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The Business Times | Tuesday, July 18, 2017 ●

Singapore-based CellResearch considering Nasdaq listing The company holds 41 patents in regenerative medicine, including a topical treatment for chronic wounds By Judith Tan juditht@sph.com.sg @JudithTanBT Singapore WHEN CellResearch Corporation (CellResearchCorp) started working on ways to treat hard-to-heal wounds, it was wandering into uncharted territory – using stem cells from the lining of babies’ umbilical cords to develop treatments for such wounds. Today, 15 years and 41 patents later, the S$700-million company has the technology to bank these stem cells; it has also developed a topical treatment for chronic wounds. It has now set its sights on the global market, and a Nasdaq listing by 2019. The company’s group chief executive Gavin Tan told The Business Times: “The market for advanced wound care is already worth US$22 billion, and we’re confident we can get a good slice of it. We are now embarking on clinical trials, and hoping to be fast-tracked because our data series is promising.” CellResearchCorp is putting its bet on stem cells as a valuable source of material for wound care, especially for the chronic wounds diabetics often suffer.

CellResearchCorp’s chief medical officer Ivor Lim said going for an initial public offering would “generate interest and income”, and that the income could go towards developing new strategies in the exploitation of cord-lining stem cells. “ We are looking at the Nasdaq because biotech and medical research are seen as blue-sky investments, where there is a likelihood of the company making profits, as opposed to an established profit track record. “There are pools of investors in the US who are more savvy and not as risk averse. They are willing to forego proven profit track records in return for a breakthrough,” he said. Risk-averse and conservative investors usually miss out on big biotech returns, he added. Dr Lim said CellResearchCorp wants a “global launchpad” for its treatment drug. Its cord-lining stem cell topical treatment has a high safety margin, and healing is directly observable, which means the US Food and Drug Administration (USFDA) is more likely to grant it fast-track status. CellResearchCorp is the second Singapore-based biotechnology firm looking at listing in the United States. The first was Tessa Therapeutics,

Gaining momentum Singapore M&A half-yearly trend (US$m)

(Volume) 450

70,000

■ Total announced value (US$ million)

60,000 50,000

400 350

Total number of deals

300

which will be looking for about US$100 million in extra funding later in the year. One way for it to get these funds is to go for an initial public offering at the Nasdaq in the next 12 to 18 months. CellResearchCorp was founded in Singapore in 2002 by a team of scientists led by chief scientific officer Phan Toan Thang. The team discovered that the lining of umbilical cords, usually discarded after childbirth, contains two types of stem cells – epithelial stem cells (considered a key resource for skin and tissue-lining regeneration), and mesenchymal stem cells (which are key to bone and solid organ repair). The company’s CEO, Mr Tan, said: “This novel and significant discovery was put up for intellectual property protection, and to date, we have patents granted in multiple strategic key territories around the world.” CellResearchCorp uses its patents to enhance collaborations with research groups in Singapore, the US and elsewhere, so that its proprietary stem-cell technology can achieve its full potential as a platform to treat a wide range of diseases, including those of the skin, brain, heart and cornea. The company signed a Memorandum of Understanding with the Agency for Science, Technology and Research (A*Star) on June 1 to work

By Claire Huang huangjy@sph.com.sg @ClaireHuangBT

250

30,000

200

Singapore

150

DEAL making in Singapore is continuing an upward track. The trend was led in the first half of the year by the growth of mergers and acquisitions (M&As) – in terms of both volume and value of deals. There was also a doubling in value of private equity (PE) and venture capital (VC) investments, even as the initial public offering (IPO) market recorded a sharp year-on-year drop in value. Between last December and June 2017, Singapore recorded a total of 485 deals worth US$46.1 billion, up from 383 deals valued at US$43.4 billion in the corresponding period a year ago, said a Duff & Phelps report on Monday. Of all Singapore deals made, M&As contributed the most in terms of volume and value; there were 383 such deals worth US$42.6 billion registered in H12017, more than the 339 deals worth US$40.5 billion a year ago.

100

10,000

50 H1 2013

H1 2014

H1 2015

H1 2016

H1 2017

Source: Duff & Phelps Singapore

Deal segmentation by value ■ Private equity & venture capital 100

■ Domestic ■ Outbound

■ Inbound

(%)

80 60 40 20 0 Singapore

Malaysia

Indonesia Source: Duff & Phelps Singapore

Fintech giant Lufax to launch online investment platform in Singapore By Jamie Lee and Kimberly Chan leejamie@sph.com.sg cwanlin@sph.com.sg @JamieLeeBT Singapore LUFAX, the world’s second-largest fintech firm, is staking its claim beyond China, as the unit of Ping An Group plans to launch its first overseas online wealth management platform in Singapore targeting offshore mid-market retail investors. Expected to launch by September this year, Lu International targets the burgeoning middle-class in Asia, in part by attracting them with competitive fee structures that will beat the typical 3-5 per cent upfront fees charged to retail investors today. “There is a lot of space to be competitive,” said Kit Wong, chief executive of Lu International that will be based out of Marina Bay Financial Centre, at a press briefing on Monday. Without a need for physical distribution, Lu International could save about half of expenses borne by a traditional fund distributor, it has estimated. Broadly, the platform will offer both investments in funds present in Singapore as well as global funds, with the platform using facial recognition to register users online. The fund distribution model allows Lufax to break down and sell a fraction of a fund at about US$5,000 per pop to each individual investor. Lu International already has a list of funds, but Mr Wong declined to cite a target for the number of funds to be offered on the platform, or a target for assets under management.

The report, titled “Transaction Trail”, said outbound deals (in which Singapore-based companies or sovereign wealth funds or SWFs buy overseas firms) accounted for about 68 per cent of the total deal value, compared with 66 per cent last year. This was followed by inbound deals (19 per cent) and domestic deals (13 per cent). Duff & Phelps said: “M&A deal values continue to be driven by sizeable M&A transactions by the SWFs, GIC and Temasek Holdings in consortium as well as stand-alone investments, complemented by other notable deals such as Exxon Mobil Corp’s acquisition of InterOil Corp, Mapletree Investments’ acquisition of US student housing assets, Mercatus Co-operative’s acquisition of Jurong Point Mall, and Jacobs Douwe Egberts’s acquisition of Super Group Ltd.” The largest contributor to M&A deal values here was the real estate sector (29 per cent), followed by healthcare (25 per cent) and technology (10 per cent). PE and VC investments in Singapore companies in the first half of this year came in at US$3.2 billion,

tient will need regular care in a medical facility and be treated by a doctor and nurses at each instance, in addition to which someone needs to take time off work to accompany him to the hospital and back. “This sequence of events needs to be repeated many times until the wound heals – if it even heals at all. All

this simply adds to the healthcare burden of the country.” CellResearchCorp also owns Calecim Cosmeceuticals, which has a proprietary formulation that encourages skin to regain its youthfulness, and CordLabs, which licenses cord-lining stem-cell banking technology to cord blood and tissue banks.

Lu International chairman and former GIC president of special investments Teh Kok Peng told reporters the platform would be mindful that MAS is protective of such mass-affluent investors, who are shut out of access to private banks. Mr Gibb said one aim is to help such investors allocate funds to investments that are still lower in risk, but improve returns over bank deposits. The platform is also keen to tap on the emerging trend of infrastructure funds. He noted that at this point, Lu International is not billed as a robo-adviser, since it does not yet automatically allocate investments to funds even as there is already an investment advisory element in its service. Lu International has secured in-principle approval from the Monetary Authority of Singapore for its capital markets services licence, after engaging with the regulator for six months. “Singapore has a very mature regulatory framework,” said Mr Gibb. “There's been real interest and willingness in looking at how technology can solve traditional problems.” Lufax’s wider expansion into wealth management comes as it moves from peer-to-peer (p2p) lending amid expected regulatory scrutiny in China following a Ponzi scheme exposed at a smaller p2p competitor. Monthly p2p transactions now make up just 10 per cent of all transactions on the domestic platform today, said Mr Gibb. He declined to set a specific timeline for Lufax’s IPO in Hong Kong.

double that of the year-ago period, said the report. The IPO market, on the other hand, fell from seven IPOs raising US$1.6 billion in H12016 on the Singapore Exchange to US$300 million raised from 12 IPOs in H12017. Looking to the region, total deal activity in the first half of the year registered in Singapore, Malaysia and Indonesia was US$63.3 billion from 818 deals, led by M&As in Singapore. In H12016, total deal activity was US$54.2 billion from 655 transactions. Malaysia and Indonesia recorded a total of 256 and 118 deals worth US$13.6 billion and US$4.7 billion respectively in H12017, up from 222 and 90 deals worth US$9.4 billion and US$2.6 billion a year ago. Srividya Gopalakrishnan, managing director at Duff & Phelps, said: “Corporates and funds have been opportunistic in tapping into the global markets, leveraging low valuations in certain sectors and high growth in certain other sectors. “Singapore has contributed to a significant part of the deal values, driven by outbound transactions,

while Malaysia and Indonesia have contributed to the growth in deal making, driven by inbound investments.” Turning to the outlook for the second half of the year, she said that uncertainty could come from factors such as the slower pickup in oil prices, a steady stream of bad news coming from the shipping and marine sector, a lack of large acquisitions in the private sector, a reduced number of IPOs and slowing growth in developing economies. But there are some positive trends emerging in the region, which could buoy the second half of the year, she added. These include growth in M&A deal volumes and value, a significant increase in PE/VC investment, a strong IPO pipeline, improved infrastructure in developing countries due to non-traditional sources of energy and more alternate investment funds setting up a base in Singapore. Ms Gopalakrishnan added that the tech startup ecosystem could also make significant strides in South-east Asia, a trend that would include a rise in the number of tech unicorns in the region, as well as several global companies setting up their intellectual property hubs in Singapore.

AG’s Chambers looking into Facebook post by Hsien Yang’s son Singapore

“We don't want to be a supermarket,” said Mr Wong, adding that the platform would curate the fund offering according to demand. Demand is expected to come from offshore investors from China and Indonesia, where Mr Wong has been travelling to frequently in recent months. At home, Lufax sells more than 3,500 fixed-income, money-market and mutual funds and insurance products from domestic banks and asset managers. As at end-December last year, its retail assets under management stood at 438 billion yuan (S$88.5 billion). Speaking also at the press briefing, Lufax co-chairman and CEO Gregory Gibb said the platform will assess the risk profile of its registered investors and hide products that do not meet various investors’ risk tolerance and suitability. Lufax judges the risk factor of products based on the level of transparency in the fund, and the level of volatility. For example, funds may be structured to take in leverage. Lufax will also look at the underlying credit risk of the product, whether there is a clear cashflow, and whether the returns are fixed or floating. Being transparent about risk is critical to such an online wealth management platform, which already offers a profitable business for Lufax in China. “(We) don't have a sales force – the sales force is a four-inch screen,” said Mr Gibb, noting that investors are screened for their suitability based on online tests that they take.

The chief executive of CellResearchCorp Gavin Tan says the market for advanced wound care is already worth US$22 billion. He is confident that his company can capture a good slice of it. PHOTO: YEN MENG JIIN

Singapore deal-making still growing strong, led by rise in M&As

40,000

20,000

on further developing cord-lining stem cell technology platforms, and identify new ways of using cord-lining stem cells therapeutically. The topical treatment formulated from cord-lining stem cells is now undergoing USFDA trials for use on diabetes patients’ chronic wounds and other hard-to-heal wounds. In the US, 85,000 amputations are performed each year on patients with diabetes. These amputations are the result of gangrene in the leg or foot, which typically start off as ulcers on the pressure points. Diabetics have compromised blood supply in their extremities and often do not have sensation there. Singapore has one of the highest rates of lower-extremity amputations in the world; in April last year, Health minister Gan Kim Yong noted that public hospitals here perform an average of four amputation procedures a day. In the Middle East, one in five adults with diabetes will eventually need limb amputation. Mr Tan said: “We believe that we are going to get to the market by 2022, starting with the US market, at which point, we will have a potential revenue forecast of US$3 billion.” Mr Lim said: “We already see a potential in wound care, especially in burns. But it is the slow-healing wounds that are the most expensive in terms of time and money. The pa-

THE Attorney-General’s Chambers (AGC) said on Monday it is looking into a recent Facebook post put up by Li Shengwu, the son of Lee Hsien Yang and nephew of Prime Minister Lee Hsien Loong. In the post, which was uploaded on Saturday, Mr Li, 32, shared a Wall Street Journal article on the recent Oxley Road dispute, titled “Singapore, a model of orderly rule, is jolted by a bitter family feud”. He also commented on Singapore’s court system.

