Geun-hye, who was dismissed as president in March. The court decided the bribe helped Lee strengthen his control of the crown jewel in the conglomerate, Samsung Electronics, one of the world's biggest technology companies. The appellate court hearing the appeal is likely to try to rule on the case by next February, legal experts said. Whichever side loses could take the case to the Supreme Court, the final court of appeal in South Korea. Lee's presence marked his first public appearance since the August ruling. He did not speak during the proceedings other than giving his birth date and address. The lower court in August had ruled that while Lee never asked

Defence fights back

for Park's help directly, the fact that a 2015 merger of two Samsung affiliates did help cement Lee's control over Samsung Electronics "implied" he was asking for the president's help to strengthen his control of the firm. Lee, sitting mostly expressionless in a dark suit without tie, listened to hours-long PowerPoint presentations by both sides arguing over the lower court's logic that Lee's actions "implied" solicitation for help from Park by providing financial support

for Park's close friend and confidante Choi Soon-sil. Yesterday the defence strongly challenged that logic. "In order for implied solicitation to exist, there needed to have been a level of wordless understanding between Lee and the former president that transcended speaking," said Lee In-jae, Jay Y. Lee's lead counsel. The prosecution, which has lodged a cross-appeal against the lower court ruling that found Lee innocent

The defence, which spent much of its time during the initial trial refuting the prosecution's individual charges, said it will focus on a few key arguments in the appeal - including whether there was in fact an "ordinary type of bribery" as defined under South Korean law, which says only civil servants come under the statute. Park's friend Choi was not a civil servant. The lower court found that Samsung's financial support of 7.2 billion won (US$6.27 million) to sponsor the equestrian career of Choi's daughter constituted an ordinary type of bribery, as "it can be considered the same as she (Park) herself receiving it." The defence is expected to strongly challenge this by saying that the prosecution, on whom the burden of proof lies, has not proved collusion between Park and Choi. The appeal hearing continues on Oct 19. Reuters

Telecom

Billionaire Birla may tap markets amid telecom shakeout Idea Cellular is set to become the biggest player by subscribers after it closes its merger with the local unit of Vodafone Group Plc Bhuma Shrivastava

Billionaire Kumar Mangalam Birla, whose Idea Cellular Ltd. is poised to become India’s top carrier, sees only

a handful of businesses surviving a price war roiling the world’s second largest telecom market. The chairman of the Aditya Birla Group also won’t hazard a guess on when the industry shakeout will end in a country where calls already cost less than two cents a minute -- and are sometimes offered free. “The telecom sector is undergoing a very turbulent and difficult phase,” Birla said in an interview this week. “Probably the fittest three will survive.” India’s mobile operators have seen revenue plummet and debt soar after last year’s launch of Reliance Jio Infocomm Ltd., a wireless carrier owned by Mukesh Ambani, the country’s richest man. That triggered a bruising price war for mobile services. Jio started offering free calls and many

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others in the industry followed. Idea Cellular is set to become the biggest player by subscribers after it closes its merger with the local unit of Vodafone Group Plc, but it may

still have to tap financial markets to fund its substantial capital requirements, according to Birla. Banks are growing more cautious in lending to the beleaguered industry as telecom profits fizzle out. With players falling “like nine pins,” Birla predicts that “the tariffs should stabilize at some point.” It’s still hard to say when prices will stop falling, and Idea won’t rule out share sales or bond issues to raise funds, he added. The telecom operator has lost 1 per cent this year compared to the Sensex’s almost 20 per cent gain. Birla, 50, now faces the task of reviving profitability at Idea Cellular, which has reported three consecutive quarters of losses. Telecom accounts for about 13 per cent of the overall revenue of the Birla group, which also includes mining, cement and financial

services. The Bloomberg Billionaires Index puts Birla’s net worth at US$8.2 billion. The Vodafone merger will help Idea save US$2.1 billion a year on operating costs and capital investments, while enabling the combined entity to make better use of wireless spectrum. Banks though have become wary of wireless operators and are charging more, if they lend to them at all. Combined, the carriers owed 4.6 trillion rupees (US$71 billion) at the end of March, according to rating company ICRA. “Banks have become very selective,” Birla said. “Loans for the telecom unit have become more expensive than for other group companies because it has become a far riskier business.”