The AGC said in a brief statement on Monday morning that it is aware of Mr Li’s post and is looking into the matter. In a Facebook post on Monday afternoon responding to AGC’s statement, Mr Li said he was “somewhat surprised” that his last post – which was shared on “friends only” privacy settings – was enough to trigger a response. He added: “I’m surprised that the Singapore government is so petty. Would they also like to trawl my private Facebook feed for seditious vacation photos?”

Mr Lee Hsien Yang and his sister Lee Wei Ling had been embroiled in a public dispute with PM Lee over the fate of their father’s Oxley Road home since mid-June. The dispute prompted PM Lee to issue a ministerial statement in Parliament on July 3 to address their allegations that he had abused his power. The feud, which made international headlines, took a conciliatory turn on July 6, after PM Lee’s younger siblings said they accepted his desire to settle their quarrel in private and will stop posting evidence against him online as it was hurting Singapore’s reputation. THE STRAITS TIMES

Developers sold 73% more homes in first half of 2017 ❚ Continued from Page 1 In the executive condo market, the top-selling project in June in the primary market was MCL Land’s Sol Acres in Choa Chu Kang Grove. Forty-one units were transacted at a median price of S$829 psf, leaving only 88 of the project’s 1,327 units available. At The Visionaire in Sembawang, 35 were moved at S$811 psf, while at Signature at Yishun, 30 units fetched S$757 psf. In all, developers found buyers for 244 EC units in June, down 35.3 per cent month-on-month but a 5.2 per cent year-on-year increase. No new projects were launched last month. This weekend, all eyes will be on Hoi Hup’s Hundred Palms Residences EC in Yio Chu Kang Road, with sales

bookings scheduled to begin on Saturday. Some observers expect the average price could cross S$800 psf. The 531-unit project has three, four and five-bedroom units. In Q2 this year, developers sold 992 EC units – lower than the 1,072 in Q1 2017 and the 1,105 in Q2 2016. The H1 tally of 2,064 is slightly over half the 3,999 for full-year 2016. PropNex Realty chief executive Ismail Gafoor predicts this year could end with about 3,500 sold in the primary market. ERA Realty Network key executive officer Eugene Lim predicts 3,000-4,000. Excluding ECs, he expects sales of 10,000-12,000 private homes. Mr Ismail believes the number will cross 11,500, given the current positive market sentiment. Mr Ong of JLL, who

reckons the figure could reach 12,500, predicts that URA’s benchmark private home price index could bottom at year-end or early next year. Based on URA’s flash estimate, the Q2 index reflects a quarter-on-quarter drop of 0.3 per cent – the smallest of the 15 quarters of decline since the peak in Q3 2013. In all, the index has shed 11.8 per cent. The final Q2 index will be released later this month. Other upcoming launches include Qingjian Realty’s Le Quest in Bukit Batok West Avenue 6, which will have 516 units. Sales bookings are scheduled to begin on Aug 5. Desmond Sim, CBRE Research head of South-east Asia, said: “Developers may want to hasten their launches in the second half to ride on the current momentum.”

The Business Times | Tuesday, July 18, 2017

| TOP STORIES

The Business Times | Tuesday, July 18, 2017

JPMAM Asia-Pac fund extracts value from oil rout The fund is now rotating into Asian banks, which form about a third of its portfolio excluding properties By Jamie Lee leejamie@sph.com.sg @JamieLeeBT Singapore JP MORGAN Asset Management’s (JPMAM) income team in Asia-Pacific ex-Japan has found value playing off the wild ride in oil prices. It has doubled the money that went into investing in oil-related plays at the beginning of last year, and is now rotating into Asian banks as much of the bad-debt provisioning for the lenders’ oil exposure may be over. “The best and bravest thing we

had done in the last three years, was that we had double-digit percentage of our fund in oil-related stocks when oil price bottomed,” said JPMAM’s Jeffrey Roskell, head of income strategy within the emerging markets and Asia-Pacific equities team. It was the biggest contributor to the income portfolio over the last two to three years, though the fund has shaved its exposure in oil-related companies to the current 6-7 per cent. “When the oil prices first collapsed, we started moving into refining companies, which made more money in that lower price environ-

ment. The stock market didn't like them because they were exposed to inventory losses. If I was a refinery company, and I owned oil, in the first quarter when the price falls, I lose money. But in the next quarter, I don't have any inventory losses any more, and I make more money because margins were going up,” said Mr Roskell, who manages US$2.24 billion as at end-April under JPMorgan’s Asia-Pacific Income Fund. The fund has put in an annualised performance of 5.4 per cent against its benchmark over the last five years.. “Moving into refining was just utterly logical, and we thought the market got it wrong.” As oil prices continued to fall, right down to US$27 per barrel, the

fund also turned to exploration and production companies, mainly through Thailand, where it got attractive valuations through oil companies that were vertically integrated. Today, the expectation is for oil prices to return to the higher end of a US$50-60 range, with the fund’s exposure to oil now concentrated in Chinese oil companies. “The capex in the oil industry has been annihilated in the last three to four years. So on a longer term basis, that supply is going to be quite constrained in the oil industries,” said Mr Roskell. “Some oil equities in the region still offer some kind of value if you assume that oil price range, because they generate a lot of free cash flow.”

By Jeff Hutton btworld@sph.com.sg Jakarta

By Virginie Mangin btworld@sph.com.sg

Monday’s data and other statistics for June show that so far, the economy has been holding up well, with the real-estate sector defying government efforts to cool it down. PHOTO: REUTERS rose to 6.6 per cent in June, from 5.9 per cent in May. Analysts had expected the Chinese economy to slow down its growth after a strong 6.9 per cent expansion in the first quarter, following the central bank’s tightening of its monetary policy to make it harder for companies to borrow money and putting the heat on companies and local governments to clean up their balance sheets. The GDP-to-debt ratio has soared to around 270 per cent of GDP, according to some estimates, prompting Moody’s to downgrade its sovereign debt rating in May. But Monday’s data and as well other statistics for June, including that for the purchasing managers’ index (PMI) and trade, show that so far, the economy has been holding up well, with the real-estate sector defying government efforts to cool it down. New home sales rose 13.5 per cent (on a square-meter basis) in in the first six months of the year. In the property market, housing sales growth came in at 21.4 per cent in June, up from 10.2 per cent in May. Meanwhile, property investment

growth rose to 7.9 per cent in June, from 7.3 per cent in May. HSBC economist Julia Wang said: “PMI reading and confidence indicators suggest that the cyclical recovery should continue in the coming months. “The private-sector dominated manufacturing sector will continue to lead the recovery, which is positive for productivity growth and can help to ease debt concerns.” After the release of the data, BMI Research revised its annual GDP growth target for China up – to 6.6 per cent for this year and 6.3 per cent the next year. Nomura also revised its forecast to 6.8 per cent, from 6.7 per cent for 2017. Beijing has set a GDP growth target of about 6.5 per cent this for this year, but analysts say it is unlikely that the Chinese economy would maintain such high growth rates in the short term. The government has repeatedly said deleveraging and cutting overcapacity, as well as structural reform, are key to sustaining a healthy economy. This entails less credit expansion, and closing redundant factories. Chua Han Teng, head of research

for BMI, said: “Despite our upgrade, our forecasts still reflect our expectations that the Chinese economy will continue to face headwinds from tightened monetary and macro-prudential policies, a moderation of an expansionary fiscal policy and an overhang from elevated debt.” After closing a five-yearly financial work conference on Saturday, President Xi Jinping reiterated the need for reform, especially among the inefficient state-owned enterprises; he also urged banks to control financial risks. The setting up of a new regulatory body to oversee financial reforms was announced at the conference. Banks have been asked by the central bank to limit mortgage lending in a further bid to cool the property market. Martin Petch, senior credit officer at Moody’s Sovereign Risk Group, said: “In the remainder of this year, we expect GDP growth to slow moderately, as the tightening of the shadow banking sector restrains credit availability.” Julian Evans-Pritchard economist with Capital Economics, said: “We think it’s only a matter of time before the government’s efforts to rein in financial risks start to weigh on growth.”

SMU, BT organise seminar on digital transformation By Syarafana Shafeeq muhdss@sph.com.sg

How Gnowbe will work during the seminar Singapore

■ Participants will receive a prompt to download the Gnowbe app

upon registration. ■ Details of each segment of the seminar, including speaker profiles,

A ONE-day seminar on digital transformation will be held next month, organised by the Singapore Management University (SMU) and The Business Times. Five keynote speakers are slated to present a range of topics on the subject. The seminar will kick off with Steven Miller, SMU vice-provost (research), discussing how the boundaries are blurring across the physical world and cyber world, as well as human intelligence and machine intelligence. Prof Miller will provide insights into these shifting boundaries by explaining how the world is being reshaped by bringing together minds and machines, and share his view on how these developments in technological capabilities will be driving change in our lives. Following that, Janos Barberis, Asia lead for the Digital Finance Institute and founder & CEO of SuperCharge will speak on harnessing the full power of digital and delivering new value. Mr Barberis will provide an overview of the evolution of fintech over the last 150 years and how it has adap-

may have also peaked in Thailand, he observed. And banks are among the rare companies that benefit from a rising interest rate environment. Given the rates backdrop, the portfolio also has just about 5 per cent in Reits, with any exposure to S-Reits limited to those with assets outside of Singapore. “Things that look like bonds, including bonds themselves, and equities that look like bonds, I think will produce quite moderate returns going forward. Those are my kind words: moderate returns,” said Mr Roskell. “We don't think they are going to collapse. But they are just not going to produce the returns they produced in the past, because the starting yield is much lower.”

Indonesia on track to have a busy year for IPOs

China GDP beats expectations with Q2 growth at 6.9 per cent Beijing CHINA’S second-quarter gross domestic product (GDP) beat expectations on the back of a strong manufacturing sector and healthy domestic consumption, despite a government crackdown on the real-estate sector and monetary tightening by the central bank. The economy grew at a steady 6.9 per cent in the second quarter; the monthly data for June points to stable growth over the next three months. Analysts say the main driver of growth was the manufacturing sector, which has been held up by fiscal policies in the past year after growth slowed to 6.7 per cent last year, the slowest pace in 25 years. China’s factory output grew 7.6 per cent in June from a year earlier – the fastest pace of growth in three months. Fixed-asset investment expanded 8.6 per cent in the first six months of the year, and 8.8 per cent in June. Despite the government putting pressure on steel mills to cut back on excess capacity, steel output rose 5.7 per cent in June to a record 73.23 million tonnes. Andy Rothman, strategist with Mathews Asia, said: “The macroeconomic data published is consistent with a healthy economy, driven by impressive wage growth and consumer spending, and supported by strong earnings growth.” Retail sales rose 11 per cent in June from the previous year, the fastest pace since December 2015. Per capita urban household income rose 6.5 per cent in the first half of this year, up from a 5.8 per cent pace in the first half of last year, driven by improved profitability of industrial firms. Manufacturing investment growth

Asian banks currently offer compelling valuations, and is the single biggest sector in the portfolio excluding properties, at about a third, he said. The portfolio includes banks in Thailand, Singapore and Hong Kong, as well as some insurance plays in Australia and China. Among the top 10 holdings of JPMorgan’s Asia Pacific Income Fund as at March 31, 2017, are Bangkok Bank Public Company, HSBC Holdings, DBS Group, and Australia’s QBE Insurance Group. “The valuations are still quite compelling,” said Mr Roskell, expecting a return of as much as double-digit in the medium term from the investments into banks. Bad debt provisioning has already started to come off in Singapore, and

sypnoses and other featured articles or pre-reading material, will be available after login. ■ Participants will be able to use the app to interact with one another,

posing questions or comments, taking video clips of key moments or snapshots of the presentations to share with each other. ■ Participants’ feedback after each session can be captured immediately

for speakers’ reference. ■ Participants will receive an e-goodie bag containing the slides from each

presentation after the seminar, enabling them to remain in the learning community and have access to any additional resources the speakers might put up. Source: Gnowbe

ted and brought values and relevant regulatory framework to the industry. Patrick Thng, director of innovation management at the School of Information Systems and co-director of IIE SMU, will then discuss topics from big data and analytics to artificial intelligence. He will touch on how digital innovation would disrupt and transform many industries and jobs at an accelerated speed with the convergence of big data and artificial intelligence. Jennifer Qin, Asian Pacific investment management leader of Deloitte Asia Pacific, will speak next. She will

talk about blockchain as the new world order. This session will provide an overview of the blockchain technology and its applications, and discuss how it has the transformative potential to redraw the structure of financial institutions and back-end services and completely change the way we think about money, social organisation and trust. The final keynote speaker, Samuel Cammiss, director of Deloitte Innovation SEA, will focus on artificial intelligence. He will explore how smart robots are, and how robotics and cognitive technologies are beginning to flood the workplace, taking on a range of complex tasks previously

thought to be the sole reserve of human workers. Mr Cammiss will map and illustrate key technologies – detailing what can be achieved today, what may be possible in the future, and where the pitfalls lie. Concurrent workshops will also be held on transformational innovation, as well as on blockchain that provide an overview of the experiments in the blockchain space The seminar will make use of an app called Gnowbe, which is a mobile digital learning platform. Participants will be able to pose questions or comments synchronously, take video clips of key moments or snapshots of the presentations to share with one another during the talks. “The Gnowbe platform is the most versatile mobile learning platform we have come across as it allows us to do a range of learning activities rather than just going through text, videos or quizzes,” said Lim Lai Cheng, executive director of SMU Academy. “Participants are prompted to take notes, do reflections, and share their views at relevant segments of a talk. It follows closely andragogical principles, and a research-based approach for adult learning.” The seminar is open to 100 participants, and will be held at Parkroyal on Pickering on Aug 18. For details and to sign up, log in at https://eventreg.asiaone.com/register/smubtseminar

WHEN a rice porridge vendor in West Java uploaded a photo of what she claimed to be plastic rice that wouldn’t soften in time for her breakfast customers, it was as if Christmas and birthdays came all at once for rice producer PT Buyung Poetra Sembada. The company’s revenues nearly doubled that year as consumers snubbed bulk rice at traditional markets. They have been hauling 5kg-20kg bags of the company’s rice off supermarket shelves ever since – believing those products were safer. Trouble was sluggish markets, a slowing economy and political uncertainty made it tough to raise capital to seize on the shift in consumer taste – until now. “2015 was sluggish, 2016 was confusing but now there is certainty and the economy is strong,” says Dion Surijata, who heads investor relations at Buyung Poetra Sembada. “For foreign investors Indonesia looks like a pretty lady.” Indonesia is on track to have its busiest year for initial public offerings in at least a decade as companies rush to seize on favourable economic data and a period of calm to tap capital markets. Already 18 companies have sold shares to the public during the first half of 2017, seven of these just last month. At this rate, the IPO flurry would outpace 2013 when 30 companies sold shares to the public. In May sovereign rating agencies Moody’s and S&P upgraded Indonesian debt to “investment grade”. The move followed the shock election defeat in April of Jakarta’s former governor Basuki “Ahok” Purnama and his jailing in May for committing blasphemy while campaigning following mass protests. As the spectre of public unrest subsides, GDP growth seems set to resume. The government expects the economy to expand by an average annual rate of 5.2 per cent this year, up from its previous estimate of 5.1 per cent. Harry Su, head of strategy and research at Bahana Securities in Jakarta, expects at least another six IPOs to follow during the second half. Most of these will be from state-owned enterprises, he says, including GMF AeroAsia, the aircraft maintenance provider of the country’s governmentcontrolled carrier Garuda Indonesia. Smaller companies were eager to get their IPOs to market before bigger, more attractive offerings followed. “It’s been very busy and the second half will be busy, too,” Mr Su said. “There’s a window of opportunity opening.” He says the Jakarta Composite Index will climb another 8 per cent to 6,300 by year’s end – a full 1,000 points from where it started in January. To be sure, so far, the IPOs have been small: usually no more than 30 per cent of the value of the company and floated with the help of a strategic investor to give the sale some ballast. Founding families stay in charge and repay bank debt that can carry interest rates of 12 per cent or more. Buyung Poetra raised 217 billion rupiah (S$22 million) by floating about 30 per cent of the company. Most of the money raised will go towards paying debt and working capital. A third of the funds will go towards a new factory in East Java. But for some companies the floats are a chance to put a more professional face to the operation.

One of the early movers this year was property developer Forza Land Indonesia, which raised nearly 70 billion rupiah in April when it sold 20 per cent of its shares to the public. The company develops apartment complexes that appeal to the country’s growing pool of young, moneyed professionals who want to avoid lengthy commutes to the suburbs. Sales are slow for now. Not everyone can afford the five billion rupiah price tag and high taxes on property sales. But falling interest rates and hopes of tax reform mean the company had to be prepared for a boom when it came. It was much the same reasoning that helped Integra Indocabinet in Surabaya pull the trigger on its IPO. “We want to be more open and plan more,” said Wang Sutrisno, the company’s finance director. “We want to show investors we can deliver. We want to be thinking about next year.”

Already 18 companies have sold shares to the public during the first half of 2017, seven of these just last month. At this rate, the IPO flurry would outpace 2013 when 30 companies sold shares to the public. Harry Su, head of strategy and research at Bahana Securities in Jakarta, expects at least another six IPOs to follow during the second half.

Integra operates five factories. Last month, it raised 325 billion rupiah from its share sale. A third will go towards paying off debt, while most of the capital will be ploughed back into the company to lift productivity amid a boom in orders. At stake for Integra is keeping pace with a surge in government orders and a potential expansion into a US market that is remarkably underserved by Indonesian furniture makers. The company has 250 billion rupiah worth of orders from the government to furnish the athletes’ village at the Asian Games that will take place next year in Jakarta. Still, US-bound exports account for half of the company’s sales. Building on that will mean appealing to picky retailers and accommodating their demands. One example is Ikea, which is currently a client. It has a minimum toilet-to-worker ratio that its suppliers must meet. Few furniture can meet those demands or even fill a container regularly. Of the 1,000 biggest furniture makers, only a quarter can fill as many as 50 containers a month. Still, with abundant cheap labour and lumber that costs half what it does in neighbouring Malaysia, and now a fist full of cheap capital, Integra is bullish. It said: “We depended a lot on our own capital and our bankers. Our growth potential was limited. There is a lot of growth opportunity in Indonesia and in the world.”

The Business Times | Tuesday, July 18, 2017

| TOP STORIES

The Business Times | Tuesday, July 18, 2017

More than 400 safety violations uncovered in June MOM inspected 400 worksites, meted out 322 notices of non-compliance, 70 composition fines, 4 stop-work orders Singapore THE Ministry of Manpower (MOM) had stepped up enforcement efforts at worksites in June and uncovered more than 400 safety violations, said Minister of State for Manpower Sam Tan on Monday. This update comes after a structure at a Pan-Island Expressway (PIE) worksite in Upper Changi Road East collapsed last Friday, killing one worker and injuring 10 others. Speaking at a Workplace Safety

and Health (WSH) forum, Mr Tan said inspections were done at 400 sites targeting work-at-height activities and these netted more than 400 safety violations. Of these, the authorities meted out 322 notices of non-compliance, 70 composition fines and four stop-work orders. Three of the four stop-work orders were given due to work-at-height safety infractions, said Mr Tan. “We will take strict and serious action for each safety violation and impose

severe penalties. These violations could have been injurious or harmful to the workers,” he said in Mandarin. Last Friday morning, a 40-metre segment of a viaduct at the PIE worksite collapsed, when the corbels holding up the horizontal beams that the workers were on gave way, according to preliminary findings. Said Mr Tan on Monday: “The accident has shocked many and I am also deeply saddened by it. The Ministry of Manpower and relevant authorities have commenced an investigation into the cause, and issued a stop-work order. “The investigation is still ongoing,

but the worker who was killed can’t be brought back to life. We must make sure that safety comes first.” Mr Tan was speaking to about 90 participants – mainly bosses from construction firms – at the WSH forum, which was conducted in Mandarin at the Devan Nair Institute for Employment and Employability. Organised by the WSH Council, the lunchtime forum is the first one to reach out to Mandarin-speaking senior management of small and medium enterprises (SMEs) in the construction industry to educate them on the importance of safety for work at heights.

Falls from height were responsible for most deaths at workplaces last year. This was one of three priority areas under this year’s Engagement Plus programme, which aims to raise WSH competencies and awareness by engaging the industries involved. There were 13 falls from height incidents last year, compared to 24 in 2009. Within the construction sector, six workers were killed last year after falling from heights. The other two priority areas under the programme are accidents leading to amputations and traffic accidents. Mr Tan on Monday also highlighted the importance of work at

heights safety and how falls-related workplace incidents can be prevented. He reiterated some of the initiatives rolled out to educate and guide companies in adopting safe work-at-heights practices, such as the expansion of the Mobile Work at Heights Programme in which MOM visits worksites to share tips on safe work practices. There were 80 such visits when the programme launched last year. Mr Tan said the goal this year is to increase that to 300, in order to benefit more small and medium-sized construction enterprises. THE STRAITS TIMES

COMPANY OF GOOD

Linking up opportunities for youth to ‘rock’ their profiles By Navin Sregantan navinsre@sph.com.sg @NavinSreBT Singapore FOR many youths such as 18-year-old Abigail Chloe Chew, preparing for the working world is more often than not one of their top priorities – and building up a credible CV and professional profile serve as important starting points in that process. “After attending a career workshop with LinkedIn, I have been able to pick up practical skills such as tips on how to build up my professional profile and also learnt good practices on how best to bring out my strong points,” says Ms Chew. The LinkedIn Career Roundtable Event attended by Ms Chew is part of a collaboration between LinkedIn and Halogen Foundation, a not-for-profit Institution of Public Character (IPC) dedicated to youth leadership and entrepreneurship development. “In the past 12 months, these sessions, which gather up to 50 tertiary students, have been organised three times. LinkedIn employees teach the youths the importance of creating their online professional profiles,

mentor them as they chart out their career paths, and in the process, inspire them as they make their first foray into the workplace,” says Olivier Legrand, managing director of LinkedIn Asia Pacific. Synonymous with business and employee-oriented social networks, LinkedIn has focused on youth empowerment in its corporate social responsibility (CSR) efforts to bring about new opportunities to grow their careers and to connect with other professionals the world over. “Our global focus for this year has been around youth empowerment with more than 100,000 youths across 19 countries having been impacted by our programmes,” says Mr Legrand. “In Singapore, LinkedIn takes part in such CSR efforts through the global employee-led initiative, LinkedIn for Good (LIFG),” he adds. Founded in 2010, LIFG was established to connect underserved communities around the world with economic opportunities. In 2016, LIFG reached one million underserved youth, military veterans, refugees, employees and non-profits globally.