Shifting trends

India is the world’s second largest telecom market by subscribers after China. For now, the sector is dominated by Bharti Airtel Ltd., controlled by billionaire Sunil Bharti Mittal. Although that will change after Idea’s deal with Vodafone is completed. A wave of other consolidation is reshaping the industry. Bharti Airtel agreed to buy the struggling local unit of Telenor ASA in February, while Reliance Communications Ltd. said in 2015 that it would buy AFK Sistema’s local unit. Smaller players including Reliance Communications and Tata Teleservices Ltd. are being forced to attempt to restructure debt and sell assets. Loss-making Tata Teleservices is said to be preparing to shut a large part of its telecom business, according to a

Business Standard report that cited people it didn’t identify. “No Indian bank is ready to fund the telecom operators. No foreign bank wants to do it,” Anil Ambani, chairman of Reliance Communications, told shareholders on Sept. 26. “There’s no financing for growth. Period.” Anil Ambani is younger brother to Mukesh, and the two brothers’ businesses are independent although they share spectrum, telecom towers and fibre.

Top operators

Reliance Communications faces a deadline to restart payments to lenders and is racing to sell its spectrum and real-estate assets to reduce debt. A planned merger with Aircel Ltd. collapsed earlier this month, bogged down by delays and lawsuits. Consolidation in the Indian mobile industry is set to accelerate, turning it largely into a three-player market benefiting top operators, CLSA analysts wrote in an Oct. 9 note. Mobile voice and data tariffs have plummeted to below-cost levels and the industry’s revenues will decline as much as 15 per cent this year, Himanshu Kapania, the managing director of Idea Cellular said in New Delhi last month. Birla admitted that the entry of a large player with “deep pockets” had unleashed a lot of upheaval and all of Idea’s business strategies would need to take this entrant into account. So when is the scathing price war expected to end? “It’s hard to say,” Birla said. “You are asking the right questions to the wrong person.” Bloomberg

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Business Daily Friday, October 13 2017 13

Asia In Brief Imports

Japan to propose changes to beef import safeguards in talks with U.S.

M&A

Australian hotel giant Mantra rolls out carpet for US$920 mln Accor bid The deal would be the second biggest in Australia's hotel sector, and the largest buyout of an Australian entity by French interests Tom Westbrook and Shashwat Pradhan

Australian No. 2 hotel company Mantra Group Ltd agreed yesterday to a A$1.18 billion (US$920 million) buyout from larger Accor SA, a deal which would join the country's top two hotel groups at a time when tourism is rising sharply. The deal would give the combined group about 50,000 rooms or about 11 per cent of Australia's hotel market, according to IBISWorld statistics. It comes as Australia's hoteliers rush to build more rooms to meet growing demand. France-listed Accor is offering A$3.96 per share, a 23 per cent premium to Mantra's last trade before the bid was announced on Monday. The offer price is more than double Mantra's A$1.80 issue price when it listed in 2014. Shares in Sydney-listed Mantra edged up 0.1 per cent by midsession to A$3.88, indicating investors support the deal but are leaving open the possibility it may meet regulatory hurdles. "It's within the bounds of fairness, given what the shares have

done recently," said Noel Webster, a portfolio manager at BT Investment Management, Mantra's largest shareholder. "Our first reaction would be not to block it." The merger needed clearance from

Key Points Mantra welcomes takeover at "significant premium" Offer at 23 pct premium to last trade before announcement Merged group to have about 11 pct of Australian market-IBISWorld Merger needs foreign investment, competition approvals the Foreign Investment Review Board and antitrust regulator the Australian Competition and Consumer Commission (ACCC), Mantra said. The ACCC expected the No. 1 and No. 2 hoteliers to file a "detailed submission" about the deal shortly, a spokesman said. The regulator previously said it would review any deal

to decide whether to open a formal investigation. The deal would be the second-biggest in Australia's hotel sector, and the largest buyout of an Australian entity by French interests, according to Thomson Reuters data. The number of visitors to Australia surged 9 per cent in the past financial year to hit a record 7.9 million while spending by international visitors climbed to US$40.6 billion - also a record. Mantra Chairman Peter Bush said in a statement the company's board was recommending the deal to shareholders, having concluded that the "sale of the company at a significant premium to market is an attractive outcome". Accor Chairman and Chief Executive Officer Sebastien Bazin said the takeover would "underpin our long-term growth in the Asia-Pacific region". If approved, the merger could put pressure on Australia's third-largest hotel company, Marriott International. Marriott Australia and New Zealand Vice President Sean Hunt declined to comment. Reuters