“The mentorship programme provided me with insights on working life. We had many opportunities to network with different staff and gain perspectives on corporate life,” says Ms Chew. “Helping to organise the partnership programme we have with Halogen Foundation was a really memorable experience for me, especially mentoring tertiary students in Singapore on how they can utilise LinkedIn for career planning and personal branding,” says Jacelyn Tan, an enterprise relationship manager at LinkedIn. While the global focus is on youth empowerment, LinkedIn and its employees continue to participate in other initiatives geared towards serving the community, through other employee-led initiatives. In the same vein as its career roundtable event, “LinkedIn also organised Rock Your Profile sessions with the People’s Association where employees share advice with the elderly on how to spruce up their online professional profiles,” says Mr Legrand. In the past year, LinkedIn staff

Volunteers from LInkedIn with members of the Association of People with Special Needs. LinkedIn and its employees lend their support for initiatives geared towards serving the community. PHOTO: LINKEDIN based in Singapore have also worked with the Association of People with Special Needs (APSN) on conducting a terrarium workshop and the Children’s Wishing Well, where employees packed and distributed groceries to low-income families. In addition to these efforts, LinkedIn staff also contribute to the community once a year through a LinkedIn corporate tradition, Investment Day (InDay).

“Some of the activities on InDay included conducting charity auctions with the proceeds going to Singapore Cancer Foundation and inviting non-profit organisations to participate in our Farmers’ Market,” says Mr Legrand. Looking forward, Mr Legrand is keen to build on his two-year partnership with Halogen Foundation and is also open to working with new partners in LinkedIn’s efforts to support the community in Singapore.

❚ This article is part of a series covering companies contributing towards under-served causes. The Business Times supports NVPC's Company of Good programme as media partner. Go to www.companyofgood.sg for more information. Company of Good is in support of SGCares, a national movement dedicated to supporting the goodwill of Singaporeans and to guide them to better help those in need.

S’pore banks need to maintain NSFR ratio of 100% over long term from 2018 Singapore SINGAPORE’S three biggest banks will be required to prioritise long-term funding from next year to ensure they will be stable in extended periods of market stress. The Monetary Authority of Singapore (MAS) issued Notice 652 on July 10, which will require DBS Bank, OCBC Bank and United Overseas Bank to maintain a net stable funding ratio of 100 per cent from January 1, 2018. The NSFR, a key reform announced by the Basel Committee on Banking Supervision in January 2014, measures a bank’s long-term resources over 12 months of liquidity requirements. The aim is to ensure banks can continue to operate when wholesale funding markets are closed for an extended period. During the financial crisis, many global banks struggled to access external funding, severely stressing the banking system. Singapore’s three domestic systemically important banks (D-SIBs) will have to maintain a net stable funding ratio of 100 per cent by January 1. Other D-SIBs in Singapore with headquarters offshore will have to meet a minimum NSFR of 50 per cent. The city’s top banks said they already met the MAS’s ratio requirements. “We have adequate stable funds as prescribed by the NSFR standards, and are already holding a comfortable buffer above the regulatory requirements,” said Darren Tan, chief financial officer for OCBC Bank. A DBS Bank spokesperson told IFR the bank’s NSFR was above the regulatory requirement for 2018, while an industry source said UOB had been tracking its NSFR for a long time and that the ratio was now well above 100 per cent. “Last year, many of the banks were preparing for Basel III in terms of capital and liquidity and with their bond issuances, so a lot has been done to prepare for NSFR,” said Simon Chen, senior analyst at Moody’s Investors Service. “Going forward, further fundraising will be incremental as and when they need it.” Attracting more deposits is one way to beef up NSFRs. Singapore banks’ loan-to-deposit

The aim is to ensure banks can continue to operate over 12 months during a financial crisis. The NSFR is a key reform announced by the Basel Committee on Banking Supervision in Jan 2014. FILE PHOTO ratios range between 84 per cent and 87 per cent, which is better than Australian banks which average over 100 per cent as well as most European names, said Andrew Wong, a credit analyst at OCBC. Debt bankers also see opportunities for banks to issue more long-term funding from the market. “It is positive news for the primary bond market,” said one Singapore-based debt capital markets head. “The NSFR rules also allow banks to hold a percentage of corporate bonds as high-quality liquidity assets, which means the banks will provide a larger investor pool.” Taking on corporate debt, however, may have a negative impact in the future. The Basel Committee is now exploring standards under the recalibrated

Basel III standards, dubbed the Basel IV regime by the financial industry. Under those proposed standards, banks holding loans to large corporates may have to allocate more capital. “This is another consideration that is important as it relates to how much capital a bank has to allocate against large loans,” said Eugene Tarzimanov, vice-president and senior credit officer at Moody’s. “The Basel Committee has not finalised work on this yet, but if implemented it will make it more difficult for banks to provide large long-term loans to corporate clients.” The NSFR will complement the Basel Committee’s liquidity coverage ratio (LCR), which measures a bank’s ability to survive a significant stress scenario lasting 30 days. REUTERS

COMPANIES & MARKETS | 7

The Business Times | Tuesday, July 18, 2017

❚❚

DBS Group plans US dollar green bond debut

HOCK LOCK SIEW BY KENNETH LIM

Much work ahead for success of Women’s Livelihood Bonds

Hong Kong

HE newly created Women’s Livelihood Bonds (WLB) offer an innovative structure in the world of social sustainability financing, but it remains to be seen whether listing them will work out as planned. Created by social impact financing outfit Impact Investment Exchange (IIX), the US$8 million four-year 5.65 per cent WLB will be listed on the Singapore Exchange (SGX). The bonds are issued by a special purpose vehicle, which in turn on-lends the proceeds to three micro-finance institutions and impact enterprises in Cambodia, the Philippines and Vietnam whose activities benefit women. The structure offers a few benefits. First, by pooling more established and stable micro-finance institutions with higherrisk impact enterprises, the bonds allow the smaller impact enterprises to tap capital that would otherwise be inaccessible to them. Half of the principal amount is also guaranteed by the US Agency for International Development (USAID), while IIX itself provides an additional US$500,000 of first-loss capital. The guarantee not only lowers the ultimate borrowing cost, it also allows USAID’s backing to be po-

tentially recycled for future issues if the current bonds are fully repaid down the road. But there are some trade-offs. For instance, while the pooling clearly helps the smaller impact enterprises, it might not be the optimal fund-raising method for the micro-finance institution, whose creditworthiness is being used to subsidise the others. While it is true that the cost of the subsidy might be a reasonable price for access to more capital, the micro-finance institution might perhaps be better off being in a pool of other more-comparably rated micro-finance institutions, for instance.

Listing expense Perhaps the more interesting feature is that the bonds will be listed. Listing comes with costs, and the question is whether putting the bonds up on an exchange confers enough benefits to make it worth the expense. The value of listing, as the bonds’ designers explain, is that it gives bond-holders a potential exit from their initial investment. The hope is that the comfort of an exit channel will help the bonds to attract more investors, and for those already willing to take part, it might give them incentive to put up more money.

That value means a world of difference, even if the exit option comes with a huge haircut. Simply offering that choice should help the borrowers to shave a few basis points, at least, from the coupons that they have to pay. But the proposition has yet to be tested, and there is a risk that no buyers may emerge when they are needed. Given the thin volumes for existing listed social bonds in Luxembourg – albeit with different structures – this concern is not entirely hypothetical. One way that an illiquid secondary market may occur is if investors on the secondary market struggle to understand the product’s novelty enough to price it. It is therefore important that the stakeholders in the WLB programme – IIX and its partners – focus on effective and ongoing education and marketing.

Secondary liquidity Another challenge to creating secondary liquidity is a lack of supply. Making enough issuance available, even if initial liquidity is lacking, may be what is needed to create a self-sustaining market and one in which meaningful comparables can be found.

If it eventually emerges that there is insufficient secondary liquidity for investors to make meaningful exits, then perhaps investors will not be willing to pay as much to have the listing option, and then there will have to be a re-evaluation of whether listing is worth the additional cost to the beneficiary borrowers. This is not to suggest that the WLBs are fundamentally flawed or to predict that secondary liquidity will be lacking. Indeed, there are many aspects of the structure that are promising, such as the way borrowers are pooled together and the use of loss-mitigating mechanisms. Together, they go a long way towards building a product that can be accepted by financial markets. If it works, the WLB would be an important development in social and sustainability financing, essentially taking fund-raising for positive causes out from the confines of philanthropic organisations and into the much bigger universe of financial markets. That goal is at least worth aiming for. But there is much work ahead. kenlim@sph.com.sg @KennethLimBT

KIT’s Q2 DPU same as last year despite 4.9% drop in profit By Andrea Soh sandrea@sph.com.sg @AndreaSohBT Singapore KEPPEL Infrastructure Trust (KIT) on Monday reported a distribution per unit (DPU) of 0.93 Singapore cent for the second quarter, unchanged from the year-ago period. This is in spite of a 4.9 per cent drop in profit attributable to unitholders as the business trust is allowed to pay distributions out of retained cash and residual cash flows, unlike companies which can make dividend payments only out of accounting profits.

KIT recorded total distributable cash flows of S$38.7 million for the three months ended June 30, 2017, up from S$38 million a year ago. Net profit fell 4.9 per cent to S$15.8 million from the year-ago period due mainly to a drop in other income; KIT in the second quarter of last year recognised insurance compensation in connection with its Australian subsidiary Basslink’s cable fault. Basslink owns and operates the electricity interconnector between the grids of the states of Victoria and Tasmania.

The trust’s revenue, however, rose 15.6 per cent to S$158.8 million in the second quarter of this year on higher revenue from Basslink, among others. This was because no facility fees were recognised during the cable outage between Dec 20, 2015, and June 12, 2016. City Gas also contributed higher revenue thanks to a stronger town gas tariff and increased volume of town gas sold. Giving an update on Basslink, KIT said that A$14.1 million (S$15.1 million) out of the A$40 million made by

the insurer to Basslink has been used to pay for repair costs for the interconnector, an increase from A$13.7 million in the previous quarter. To use the balance amount, it needs consent from its banking syndicate because of its earlier inability to meet the minimum debt service coverage ratio due to the outage. Trustee-manager Keppel Infrastructure Fund Management said that Basslink remains in discussions with the banking syndicate for release of part of the insurance proceeds to meet its immediate operating needs.

Keppel Infr Trust Q2 FY17

(S$ MILLION)

Y-O-Y % CHANGE

Revenue

158.81 137.35

15.6

Net profit

15.75 16.57

(4.9)

Distributable 38.71 cashflow

38.0

1.9

0.93

Distribution per unit (¢)

Q2 FY16

DBS Group Holdings, rated Aa2/AA(Moody’s/Fitch), has hired banks for a potential offering of US dollar green bonds, which would be the first offshore issue of this kind from a Singapore issuer. The bank plans to sell 144A/Regulation S five-year fixed and/or floating-rate senior unsecured green benchmark bonds off its global medium-term note programme. DBS Bank is sole global coordinator as well as joint bookrunner with Credit Agricole, HSBC, ING, Natixis, Societe Generale and Wells Fargo Securities. The proposed notes are expected to be rated Aa2/AA(Moody’s/Fitch), in line with the issuer. Proceeds will be allocated towards the financing of green projects or assets fitting the eligibility criteria in the DBS Green Bond Framework. The DBS Green Bond Framework is structured in accordance with the ICMA Green Bond Principles, and has a second opinion from Sustainalytics. DBS Bank is the sole green structuring agent and EY is the assurance provider for the issuance. In April, City Developments sold Singapore’s first green bond, a S$100 million two-year note, with proceeds used to repay a loan which financed the upgrading of its Republic Plaza building. Singapore has been trying to promote green bond issuance. In March, the Monetary Authority of Singapore announced that it would offer a grant of up to S$100,000 per issue to offset expenses incurred in obtaining an external review of green bonds, as part of plans to promote sustainability oriented benchmarks, funds and products. IFR

| COMPANIES & MARKETS

The Business Times | Tuesday, July 18, 2017

Furniture maker shifts focus to China retail Koda to diversify from manufacturing to retail and rebalance geographic presence By Chin Yong Chang ycchin@sph.com.sg Singapore KODA Limited, an original equipment (OEM) and original design manufacturer (ODM) specialising in household furniture, has undergone massive operational restructuring and changes in its business model since the 2008 financial crisis. It is now focusing on growing its retail and distribution arm, Commune, in the Chinese market. In the group’s first media briefing in years held on Monday, deputy chairman and managing director of Koda, James Koh, said the financial crisis was a particularly difficult time as the US was Koda’s biggest market at the time. “Where our customers used to order, for example, 50,000 units of a particular chair, today they might only order 50 units. It has become a very conservative market.” Mr Koh explained that over the last few years, the company had been streamlining its operations and removing unprofitable aspects of it.