Disposal

Forecast

India profits seen emerging from the shadow of new tax, cash ban Corporate India is forecast to swing back to profit growth as businesses resume stocking up shelves after getting a better handle on the new countrywide tax regime. Earnings for the three months ended in September will increase 10 per cent from a year ago, according to CLSA India Pvt. forecasts for the 104 companies it tracks, a turnaround from the 18 per cent decline in the previous three months. Citigroup Global Markets India Pvt. expects profits for the 131 companies it covers to increase 13 per cent. Government flip-flops on the goods and services tax, or GST that went into effect on July 1, compounded uncertainties lingering on from November’s cash ban. That contributed to a slowdown in growth in Asia’s third-largest economy. But, equity investors remain bullish, pushing the 30-member S&P BSE Sensex Index up 20 per cent this year. Tourism

Asahi considering selling stake in Tsingtao Brewery The company has said that it would restructure its operations in Southeast Asia and China

apan's Asahi Group Holdings said yesterday it is considering selling all or part of its 19.99 per cent stake in Tsingtao Brewery Co Ltd , its latest divestment from China's beer industry as it seeks growth in Europe and other Asian markets. Asahi's decision to sell the stake, which it acquired in 2009 for around US$666.50 million, follows its announcement in June to sell its 20 per cent stake in Chinese brewer Tingyi-Asahi Beverages Holding Co Ltd for US$612 million. Tsingtao said Asahi holds 270.1 million of its Hong Kong listed H-shares. At yesterday closing price, the stake would be valued at nearly HK$8.5 billion (US$1.09 billion). The maker of Japan's best-selling beer, Asahi Super Dry, has been intensifying its focus on Europe, scooping up a group of eastern European beer brands from Anheuser-Busch InBev for 7.3 billion euros late last year. That move gave the company around 9 per cent of the European beer market, excluding Russia.

Japan will propose changes to its safeguard mechanism on frozen U.S. beef imports that will shorten review periods and allow importers to voluntarily lower import volumes to prevent tariffs from automatically kicking in, two government sources said on Thursday. The proposal will be made at the second round of the U.S.Japan economic dialogue in Washington on Oct. 16, but it is uncertain if the U.S. side will go along, said the two sources, who have direct knowledge of the matter. If successful, the proposal could help ward off trade friction with the United States, which is renegotiating free trade agreements with other countries to protect jobs and lower its trade deficit. Under current measures, Japan automatically imposes higher tariffs if quarterly imports of specific beef products from any country rise more than 17 per cent from the previous year.

"We are engaging in efforts to 'restructure our business portfolio with a focus on asset efficiency,' to assess whether each business contributes to sustainable enhancement of corporate value," Asahi said in a statement. The company has said that it would restructure its operations in Southeast Asia and China, regions which are facing increased competition as the market consolidates just as growth slows.

It did not identify a potential buyer or selling price for the stake. Tsingtao's shares in Hong Kong ended down 2.3 per cent before the announcement, and have struggled for traction over the past 12 months. China is the world's largest beer market by sales, but profits have been harder to come by amid fierce competition between local brewers and global beer giants AB InBev, Heineken NV and Carlsberg. Reuters

Thailand cuts 2017 tourist arrivals forecast to 33-34 mln Thailand's tourism minister on Thursday said the country expects 33 to 34 million visitors this year, down from an earlier forecast of 35 million. "Right now Thailand has welcomed 27 million already this year so I think for the whole year we should get 33 to 34 ," tourism minister Kobkarn Wattanavrangkul told reporters. She did not give a reason for the projecting a lower number. The smaller number would still be a record for Thailand, which welcomed 32.6 million foreign visitors in 2016, with the largest group coming from China. Tourist arrivals so far this year are 5.6 per cent above the same period of 2016, with 7.63 million out of the total of 26.9 million coming from China, Kobkarn said. The ministry said Thailand attracted far more tourists from China during its just-ended "Golden Week" holiday than a year earlier. A ministry document said that 251,120 Chinese visitors arrived during Oct. 1-9, a 69 per cent increase from a year earlier. Revenue generated by them during the period was 12.53 billion baht (US$378.55 million), or 76 per cent higher than last year, the ministry said.

14 Business Daily Friday, October 13 2017

International In Brief Data centre

Apple's US$1 billion data centre gets Irish High Court green light Ireland's High Court yesterday ruled that a 850 million euro (US$1 billion) data centre planned by Apple in the west of Ireland may proceed, dismissing an environmental challenge made by three people. Apple announced plans to build the data centre in 2015, but the project has been delayed by planning objections. A similar Apple centre announced at the same time in Denmark is due to begin operations later this year. Allegations

Tougher stance

End of UK borrowing binge in sight as banks tighten credit The BOE’s Financial Policy Committee said that banks could suffer bigger losses from defaults than they’re expecting if the economy faces a sudden downturn ritain’s consumer borrowing boom may be about to hit a wall. Major banks are now more wary about extending unsecured credit than any time since 2008, shortly after the collapse of Lehman Brothers.

change comes in the wake of multiple warnings from regulators that the pace of borrowing, with credit growth still running close to 10 per cent a year, poses a risk to financial stability. The BOE said its gauge of the availability of unsecured credit stayed below zero in the three months through September. The measure - already at

According to a Bank of England survey published Thursday, lenders are starting to see an increase in defaults and have tightened the criteria they set for borrowers. The

the lowest since 2009 - is expected to fall further this quarter. Lenders in the BOE survey - including Barclays, Lloyds Banking Group and Royal Bank of Scotland

Fergal O'Brien

Kremlin says allegations against Kaspersky Lab are "absurd" Moscow believes allegations against Russia's Kaspersky Lab are "absurd", Kremlin spokesman Dmitry Peskov said yesterday, adding that the Russian government had nothing to do with it. Israeli intelligence officials spying on Russian government hackers found they were using Kaspersky Lab antivirus software that is also used by 400 million people globally, including U.S. government agencies, according to media reports on Tuesday.

- said the tougher stance was due to the economic outlook as well as a changing appetite for risk. Banks have also started to rein in one major lure for borrowers by shortening the interest-free period when a balance is transferred to a new credit card. The head of the Financial Conduct Authority, Andrew Bailey, issued a warning this month, saying that about 5 million credit-card borrowers are experiencing difficulties paying off their balance. “Motivations for this included concerns about customer indebtedness and the squeeze in real incomes,” the BOE said in the survey. The rapid pace of consumer-credit growth has been a hot topic in the UK this year. The BOE’s Financial Policy Committee said in September that banks could suffer bigger losses from defaults than they’re expecting if the economy faces a sudden downturn. In its latest survey, it said default rates on credit-card lending increased “slightly,” while those on other unsecured lending rose “significantly.” Bloomberg news

Milestone

Bitcoin breaches new milestone by smashing past US$5,000 mark Bitcoin surged to a fresh record yesterday as the enthusiasm for cryptocurrencies showed little signs of abating. Bitcoin tumbled below US$4,000 last month after China’s central bank stepped up regulations on digital currencies, banning initial coin offerings, a popular means of fundraising for startups. Recent reports that the Chinese government will ease regulations and that Goldman Sachs Group Inc. is exploring how it could help its clients trade cryptocurrencies are now helping sentiment. “It’s a very speculative market,” Jon Moulton, a UK-based private equity veteran who owns bitcoins, said in an interview with Bloomberg TV’s Francine Lacqua. “It’s going to be a very volatile asset for a long time.” Telecom

Deutsche Telekom demonstrates first 5G antennas in Berlin Deutsche Telekom debuted its first ultra high-speed next generation mobile antennas yesterday, which Europe’s biggest telecoms provider said showed it was ready for a global launch of the technology by 2020. Telekom said it was the first use of the technology in a real world setting in Europe, with speeds of more than 2 gigabits per second to a customer device, as well as a latency of 3 milliseconds on commercial sites. The antennas are manufactured by China's Huawei Technologies Co Ltd. "This is a very decisive developmental step on the way to the global launch of 5G, which is planned for 2020," Telekom board member Claudia Nemat said in a statement. Europe is expected to take a slower approach to 5G network deployments than operators in South Korea and Japan, where rollout is due next year, followed quickly by the United States where Telekom is the majority owner of No. 3 ranked mobile carrier T-Mobile.