In an SGX filing, Koda said it had consolidated its production facilities in Vietnam, relocated unprofitable factories in China, disposed certain non-core assets for cash, as well as its loss-making Vietnamese unit Rossano. The group also said it improved its supply chain efficiency, enhanced its product mix, and has expanded the distribution of Commune, Koda’s wholly-owned subsidiary. Mr Koh said this does not mean a reduction of Koda’s core ODM and OEM business, which still supplies furniture to the US market. It still accounts for more than 30 per cent of total revenue for FY2016, according to the SGX filing. Focusing on the branding and design of Commune was one of the group’s main strategies for managing its long-term growth. Commune CEO Joshua Koh said: “We maintain a strong design focus. If you walk through any of our stores, you’ll notice we offer a very unique shopping experience. We target the growing middle-class segment, where

they tend to live in small spaces, and who have started new families. “Because of our manufacturing background, we can offer products at very affordable prices.” At present, Commune has four stores in Singapore, three in Malaysia, one in Australia, and 35 in China. The group’s vice-president of group sales and marketing Gan Shee Wen said the four stores in Singapore are owner-operated stores, while all other stores outside of Singapore are distributor-retail stores. He added that there were 12 more distributor-retail stores under renovation in China, and they will be completed by the end of next month. The group’s future expansion will be driven by a rollout of the distributor-retail network. “To expand rapidly, we do not ask for a high franchise fee from our distributors. And for markets with strong franchise laws, we don’t ask for royalties,” Mr Gan explained. Commune is also looking to expand into e-commerce, with plans to utilise WeChat in the Chinese market. Koda chief financial officer Lim

OKP’s share price tumbles after trading halt is lifted

Swee Hua said the group’s financials have been doing well in lieu of the group’s restructuring since the financial crisis. Its 3Q gross profit for the three months ended March 31, 2017, rose by 53.4 per cent from US$1.96 million (S$2.68 million) to US$3.32 million (SS4.54 million).

Singapore SHARES in construction firm OKP Holdings fell as trading resumed on Monday following an accident last week at its subsidiary’s worksite. The counter fell about 14 per cent to a low of S$0.34 during trading before recovering slightly to close at S$0.37, down 2.5 cents or 6 per cent. Some 6.96 million shares worth around S$2.51 million changed hands. The company had called a trading halt on July 14 after a viaduct under

construction at Or Kim Peow Contractors’ worksite collapsed, claiming the life of one worker and injuring 10 others. The accident took place early Friday morning at about 3.30am near the Pan Island Expressway exit to the Tampines Expressway. On Friday morning, OKP’s share price had already fallen 3.5 cents to trade at S$0.395 by the time the trading halt was requested at around 10.12am. KGI Securities issued a hold call on the stock and cut its target price from S$0.52 previously to S$0.39, highlighting that the incident could hit

OKP Holdings Ltd 0.440

OKP’s earnings and dividends. KGI’s report said: “Ongoing works on the project have been put on hold, and this has dampened our expectations of topline growth this year. A possible impairment charge due to the viaduct collapse is likely to further hurt FY17F earnings and dividends.” Noting that OKP had been penalised previously for another incident in 2015 where safety lapses led to a worker’s death, KGI added that this latest development could affect OKP’s chances of winning major, upcoming public road construction pro-

By Syarafana Shafeeq muhdss@sph.com.sg

0.400

Singapore

$0.37

0.380

12 July

Source: Bloomberg

jects as safety records could be taken into consideration. KGI lowered its target price, factoring in various risks, including possible impairment and fines due to the accident as well as temporary debarment from hiring new workers, which would hurt topline growth.

BlackRock preparing to launch private fund in China Shanghai BLACKROCK Inc, the world’s largest money manager, said that it is preparing to start a private fund in China after the country opened the market wider to global players. The firm plans to set up a wholly foreign-owned enterprise first for its private fund business in China, ac-

cording to Chen Ting, general manager at BlackRock Overseas Investment Fund Management (Shanghai) Co, who was speaking at a press briefing organised by the Lujiazui Administration Bureau in Shanghai. Global fund managers have rushed to the world’s second-biggest economy as it speeds up the opening

of its capital markets to help counter outflows and promote global use of the yuan. Fidelity International in May beat global peers to start a private fund in Shanghai. UBS Asset Management also secured a licence to offer such funds for onshore stock, bond and multi-asset investment, it said last week. Private fund compan-

(From left) Commune CEO Joshua Koh, group head of design Julian Koh, and vice-president of group sales and marketing Gan Shee Wen, drive Koda's wholly-owned subsidiary, Commune, as it seeks to expand into the Chinese retail furniture market.

SPH partners Business Insider in S’pore, Malaysia

Hurting

0.420

By Nisha Ramchandani nishar@sph.com.sg @Nisha_BT

Q3 profit after tax experienced a more than five-fold increase from US$59,000 (S$80,700) to US$325,000 (S$445,000) compared to the year-before period. The counter rose by 15 Singapore cents or 15.8 per cent to close at S$1.10 on Monday.

ies can sell products to rich individuals and institutional investors. Jackson Lee, China country head of Fidelity, said at the same briefing that he hopes the company will launch its second onshore private fund by the end of this year. Fidelity’s first fund focuses on fixed income. BLOOMBERG

SINGAPORE Press Holdings (SPH) and Business Insider (BI), a US-based global business news source, have entered into a licensing partnership to operate the Singapore and Malaysia editions of BI. In a joint announcement on Monday, SPH and BI said: “The recently launched sites complement SPH’s stable of digital publications with a millennial-focused product for young working professionals.” BI Singapore (www.businessinsider.sg) and BI Malaysia (www.businessinsider.my) offer local news, business and lifestyle coverage, in addition to content from BI’s newsrooms around the globe, including Australia, Germany, the UK, and its New York headquarters. “We're always looking for new ways to grow our readership and serve new groups of readers,” Warren Fernandez, editor-in-chief of SPH’s English, Malay and Tamil Media group and editor of The Straits Times, said. “Business Insider has a strong follow-

ing among a young and mobile readership with an interest in business and lifestyle stories delivered in its unique way. By combining this with our deep local knowledge we have in our newsrooms, we believe we will have something special to offer that readers will enjoy.” Business Insider pioneered a new type of business news that is tailored to how young professionals consume content, as well as the topics of most interest to them, including finance, technology, innovation and trends. Roddy Salazar, BI’s VP International, said: “We’re thrilled to partner with SPH on the Singapore and Malaysia editions of Business Insider. SPH has a deep understanding of business media and the digital space, so it’s the ideal partner to serve local readers with BI’s unique style of business news: social and mobile at its core and laser-focused on the news that emerging business leaders want and need to know.” “BI in Singapore and Malaysia was previously operated by Rev Asia Berhad. Existing advertisers should contact SPH sales,” said the announcement.

YuuZoo to appoint third party to investigate claims By Stephanie Luo stephluo@sph.com.sg @StephLuoBT Singapore IN A bid to put an end to what it says are misleading claims about the company, YuuZoo Corporation said on Monday that it is appointing an independent third party to investigate, among other things, allegations raised by a former financial controller. The board made this initiative at the sug-

gestion of the company’s executive chairman Thomas Zilliacus, YuuZoo said in its announcement. It added that although the executive chairman had not been accused of any wrongdoing, he would step down from his executive position during the duration of the independent review, to ensure no claims of executive interference in the process. Referring to a number of recent articles in The Business Times, YuuZoo said: “Many issues raised in the articles were already during

the audit of FY2016 reviewed by YuuZoo’s auditors, who gave YuuZoo a clean audit.” Its independent review will look into claims raised in the media reports, claims raised by its former financial controller, and claims filed by former employees against a former financial controller. YuuZoo said that it believed that the decline in its share price “can be linked to the inaccurate statements and claims made in the articles”. YuuZoo had responded to a July 5 com-

mentary published in BT, “YuuZoo Corporation – a governance nightmare”, by associate professor of accounting at the NUS Business School, Mak Yuen Teen, that discussed the company’s disclosure and accounting practices. It issued a six-point response to address another commentary published on July 6 that was also written by Prof Mak, who mentioned the cancellation of a deal to acquire Relativity Media in October 2016, of which YuuZoo said

that it had already clarified in February 2017. On July 12, YuuZoo announced that its then chief financial officer and head of East Asian operations, Raul Ikonen, had resigned from his post with immediate effect, citing “personal reasons (moving back to Finland)” for his exit. Mr Ikonen was the sixth CFO to have left the social media and e-commerce firm since its September 2014 listing. YuuZoo last traded at S$0.069.

COMPANIES & MARKETS | 9

The Business Times | Tuesday, July 18, 2017

Acquisitions boost Keppel DC Reit’s Q2 performance DPU rises 4.2% to 1.74 cents, while net property income jumps 41.9% to S$31.4m By Lee Meixian leemx@sph.com.sg @LeeMeixianBT Singapore INCOME contributions from the newly acquired Milan and Cardiff data centres and the 90 per cent interest in Keppel DC Singapore 3 (KDC SGP 3) in Tampines boosted Keppel DC Reit’s second-quarter performance. It also helped that the Australian dollar appreciated against the Singapore dollar in the quarter, and the trust saw higher income from Keppel DC Singapore 1 (KDC SGP 1) in Serangoon. For the three months ended June 30, 2017, the trust posted a 4.2 per cent increase in distribution per unit (DPU) to 1.74 Singapore cents. Distrib-

utable income rose 36.5 per cent to S$20.1 million. Gross revenue rose 38.8 per cent to S$34.5 million, mainly contributed by the new acquisitions, offset by a drop in the variable income from KDC SGP 1 and KDC SGP 2 due to lower recurring and power revenue. KDC SGP 1, 2 and 3 are all data centre assets acquired from the sponsor, Keppel Telecommunications & Transportation. KDC SGP 3 is located adjacent to KDC SGP 2 in Tampines. Net overseas contributions also fell due to the impact from the depreciation of the British pound, euro and Malaysian ringgit against the Singdollar, but this was partially offset by the impact from the appreciation of Australian dollar against the Singdollar.