New CEO

HSBC names insider John Flint CEO as Tucker bows to tradition HSBC had drawn every one of its previous 21 top executives from its own ranks over its 152-year history Stephen Morris

HSBC Holdings Plc named John Flint as its next chief executive officer after new Chairman Mark Tucker opted not to break with tradition and tapped a long-serving insider to run Europe’s largest bank. Flint, currently head of retail banking and wealth management, HSBC’s largest division, will take over from incumbent Stuart Gulliver, according to a statement on Thursday. Flint joined the bank’s management training program in 1989 and rose through the ranks of its Asian trading floor before returning to Europe 13 years ago to take on senior roles spanning the consumer and investment banking sides of the business. He’s been treasurer, deputy head of markets, chief of staff and head of strategy. “John has broad and deep banking experience across regions, businesses and functions,” Tucker said in the statement. “He has a great understanding and regard for HSBC’s heritage, and the passion to build the bank for the next generation. By picking a 28-year veteran, Tucker, himself an HSBC outsider who replaced Douglas Flint as chairman on Oct. 1, has bowed to the lender’s tradition of spurning CEO candidates without a lengthy history at the firm. Tucker also considered outside candidates, including Peter Hancock, the former boss of American International Group Inc., Bloomberg News has reported. HSBC had drawn every one of its previous 21 top executives from its own ranks over its 152-year history, according to the bank’s records. John Flint, 49, and other internal candidates had sought to persuade Tucker, the 59-year-old former CEO of Hong Kong-based insurer AIA Group Ltd., that the recent stock rally and signs of revived revenue growth justified maintaining continuity with the current management team and its threeyear-old strategy.

Flint would have emphasized the breadth of his experience at HSBC, including his ability to handle egos at the investment bank as a former trader, according to people familiar with his thinking. He also placed the importance of preserving the bank’s culture at the center of his pitch, arguing that another newcomer beside Tucker would represent a level of change and disruption to the firm’s that could derail recent progress, they said. HSBC is steeped in tradition, stemming from the days when the Hongkong and Shanghai Banking Corporation financed trade across the British Empire. Flint helped oversee a relaunch of the international manager program, people with knowledge of the program said. It seasons promising young executives with global postings that often turn into lengthy, civil-service type tenures, such as Flint’s own. The CEO-elect beat out other internal candidates including Samir Assaf, the head of the investment bank; Antonio Simoes, who runs the bank’s U.K. and European regional operations; global head of banking Matthew Westerman and Finance Director Iain Mackay. Flint’s top concerns will likely include improving the bank’s

technology, which means more job cuts in the back office; continuing Gulliver’s “pivot to Asia” and US$100 billion investment in China’s Pearl River Delta region; and growing the asset management unit. The economics graduate has given few interviews in his 28 years at HSBC. Flint has no public LinkedIn profile or Twitter account. His relationship with Tucker will depend on how quickly he can galvanize revenue growth and deliver a double-digit return on equity, considered the bare minimum in profitability by investors. Sam Laidlaw, the former head of HSBC’s board nomination committee, said earlier this year that the new chairman “doesn’t have patience for a lot of time-wasting.” By announcing a successor quickly -- Tucker only joined the bank and moved to London in September -- the chairman has avoided a repeat of the boardroom battle that led to Gulliver succeeding Michael Geoghegan six years ago. Hong Kong tycoons who were both clients and shareholders in the bank, such as billionaire Li Ka-shing, intervened to ensure an internal successor was picked when news leaked that external candidates were being considered, according to reports at the time. Reuters

Business Daily Friday, October 13 2017 15

Opinion So the Fed has absolutely nothing to worry about. Right? Lisa Abramowicz a Bloomberg Gadfly columnist