New hospital boosts First Reit’s Q2 DPU By Cai Haoxiang haoxiang@sph.com.sg @HaoxiangCaiBT Singapore BOOSTED by a full quarter of contributions from a newly acquired hospital, First Reit reported distribution per unit (DPU) for its second quarter ended June 30, 2017, at 2.14 Singapore cents, up 1.4 per cent from 2.11 cents a year ago. The real estate investment trust (Reit) owns a portfolio of mostly Indonesian hospitals. Last December, it acquired Siloam Hospitals Labuan Bajo, a 153-bed hospital in the tourist town of Labuan Bajo specialising in emergency medicine, internal medicine and neuroscience. With a full quarter of contributions from the hospital, gross revenue was up 3.3 per cent to S$27.5 million, while net property income rose 3.2 per cent to S$27.2 million. Victor Tan, acting chief executive officer of Reit manager Bowsprit Capital Corporation, said that with Reit sponsor PT Lippo Karawaci Tbk’s strong pipeline of over 40 healthcare assets in Indonesia for acquisition, the Reit “plans to acquire one or two high-quality properties this year to further boost our income stream”. Including the latest acquisition, First Reit currently owns 14 hospitals in Indonesia, three nursing homes in Singapore and a hospital in South Korea. The Reit is constantly looking out for opportunities in Singapore, Mr Tan said.

❚❚

Q2 FY16

(S$ MILLION)

Y-O-Y % CHANGE

Revenue

27.5

26.6

3.3

Net profit

27.2

26.3

3.2

Distributable income

16.6

16.2

2.5

Distribution per unit (¢)

2.14

2.11

This can be either through acquisitions or asset enhancement initiatives on existing assets, he said, citing a new extension building to nursing home The Lentor Residence in 2013. For the Reit’s half year ended June 30, 2017, DPU rose 1.4 per cent to 4.28 cents, with net property income up 2.8 per cent to S$54 million and gross revenue up 2.9 per cent to S$54.6 million. Looking ahead, the Reit manager said Indonesia’s healthcare sector will continue to benefit from its ongoing national health insurance scheme, which will boost demand among the rising middle-income class for better-quality private healthcare. The Reit’s net asset value at end-June was S$1, down from S$1.01 at end-2016. Based on its latest results, First Reit’s annualised DPU is 8.63 cents, giving it a distribution yield of 6.5 per cent on its last traded price of S$1.335.

Keppel DC Reit Q2 FY’17

Q2 FY’16

Y-O-Y % CHANGE

(S$ MILLION)

Gross revenue

34.5

24.9

38.8

Net property income

31.4

22.1

41.9

Distributable income

20.1

14.7

36.5

Distribution per unit (¢)

1.74

1.67

part of corporations’ business strategies. The book closure date is July 25 and unitholders can expect to receive their distribution on Aug 31. Units of the trust closed flat at S$1.32 on the stock market.

CORPORATE DIGEST

Keppel Corp

First Reit Q2 FY17

Net property income rose 41.9 per cent to S$31.4 million. The Reit’s portfolio occupancy was 93.1 per cent as at June 30, 2017, falling from 95.1 per cent at end-March 2017. Asked why the DPU did not increase as much as the distributable income, the trust said it was partly because of the larger unitholder base following the preferential offering last November, but also because there were some “capex reserves” set aside for the purpose of funding repair or replacement works on KDC SGP 3 that was not distributed. The trust’s manager remains confident that the data centre industry will continue to be driven by global trends such as cloud adoption among consumers and corporations, as digital transformation remains a key

UK watchdog to assess if online retail fund platforms offer clients good value

KEPPEL Seghers Belgium NV, a wholly owned subsidiary of Keppel Infrastructure Holdings Pte Ltd, has secured two contracts to provide incineration technology and services for the Beijing Fangshan District Circular Economy Industrial Park Waste-to-Energy (WTE) plant and the Hunan Yueyang Municipal WTE plant. The two contracts are worth over S$20 million and have a total incineration capacity of 2,220 tonnes per day (TPD). ST Engineering AEROSPACE and defence conglomerate Singapore Technologies Engineering said it will acquire Aethon, Inc, a Pittsburgh-based company best known for its “Tug” smart autonomous mobile robot. Under a merger agreement, a consideration based on an enterprise value of US$36 million will be payable by ST Engineering subsidiary Vision Technologies Land Systems, Inc (VTLS), subject to post closing adjustments. Upon completion, Aethon will be a subsidiary of VTLS, and will be part of the group’s land systems sector led by Singapore Technologies Kinetics Ltd (ST

Kinetics). The estimated net tangible assets of Aethon at closing is negative US$1 million. Sunpower SUNPOWER Group, a solution provider for energy conservation, waste-to-energy and renewable energy projects in China, announced on Monday that its wholly owned subsidiary, Jiangsu Sunpower Technology, was awarded a contract worth 65.9 million yuan (S$13.3 million) from Qinghai Damei Coal Industry. The group will provide engineering, procurement and construction services to Qinghai Damei’s zero-liquid-discharge facility of integrated utilisation of exhaust gas for olefins project, and is expected to be delivered by the end of 2018. Cityneon Holdings A MANDATORY unconditional general cash offer at S$0.90 per share has been made for design and exhibitions firm Cityneon Holdings. This comes after offeror Lucrum 1 Investment Limited has completed its purchase of 52.5 per cent of the firm from Laviani Pte Ltd, a wholly-owned subsidiary of Malaysia’s Star Media Group.

London BRITAIN’S markets watchdog will study whether online funds platforms that dominate the retail investment market are doing all they can to offer customers a good deal. The Financial Conduct Authority (FCA) said that it will look at how platforms and similar services offered by banks, insurance companies, financial advisers and asset managers compete, and whether they use their bargaining power from pooling money to benefit investors. “Platforms have the potential to generate significant benefits for consumers and we want to ensure consumers are receiving these benefits in practice,” Christopher Woolard, FCA executive director for strategy and competition, said in a statement on Monday. The watchdog said six of the 10 largest operators were “vertically integrated” or tied to an asset manager, and such commercial ties have the potential to “distort” competition. The platforms sector has around £692 billion (S$1.24 trillion) under management, the FCA says, equivalent to around 78 per cent of the retail investment market. The watchdog said its study will look at platforms that do and do not offer advice on investments. Paul McGinnis, analyst at financial group Shore Capital, said he did not see anything surprising in the terms of the study, and early share price reaction among the leading listed platform providers was muted. The study is part of a wider “value for money” push in the funds sector and was flagged in its broader market study of the asset management sector in June. The FCA said Cofunds, Funds Network, Standard Life and Old Mutual were the largest among “advised” platforms.

Hargreaves Lansdown, Barclays Stockbrokers, TD Direct Investing and Fidelity Personal Investing led the “non-advised” pack. “We will assess whether investors and advisers can assess the value for money of investment propositions, including investment products and platform services, from the information platforms make available,” the FCA said. It will also look if there are barriers for new entrants into the sector, and what are the main drivers of profitability. It aims to publish an interim report by summer 2018, which will set out preliminary conclusions and any potential “remedies” or actions to address concerns. The FCA could introduce new rules, publish guidance for the sector, force individual firms to change their behaviour, and take enforcement action. Shore Capital’s Mr McGinnis said he did not expect Hargreaves Lansdown, the sector’s largest direct to client platform, to be hit hard by the review. Hargreaves was “very explicit in the way in which it negotiates and passes though discounts from fund managers to its customers”, he said in a note, flagging a “buy” rating and 1,279 pence price target. Bernstein analyst Edward Houghton added that wealth manager St James’s Place “did not look particularly exposed, as the firm does not have a non-advised offering and makes asset allocation and manager selection decisions on behalf of clients”. At 0757 GMT on Monday, shares in Hargeaves Lansdown were up 0.4 per cent, in line with the FTSE 100 index of leading shares, while shares in St James’s Place were up 0.9 per cent. REUTERS

HSBC bans staff from buying stock, bonds on own accounts: sources London HSBC Holdings Plc has instructed about 6,000 employees of its global markets division to cease buying single-name securities on their personal accounts, according to people with knowledge of the matter. Purchases of single-name stocks, bonds and concentrated exchangetraded funds will be prohibited, Global Head of Markets Thibaut de Roux told staff in an e-mail on Friday, said the people, who asked not to be identified discussing internal communications. The changes also apply to employees managing the lender’s own balance sheet, the people said.

A London-based spokesman for the bank declined to comment. Employees will be allowed to maintain existing holdings of securities prohibited by the new rules, while any sales must be pre-approved by compliance personnel, staff were told. Managers have been instructed to be vigilant in such approvals and decline requests if necessary, the people said. HSBC has hired 1,800 extra compliance staff since the start of the year, raising its total to more than 6,000 worldwide as the firm strives to improve its anti-financial crime capabilities. BLOOMBERG

| COMPANIES & MARKETS STI / Catalist

Straits Times Index July 17, 2017

3,298.24

+10.81 (+0.33%) Current streak 3 days Day high 3,301.37 Day low 3,287.56 52-week high 3,298.24 (July 17, 2017) 52-week low 2,787.27 (Nov 14, 2016)

❚❚

GAINERS FTSE ST Catalist Index July 17, 2017

Indexed closing prices

488.02

115 110

+0.74 (+0.15%) Current streak 3 days Day high 490.98 Day low 487.78 52-week high 533.71 (Apr 7, 2017) 52-week low 427.34 (Sept 2, 2016)

JULY 14, 2016 = 100

105 Straits Times Index 100 95

FTSE ST Catalist Index J A 2016

J F 2017

The Business Times | Tuesday, July 18, 2017

LOSERS

BY CENTS 52w high/low

SPDR S&P500 US$

24491

360.3

1.1

24600/20953

JMH USD

6375

-82.2 -0.9

6727/5290

SPDR DJIA US$

21570

287.7

1.0

21570/17906

Jardine C&C

4305

-55.0 -1.3

4850/3580

GLD US$

11766

234.3

1.5

13400/10756

JSH USD

4142

-39.7 -0.7

4378/2933

DBXT China50 US$

3574

48.0

1.0

3580/2904

DBXT Vietnam US$

2396

-24.7 -0.7

2533/2100

DBXT S&P500 US$

4335

41.1

0.7

4344/3547

DBXT S&P 500 -1x US$

1684

-15.1 -0.6

2055/1679

CLOSE China Star W180417 Huan Hsin MMP Resources Beng Kuang M Development

BY PERCENTAGE UP 52w high/low

0.8

700.0

0.7

2.8

115.4

1.5

Magnus Energy

6.2/0.1

Centurion W171027 Pavillon

0.5

66.7

0.2

0.7/0.2

37.8

2.8

13.6/7.1

0.4

33.3

0.1

0.5/0.1

BY PERCENTAGE DOWN 52w high/low

0.1 -50.0 -0.1

2.8/0.3

10.2

DOWN

0.2/0.1

0.6 -40.0 -0.4

PSL

1/0.1

S By Kenneth Lim kenlim@sph.com.sg @KennethLimBT

For full listings of SGX prices, go to http://btd.sg/BTmkts

Ascendas Reit CapitaCom Trust

Change Day high/low 52w high 52w low

263 168.5

+3 +0.5

CapitaLand

365

367/362

379

CapitaMall Trust

199

+0.5

199.5/198

1097

226 2144

CityDev ComfortDelGro DBS Grp

265/261 276 220 169/165.5 171.5 143.5

Div yield

Mcap

6 5.4

7599.4 5157.7

296

2.7

15616.3

222

187

5.6

7055.3

1100/1088

1100

803

15.6

1.5

9975

-2

229/225

300

220

15.4

4.6

4889.1

+34

2148/2120

2148

1472

12.9

2.8

54930.4

+1 109.5/107.5 120.5

71.5

49.1

2.8

13392.2

331 cd

331/329

332

177

14.5

1.8

16034.3

-0.5

38.5/38

8.4

1.7

4878.3

HPH Trust USD

US48.5

+1.5

48.5/47.5

49.5

8.1

4224.9

HongkongLand USD

US758

760/751

789

597

5.3

2.5

17834.3

Genting Sing

109

Global Logistic Golden Agri-Res

JMH USD

(S$)