ere's something sobering that several central bankers expressed in the latest Federal Reserve meeting: Low benchmark borrowing costs may be starting to pose a more serious threat to long-term financial stability, according to Fed minutes released yesterday. U.S. central bankers have worried about frothy markets for some time, but some of them are feeling a greater urgency to do something. There are several reasons for this, but one stands out. President Donald Trump and his cabinet members have taken an aggressive stance toward loosening banking regulations. The danger here is age-old -- as banks engage in riskier activities, low rates allow them to take on more leverage until, suddenly, boom. The Fed is in a position to stop, or at least slow this process, by tightening monetary policies. By lifting the nearterm interest rate, the Fed could make it less economically attractive for firms to increase leverage, or borrow short-term money to invest in longer-term assets. In that scenario, the Fed could potentially send the U.S. economy into a recession, or at least ignite a market correction. But some policy makers may feel it's worth it, since it would take steam out of highflying markets. Rock-bottom rates are making some central bankers a little queasy. Dallas Fed President Robert Kaplan noted on Tuesday that he found the persistently low yield on 10-year Treasuries "a little ominous" -especially because they've been declining relative to shorter term rates. "What I don’t want to see us do is raise rates so fast that we get an inverted yield curve because history has shown an inverted yield curve has tended to be a precursor to a recession," he said. Indeed, U.S. yield curves have been flattening: Yet the market is still expecting the Fed to hike rates in December, with the implied chances of a move rising over the past month to about 77 per cent, according to derivatives traders. It's very likely that Fed Chair Janet Yellen and her peers would feel less inclined to raise interest rates again in the near term if it weren't for the recent chipping away of post-crisis rules. After all, Yellen said back in June that those regulations have substantially fortified the banking system. She also said that she didn't expect to see another crisis in her lifetime that compares with the 2008 credit meltdown. In August, Yellen distanced herself from Trump's anti-regulatory rhetoric, saying any rollback should be "modest" and noting that new regulations have made the financial system much safer. Then last week, the Treasury Department unveiled a 220-page report laying out a series of recommendations aimed at undoing rules affecting the largest banks, hedge funds and exchanges. The Fed undoubtedly took note. Central bankers have been well-aware that they're facing an unpredictable backdrop from regulators and politicians. And they have a wary eye on investors who've been all-but lulled to sleep in the face of any and every risk. There's a difference between high asset valuations and a dangerous bubble. Prices can go down without causing the entire credit system to collapse. But if investors end up questioning the integrity of financial institutions they rely on, or basic instruments they've come to think of as safe and reliable, the trust that underpins the entire monetary structure frays. This is far more dangerous. The looser the White House makes the rules, the more likely it is that central bankers will consider taking away bankers' punch bowl. Bloomberg Gadfly

Hong Kong investors are under surveillance. That's good Nisha Gopalan a Bloomberg Gadfly columnist

anipulating Chinese stocks from Hong Kong is about to get harder. That's the good news, for investors interested in fair and transparent markets. The bad news is that it raises the spectre of increased Chinese surveillance of investors in the city. By the middle of next year, buyers of equities via the Hong Kong exchange's trading links with the mainland will have to disclose who they are through an investor ID system, according to the head of the city's Securities and Futures Commission. The requirement is more invasive than current global norms that deny regulators direct access to that information, forcing them to request it from the brokerage through which a trade is performed. (The MiFID II regulations that come into force early next year will see the introduction of an identification system in Europe.) Until now, any investor in Chinese shares wanting to cloak their identity could route trades through Hong Kong using the socalled connect programs set up with Shanghai in November 2014 and Shenzhen last December. Such anonymity isn't possible in the mainland, which introduced strict ID requirements after a spate of scandals in the early 2000s when many brokers were accused of stealing stocks. All traders need an ID registered with the stock exchanges and clearing house; the system gives regulators access to other information besides identity, including how much cash investors have in their accounts. Investors concerned about their information being passed on to Chinese authorities can be assured that the SFC held back from adopting a mainlandstyle approach. Hong Kong's ID system will drill down only to the level of the trader, rather than the ultimate individual owner. Buying through a fund, for example, will continue to assure some anonymity. Most fund managers are relieved that the ID requirement won't go deeper, according to Eugenie Shen, head of the asset management group at the