S$3.310 (+2¢) July 17

3.100 2.900 2.700

J ‘17

110 105 100

Straits Times Index 95 J A 2016

6455/6367

6727

5290

9.5

2.4

46639.3

-55

4380/4302

4850

3580

16.7

2.5

17013.4

Keppel Corp

641

644/639

723

513

14.8

3.1

11663.8

OCBC Bank

1109

1109/1101

1109

827

13.5

3.2

46509.1

501 cd

-1

505/496

539

419

21.6

3.4

5628.4

JULY 14, 2016 = 100

746

748/740

784

696

22.9

3.8

7994.5

115

1009 cd

unch

1011/1006

1121

960

33.1

12106.6

404 cd

-2

408/403

421

335

25.7

3.5

4541.2

SPH

303

-8

305/301

401

301

18.9

5.9

4850

ST Engineering

369

-3

373/368

386

303

23.7

4.1

SGX

Sembcorp Ind

11521.7

315

316/313

338

244

15.8

2.5

5636.3

391 cd

unch

394/390

436

359

16.3

4.5

63847.2

StarHub

274

unch

274/272

397

266

13.8

7.3

5343.2

ThaiBev

+0.5

92.5/91.5

106

31.2

2.6

23101.2

UOB

2400

+15

2404/2385

2404

1751

12.9

2.9

40066

UOL

778

780/773

810

550

21.7

1.9

6331.6

Wilmar Intl

331

-4

337/329

400

296

14.9

21195.3

YZJ Shipbldg SGD

134

+4.5

134/130

134

70.5

14.1

MOST ACTIVE VOLUME

Sincap

5135

OTHER SINGAPORE INDICES

Jul 17 CLOSE

179,690,200

VALUE +/-

Jadason

99,038,900

BT OB/OS

Addvalue Tech

81,066,500

BT CADI

-91285.00 +53.00

Global Logistic

71,695,700

BT 10-day MA

-91422.00 +15.00

Disa

50,128,300

FTSE ST Mid Cap

738.78

FTSE ST Small Cap

418.28

-0.28

FTSE ST All Share

800.66

+2.17

Market volume 2,281,044,000 VALUE ($)

155.00 +28.00

+1.61

FTSE ST China

239.18

+1.39

Global Logistic

236,669,944

FTSE ST Catalist

488.02

+0.74

DBS Grp

106,609,279

FTSE ST Maritime

261.49

+7.48

Singtel

96,878,261

SIMSCI

367.64

+1.67

OCBC Bank

55,049,704

SIMSCI Futures

367.65

+2.45

UOB

52,009,319

TR/SGX SFI

129.33

+0.10

Market value

1,300,085,000

+2.17 (+0.27%) Current streak 3 days Day high 801.65 Day low 798.62 52-week high 800.66 (July 17, 2017) 52-week low 687.36 (Nov 14, 2016)

FTSE ST All-Share Index

J F 2017

STI / MSCI EAFE MSCI EAFE Index July 14, 2017

Indexed closing prices

110

1,918.74

+13.85 (+0.73%) Current streak 3 days Day high 1,921.90 Day low 1,906.33 52-week high 1,918.74 (July 14, 2017) 52-week low 1,614.17 (Nov 18, 2016)

MSCI EAFE Index

105 100 95

Straits Times Index

J A 2016

J F 2017

SECURITIES TRADING SCOREBOARD Multi Ind Manufacturing Commerce Tpt/Stor/Comms Finance Construction Properties Hotels/Rsts Services Elect/Gas/Water Agriculture Mining/Quarry BLW REIT TOTAL GLOBALQUOTE

MAIN Down

Unch

CATL Down

Unch

TOTAL Down

Unch

8 45 19 11 8 7 27 3 23 1 1 3 23 10 189 0

5 30 17 8 8 9 9 4 27 0 2 1 20 4 144 0

3 29 16 10 9 10 16 3 18 1 2 1 7 7 132 0

0 12 5 1 0 2 1 1 16 0 0 4 2 0 44 0

0 6 4 1 1 2 1 3 11 0 0 2 0 0 31 0

1 17 5 0 0 2 2 1 9 0 0 1 4 0 42 0

8 57 24 12 8 9 28 4 39 1 1 7 25 10 233 1

5 36 21 9 9 11 10 7 38 0 2 3 20 4 175 0

4 46 21 10 9 12 18 4 27 1 2 2 11 7 174 1

STI ETF NikkoAM-STC Asia REI IS MS INDIA US$ Nikko AM STI ETF Lyxor HSI US$ GLD US$

MAIN

334

+/- (‘000) Day high/low 52w high/low

Buy/Sell Mcap

522

335/333

335/281

334/335

107.2 +0.3

196

107.2/106.7

110.3/101

107.2/107.6

58.4 105.4

US843

108

844/842

844/441

843/845

339

339/337

340/286

338/339

8.2

US317

321/317

321/264

298/-

27.6

US11766 +171

11766/11698

13400/10756

11708/11716

DBXT MSINDO US$

US1580

+19

1650/1563

1700/1257

1580/1585

Phll Ap Div Reit US$

US94.8 +2.1

95/94.8

98.4/84

94.9/95.1

Lyxor Asia US$

US577

577/577

577/464

577/590

84.2

116.7 +0.4

116.7/116.3

120.1/112.1

116.6/116.9

532.7

ABF SG Bond ETF

0.120 +0.021 +21.21

M Development

3,820.3

0.004 +0.001 +33.33

Koda

202.9

1.100 +0.150 +15.79

CPH

13,390.0

0.008 +0.001 +14.29

OKP

6,959.5

0.370 -0.025

Multi Ind Manufacturing Commerce Tpt/Stor/Comms Finance Construction Properties Hotels/Rsts Services Elect/Gas/Water Agriculture Mining/Quarry BLW REIT TOTAL GLOBALQUOTE

13,749 147,498 157,314 70,931 27,041 42,989 125,843 1,791 227,115 1,214 12,468 50,802 761,447 56,290 1,696,492 -

VOLUME (‘000) CATL

TOTAL

MAIN

150 13,899 45,821 150,869 298,367 153,214 47,659 204,973 79,559 3,442 74,373 150,546 425 27,466 226,271 18,629 61,618 6,430 4,742 130,585 340,610 1,278 3,069 2,139 151,094 378,209 75,181 1,214 744 12,468 7,058 200,455 251,257 7,796 5,809 767,256 69,630 56,290 95,335 584,552 2,281,044 1,260,334 50 -

VALUE (‘000) CATL

22 5,774 2,782 570 73 984 798 700 20,919 7,083 47 39,752 -

TOTAL

45,843 158,987 82,340 151,116 226,344 7,415 341,408 2,839 96,100 744 7,058 14,879 69,677 95,335 1,300,085 24

Sing & foreign $ stocks. Value calculated using Monday's exchange rates.

-6.33

175.0

0.027 -0.005 -15.63

179,690.2

0.030 +0.005 +20.00

Shows the stocks with the highest combination of price change and of daily activity relative to the three-month average volume

❚❚

BROKERS’ TAKE

Global Logistic Properties | Neutral July 17 close: S$3.31 Target price: S$3.38 Credit Suisse, July 17 GLP announced that Nesta Investment Holdings, a consortium including HOPU and GLP chief executive Ming Mei, has proposed to privatise GLP for an offer price of S$3.38 in cash via a scheme of arrangement. This is expected to be completed by April 14, 2018. At an implied price-to-book ratio of 1.3 times, we view the exit valuation as attractive. We raise our target price to S$3.38, representing the offer price and recommend shareholders to accept the offer. For Singapore developer exposure, we advise investors to switch to UOL and City Developments Limited. Singapore Press Holdings | Hold July 17 close: S$3.03 Target price: S$3.25 OCBC Investment Research, July 17 SPH announced that its Q3 FY17 profit after tax and minority interests (Patmi) declined 45.2 per cent year on year to S$28.9 million, mainly due to poorer results from its media segment and a sizeable S$37.8 million impairment charge related to the magazine business. Excluding the impairment charge, we note that group recurring earnings would have fallen by S$17.1 million or 19.2 per cent and deem this quarter’s results to have missed our expectations. The management team indicated that they are actively pursuing growth opportunities to diversify revenue streams with their recent acquisition of Orange Valley Healthcare and the recent winning tender for a mixed site at Bidadari with joint venture partner Kajima Development. In addition, SPH has also completed the sale of 701Search on June 30, 2017, and expects to recognise a profit of about S$150 million from the divestment in the next quarter. Given the latest set of weak results, our fair value estimate slips to S$3.25. ESR Reit | Hold July 17 close: S$0.595 Target price: S$0.60 DBS Group Research, July 17 Downgrade to “hold”, awaiting clarity on the new roadmap. With a new sponsor in place, we remain optimistic about ESR Reit’s ability to access growth initiatives that new sponsor Eshang Redwood offers. But we believe that this has been priced in at current valuations (price-to-net asset valuation and yield) which is at historical average level, till more clarity is seen to drive valuations higher. Given limited upside to our target price since our upgrade in early 2017, we downgrade ESR Reit to a “hold”. Compiled by Claire Huang

Source for FTSE ST Indices: Interactive Data

SGX ETFs Most Active Last sale

50.0

Active counters with no volume for today are not included.

SECURITIES TRADING TURNOVER

Fund

0.320 -0.040 -11.11

Regal Intl

11.1/4.1

800.66

115

104.4

4.2 -20.8 -1.1

FTSE ST All-Share Index July 17, 2017

JULY 14, 2016 = 100

-60

Singtel

Indexed closing prices

4305

SIA Engineering

“These data continue to suggest semiconductor exports will likely moderate only gradually this year,” Nomura wrote in a note. China also printed economic growth numbers that beat expectations, as second-quarter gross domestic product grew 6.9 per cent year on year. Industrial production in June rose 7.6 per cent, one of the strongest performances since 2014. UOB Kay Hian said it still expects the Chinese economy to slow in the second half of 2017, although the

US6375

SIA

Source: Bloomberg

Jardine C&C

SATS

0.005 +0.002 +66.67

Dukang

Sincap

STI / FTSE ST All-Share

STI STOCKS Stock name

3.300

0.100 -0.020 -16.67

Leader Env

broker is raising its full-year forecast for the Asian giant to 6.8 per cent growth from its earlier projection of 6.6 per cent to reflect the strong first half of the year. “Notwithstanding the upbeat performance in Q2 2017 and first half of 2017, downside risks remain that would curb growth upside,” UOB Kay Hian wrote. “For one, credit creation is likely to turn more subdued in the second half as China’s government focuses on managing financial sector risks and deleveraging, as well as the exhaustion of credit quota. “With an upbeat headline figure in the first half of the year, this has certainly provided more confidence and space for the authorities to continue to tighten liquidity and raise cost of funds.” DBS Group Holdings led the banks higher, gaining 1.6 per cent or 34 Singapore cents to close at S$21.44. OCBC Bank inched up 0.4 per cent or four Singapore cents to head out at S$11.09. United Overseas Bank rose 0.6 per cent or 15 Singapore cents to finish at S$24.

Global Logistic Properties

30.0

9.1/3.5

Index closes at 3,298.24 after third straight rally; GLP remains active following takeover offer

+/-

6,891.0

MMP Resources

50/27.5

DBS MB ePW171016

Active

PS Group

4.9 -23.4 -1.5

Regional data helps STI hit two-year high The deal has mostly gained acceptance among equity analysts, with UOB Kay Hian and Phillip Securities recommending that shareholders accept the bid. “At an 18 per cent premium to our last target price (excluding six Singapore cents dividend) of S$2.87 and a 30 per cent premium to latest net asset value of S$2.60, we deem the buyout offer a fair price and advise investors to accept the offer,” Phillip wrote in a note on Monday. Another property counter, Ascendas Real Estate Investment Trust, advanced by 1.2 per cent or three Singapore cents to close at S$2.63. Outside of the merger and acquisition sphere, financials rose on a wave of positive economic data. Singapore’s non-oil domestic exports rose 8.2 per cent year on year in June to S$14.7 billion compared with a year ago. Non-electronics exports carried the rise, expanding by 9.3 per cent on the back of specialised machinery. Electronics exports, however, continued to show signs of slowing growth, with June’s increase of 5.4 per cent year on year, representing a moderation from May’s 28.9 per cent growth.