“

Asia Securities Industry and Financial Markets Association. "The operational and administrative burden of operating an ID system down to the ultimate beneficial owner level would be very high," Shen said. Hedge funds and other professionals might fret that a full-disclosure system would open them to the risk of information leakage that would tip off other investors on their trading strategies. In truth, though, the ID move is primarily aimed at Chinese investors who are using Hong Kong as a convenient platform to play the markets back home. A case in point: In March, the Chinese Securities Regulatory Commission fined Tang Hanbo the equivalent of about US$170 million in two cases of market manipulation, one of which was the first to involve trading through the stock connect between the mainland and Hong Kong. Tang, who had been punished for illegal trading at least twice before, used the link to manipulate the Shanghai-listed shares of Zhejiang China Commodities City Group Co. At some point, the ID system will be extended to mainland investors trading Hong Kong stocks, SFC Chief Executive Officer Ashley Alder said this week. That could help combat manipulation of the city's stocks, a rising problem that is worrying the securities regulator. More money has flowed into Hong Kong than in the other direction via the connect programs this year -- RMB520 billion (US$79 billion) versus RMB315 billion into Shanghai and Shenzhen stocks, according to Alder. While privacy will remain a concern for foreign investors, Hong Kong looks to have struck a reasonable balance. With MiFid II, there is a global trend toward more transparency in markets. Better for Hong Kong and China to be taking such action at a time when billions of dollars of foreign investment are flowing in than during a drought. If identity disclosure helps to create fairer and more trustworthy markets, then it will be a price worth paying. There's no free lunch. Bloomberg Gadfly

The ID move is primarily aimed at Chinese investors who are using Hong Kong as a convenient platform to play the markets back home

”

16 Business Daily Friday, October 13 2017

Closing Disposal

Lotte says has several suitors for China supermarkets, seeks sale by year-end

South Korea's embattled Lotte Group said yesterday several firms have expressed interest in acquiring its Lotte Mart stores in China and that is aiming for a sale by the end of this year. The country's No.5 conglomerate decided to bow out of the business after most of its hypermarkets and supermarkets in China were shut down amid political tensions between the two nations. "We are in detailed talks with some of those companies," Lim Byung-yun, an executive vice president at Lotte Corp, said at a news conference to mark the launch of the group's new holding company.

The size of the deal is expected to be small at a couple hundred million dollars, a banking source said, declining to be identified as the talks were confidential. Goldman Sachs has been picked to managed the sale. Lotte, already reeling from internal power struggles and a corruption scandal, has been particularly hard hit by the political friction after it agreed to hand over land for a U.S.made missile defence system - a plan that has angered Beijing which argues the radar can penetrate far into its territory. But even before the disputes, Lotte's Chinese hypermarket operation had been generating operating losses of well over 100 billion won (US$88 million) per year for the past three years, Fitch Rating said in report last month. Reuters

Strategy

Sports car maker Aston Martin counts on an SUV to drive its future The DBX will be a four-door SUV designed to compete with models such as Volkswagen AG's Bentley Bentayga Joseph White

he arrival of Aston Martin's DBX sport utility vehicle in 2019 could help more than double sales of the British sports car maker by early next decade, its chief executive told Reuters. The company's entry into the fast-growing super-premium SUV market "absolutely changes the business," Andy Palmer said in an interview in the United States. It could boost sales to as many as 12,000 vehicles a year by early in the next decade, more than double the roughly 5,000 sports cars the company expects to sell globally this year, he forecast. Aston Martin's previous peak sales year was 2007, when it sold 7,300 cars just before the financial crisis. Palmer said U.S. sales could reach about 1,300 cars this year, propelled by the new DB11 model. "I am not claiming success," he said. Aston's goal is to get over 2,000 cars a year in the United States. The DBX will be a fourdoor SUV designed to compete with models such as Volkswagen AG's Bentley Bentayga, a US$229,000and-up vehicle billed by its maker as "the fastest SUV ever built". The DBX's design "is

complete", Palmer said, and the factory should be building prototypes by the end of 2018. Aston Martin, the preferred drive of fictional British spy

Brexit

Privately-owned Aston Martin reported 94.6 million pounds (US$125.1 million) of cash from operations during the first half of 2017,

the relaunch of the Lagonda brand - will have a profile similar to Ferrari, Palmer said, adding: "Ferrari is a US$15 billion company." Decisions about a public of-

James Bond, is late to join the SUV mania gripping the global luxury car business. The financial incentives are clear. In the United States, SUVs accounted for nearly 40 per cent of total U.S. vehicle sales in 2016, up from 32.6 per cent in 2014, and super-premium models are one of the fastest growing segments.

after years of losses. Under Palmer, a former Nissan Motor Co executive, Aston Martin has restructured and issued 550 million pounds in debt securities that are due in 2022. That year is also near the end of Palmer's restructuring plan. By then, Aston Martin - with the DBX SUV and

fering or a sale of the company are up to the Kuwaiti and Italian investors who control it, Palmer said. "One assumes they will want an exit." Britain's departure from the European Union could make Aston Martin's road tougher if the two sides fail to maintain favourable trade rules, Palmer said. Non-tariff

barriers that could slow deliveries in Europe "are my first concern," he said. "Our brand is largely rooted in the UK so it’s a tough call" to consider factories elsewhere, he added. A weaker British pound and the ability of Aston's client base to absorb the costs of tariffs could offset Brexit costs, he said. In the meantime, Aston Martin faces the same pressures to develop cleaner petroleum fuelled engines and electric cars as better funded rivals. Aston will eventually offer hybrid options on all its models, and will build a limited run of 155 RapidE electric cars in 2019 that will serve as a test fleet for developing a future generation of electric cars, Palmer said. "The idea that every vehicle on the road will be electric in 2040 isn't going to happen," he said. Aston's more valuable play in the electric vehicle field could be as a consultant for electric car startups that don't know how to build lightweight vehicles such as Aston's aluminium- bodied sports cars. The company recently established an engineering consulting arm. "It's starting to get its first contracts," Palmer said. Reuters

M&A

Impasse

Review results

China's CEFC set to raise US$5.1 bln from VTB for Rosneft deal

Brexit talks hit deadlock as both sides Airbus board backs CEO after reviewing top prepare for cliff edge management

CEFC China Energy is set to raise US$5.1 billion in shortterm loans from VTB , Russia's second-biggest lender, to part finance its US$9.1 billion purchase of a stake in Rosneft Oil, three people with knowledge of the matter said. CEFC last month said it will buy a 14.16 per cent stake in the Russian oil major from a consortium of Glencore and the Qatar Investment Authority, strengthening energy ties between Moscow and Beijing. It received preliminary Chinese approval to buy the stake about a week after the deal was announced. The US$5.1 billion loan agreement would help the privately run Chinese conglomerate to close the Rosneft deal. Two sources said the loan would be for one year, with one saying the tenure could be extended by another year. CEFC will use its own cash for the remaining US$4 billion of the purchase price, the sources said. CEFC is also in separate talks with China Development Bank (CDB), a policy bank, to refinance the short-term credit from VTB, they said. The deal is set to win final approval from the Chinese government, including the State Council, or Cabinet, by the end of 2017, as it is seen as an investment that fits into Beijing's Belt and Road initiative, said two of the sources. Reuters

The European Union said talks hit an impasse over what the UK owes when it leaves, increasing the chances of a messy departure as time is running out to clinch a deal. The pound fell to the weakest in a month after chief EU negotiator Michel Barnier said there had been no discussions over the all-important bill that the UK has to agree it will pay before the EU will start trade talks. Barnier put the onus firmly on the UK’s squabbling government to find the political will to move the talks forward, while both sides raised the prospect of talks breaking down without an agreement -throwing businesses into a chaotic legal limbo. “No deal will be a very bad deal, huh? And to be clear on our side we will be ready to face any eventualities and all eventualities,” Barnier, told reporters in Brussels yesterday. After his words, the pound traded down by as much as 0.6 per cent against the euro. On the question of the financial settlement -- the most intractable of the three pressing issues -Barnier said: “We have reached a state of deadlock which is very disturbing for thousands of project promoters in Europe and it’s disturbing also for taxpayers.”. Bloomberg news

Airbus directors publicly backed Chief Executive Tom Enders yesterday in the face of European investigations into the use of middlemen in airplane sales and a US$2 billion fighter deal. But in a sign of the disquiet within the aerospace group, the board only declared its support for Enders after its own review of senior management, two people familiar with the matter said. The investigations by Britain's Serious Fraud Office and later its French counterpart were triggered by Airbus in 2016 when it reported itself to UK authorities after uncovering flawed documents over the use of intermediaries in airplane sales. Enders and legal counsel John Harrison have come under fire from within Airbus and in the French media for opening the floodgates to widening investigations and for overseeing what several insiders have called an internal witch-hunt. The Airbus board defended the decision to alert UK authorities to its initial findings. "These decisions were made with the board's unanimous approval and actions were all directed by Tom Enders, the company's CEO," it said in a statement. "The Board has full trust and confidence in Tom and depends on his leadership to continue the transformation of the company and in particular our compliance programme alongside our General Counsel, John Harrison," it added. Reuters