VOL CLOSE($) CHANGE

27.5 -22.5 -8.0

STOCKS

INGAPORE stocks mounted a third straight rally on Monday to hit a two-year closing high amid positive economic data in the region. The Straits Times Index (STI) rose 0.33 per cent or 10.81 points to close at 3,298.24. The last time the blue-chip benchmark finished the day higher was on July 27, 2015, when it closed at 3,313.42. Gainers outnumbered losers 261 to 181, or about three up for every two down, with decent activity. A total of 2.3 billion shares were traded on Monday, which was about 98 per cent of the daily average volume in the first half of the year. Monday’s total turnover was S$1.3 billion, about 10 per cent above the first-half daily average of S$1.2 billion. Global Logistic Properties (GLP) remained active following the emergence of a takeover offer before the weekend. The warehouse developer’s stock closed at S$3.31, which was up 0.6 per cent or two Singapore cents, on the day. But that stock price remained below the S$3.38 offer price.

UNUSUAL ACTIVITY

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein. Brokers who wish to send in their reports can e-mail us at btnews@sph.com.sg

COMPANIES & MARKETS | 11

The Business Times | Tuesday, July 18, 2017

❚❚

CURRENCIES

Dollar struggles as carry trades flourish London THE US dollar held at a 10-month low against a basket of currencies while high-yielding currencies such as the Australian dollar rose to two-year peaks as investors piled into leveraged bets after data dampened expectations of a US rate hike in coming months. Some of the biggest gains were seen in the yen crosses such as ster-

ling, earlier in the day after Chinese economic data topped expectations, though some profit taking set in at higher levels. “The broader outlook still remains positive for risk but the recent volatile moves seen in higher yielding currencies such as the Turkish lira means that investors should be wary of a washout in crowded positions,” Luis Costa, a strategist at Citibank in London, said.

China’s second-quarter gross domestic product topped forecasts with a rise of 6.9 per cent on the year, while retail sales and industrial output were both strong. The Australian dollar shot to a two-year high and breached major chart resistance in the process in the US$0.7700/7778 range. The Aussie was last at US$0.7814 with bulls targeting the 200-week moving average around US$0.8018.

US rate hike expectations have been pared to less than a 50-per-cent probability after the latest inflation print on Friday and with no top-tier data this week, markets have plenty of time to mull over the future direction of interest rates. The repeated disappointment on prices cast a question mark over the Federal Reserve’s confidence that inflation would soon rebound. “It is a possible third hike this year

Australia Canada China Euro Hong Kong India Indonesia Japan Korea Malaysia NZ Pakistan Philippines Singapore South Africa Switzerland Taiwan Thailand UK United States

Rmb

1.012 0.189 1.466 0.164 0.020 0.010 1.138 0.114 0.299 0.938 0.012 0.025 0.935 0.098 1.329 0.042 0.038 1.674 1.281

0.989 0.187 1.450 0.162 0.020 0.010 1.125 0.112 0.295 0.927 0.012 0.025 0.924 0.097 1.314 0.042 0.038 1.655 1.266

5.286 5.347 7.751 0.868 0.105 0.051 6.016 0.600 1.579 4.957 0.064 0.134 4.943 0.521 7.024 0.223 0.201 8.851 6.772

Euro

on the dollar with the first US dollar shorts evident since May 2016. However, carry trades are flourishing with Japanese yen shorts at the highest level since June 2015. That pushed the dollar down to fresh 2017 lows against the Singapore dollar and the Mexican peso on Monday. The dollar was trading a shade weaker at 112.485 against the yen. REUTERS, BLOOMBERG

INTERBANK CURRENCY RATES

INTERBANK CROSS RATES

FOREX RATES

that the market is now sceptical of,” Brown Brothers Harriman strategists wrote in a note. Federal Reserve chair Janet Yellen also indicated on Wednesday last week that the Fed’s rate hikes could be gradual rather than fast. Analysts say the dollar’s got further to fall as Thursday’s European Central Bank meeting approaches. Latest positioning data suggest that markets are also turning bearish

Jul 17

Ind Rs Rupiah

Yen

Won

NZ$ Pak Rs

Peso

Rand

Sfr

NT$

0.682 6.091 50.258 104.024 0.690 6.162 50.841 105.231 0.129 1.152 9.508 19.679 - 8.932 73.698 152.541 0.112 - 8.251 17.079 0.014 0.121 - 2.070 0.007 0.059 0.483 0.776 6.932 57.195 118.383 0.077 0.691 5.705 11.807 0.204 1.820 15.014 31.076 0.639 5.711 47.125 97.540 0.008 0.074 0.611 1.266 0.017 0.154 1.270 2.629 0.638 5.695 46.993 97.267 0.067 0.600 4.949 10.244 0.906 8.094 66.785 138.233 0.029 0.257 2.119 4.385 0.026 0.231 1.909 3.952 1.142 10.199 84.154 174.184 0.874 7.803 64.388 133.270

HK$

0.879 0.889 0.166 1.289 0.144 0.017 0.008 0.100 0.263 0.824 0.011 0.022 0.822 0.087 1.168 0.037 0.033 1.471 1.126

8.810 8.912 1.667 12.919 1.446 0.175 0.085 10.026 2.632 8.261 0.107 0.223 8.238 0.868 11.707 0.371 0.335 14.752 11.287

3.347 3.386 0.633 4.909 0.550 0.067 0.032 3.809 0.380 3.139 0.041 0.085 3.130 0.330 4.448 0.141 0.127 5.605 4.289

1.066 82.192 1.079 83.146 0.202 15.549 1.564 120.526 0.175 13.494 0.021 1.635 0.010 0.790 1.214 93.538 0.121 9.329 0.319 24.554 - 77.069 0.013 0.027 2.077 0.997 76.853 0.105 8.094 1.417 109.221 0.045 3.465 0.041 3.123 1.786 137.627 1.366 105.300

39.566 40.025 7.485 58.020 6.496 0.787 0.380 45.028 4.491 11.820 37.100 0.481 36.996 3.897 52.578 1.668 1.503 66.252 50.690

1.069 1.082 0.202 1.568 0.176 0.021 0.010 1.217 0.121 0.319 1.003 0.013 0.027 0.105 1.421 0.045 0.041 1.791 1.370

10.154 10.272 1.921 14.890 1.667 0.202 0.098 11.556 1.153 3.033 9.521 0.124 0.257 9.495 13.493 0.428 0.386 17.003 13.009

0.753 0.761 0.142 1.104 0.124 0.015 0.007 0.856 0.085 0.225 0.706 0.009 0.019 0.704 0.074 0.032 0.029 1.260 0.964

23.721 23.997 4.488 34.785 3.895 0.472 0.228 26.996 2.693 7.087 22.243 0.289 0.600 22.180 2.336 31.522 0.901 39.720 30.391

Baht Pound

26.320 26.626 4.979 38.596 4.321 0.524 0.253 29.953 2.988 7.863 24.680 0.320 0.665 24.610 2.592 34.976 1.110 44.072 33.720

0.597 0.604 0.113 0.876 0.098 0.012 0.006 0.680 0.068 0.178 0.560 0.007 0.015 0.558 0.059 0.794 0.025 0.023 0.765

US$

0.781 0.790 0.148 1.145 0.128 0.016 0.008 0.888 0.089 0.233 0.732 0.009 0.020 0.730 0.077 1.037 0.033 0.030 1.307 -

The figures are based on mid prices of currencies quoted by OCBC. For Rupiah, Yen and Won, the figures are in 100 units of the foreign currency indicated. Among the three currencies themselves, the exchange rate should read as it is.

Against S$ Bid Offer

Currencies

US$/S$ FORWARD RATES

Jul 17

Against US$ Bid Offer

S$/US$ to one unit of foreign currency:

Australian dollar Canadian dollar Euro NZ dollar Sterling pound US dollar

1.0689 1.0815 1.5677 1.0022 1.7902 1.3699

1.0700 1.0823 1.5688 1.0034 1.7914 1.3704

0.7803 0.7898 1.1444 0.7316 1.3068 -

0.7808 0.7895 1.1448 0.7322 1.3072 -

Bid

1-month 2-months 3-months 6-months

Jul 17

1.3691 1.3684 1.3675 1.3655

Offer

1.3697 1.3691 1.3685 1.3665

Source: OCBC S$/US$ to 100 units of foreign currency:

Chinese renminbi Danish kroner Hong Kong dollar Indian Rupee Indonesia rupiah Japanese yen Korean won Malaysian ringgit New Taiwan dollar Norwegian krone Philippine peso Saudi riyal Swedish krona Swiss franc Thai Baht

20.2277 20.2366 14.7658 14.7669 21.0828 21.0938 15.3901 15.3924 17.56 17.56 12.8149 12.8151 2.13 2.13 1.5530 1.5532 0.0103 0.0103 0.0075 0.0075 1.2168 1.2174 0.8883 0.8883 0.1213 0.1215 0.0885 0.0887 31.93 31.97 23.3100 23.3263 4.5054 4.5116 3.2888 3.2922 16.7367 16.7510 12.2175 12.2234 2.7020 2.7040 1.9724 1.9732 36.5258 36.5430 26.6631 26.6660 16.4245 16.4384 11.9895 11.9953 142.0616 142.1724 103.7022 103.7452 4.0614 4.0653 2.9647 2.9665 Source: OCBC

HANG SENG

SHANGHAI COMPOSITE

NIKKEI

DOW JONES

26,500

3,250

20,250

21,800

INTERBANK RATES

BANK RATES

3,176.47 (-45.95) July 17

3,200

19,750

26,470.58

3,150

(+81.35) July 17

24,500

21,400

20,118.86

25,500

(+19.05) July 14

19,250

21,000 3,100

21,637.74 (+84.65) July 14

18,750

20,600 Apr

May

June

July

Apr

May

Apr

July

June

SGX DERIVATIVES TRADING

EQUITY BONDS WARRANTS FUTURES

Jul 17 OPEN

HIGH

LOW

SETT

FTSE CHINA A50 INDEX FUTURES Jul17 11720.00 11870.00 11612.50 11772.50 Aug17 11735.00 11885.00 11632.50 11785.00 NIKKEI 225 INDEX FUTURES Sep17 20090.00 20115.00 19970.00 20075.00 Dec17 19935.00 19935.00 19900.00 19950.00 MSCI TAIWAN INDEX FUTURES Jul17 392.50 395.80 392.00 Aug17 390.40 392.90 390.00 CNX NIFTY INDEX FUTURES Jul17 9903.00 9965.00 Aug17 9960.00 9991.50

9903.00 9954.00

MSCI SINGAPORE INDEX FUTURES Jul17 365.00 367.90 364.80 Aug17 360.95 363.45 360.95

OP/INT

279012 10071 19661 3

608523 15317 224247 2899

36901 1665

225895 11400

9944.50 9983.00

37294 270

408420 339

367.65 363.45

- 20100.00 - 20030.00

18340 310

181419 176

MSCI INDIA INDEX FUTURES Jul17 1174.00 1176.00 1174.00 Aug17 MSCI INDONESIA INDEX FUTURES Jul17 6960.00 6985.00 6930.00 Aug17 -

1172.40 1179.00 6975.00 6980.00

50 0 0 0

1356 0 137 0

168 0 5 0 104 0

14507 0 300 2 5907 0

MSCI THAILAND INDEX FUTURES Jul17 Aug17

MSCI MALAYSIA INDEX FUTURES Jul17 Aug17 -

541.25 538.50 612.25 610.75

SGX-PSE MSCI PHILIPPINES INDEX FUTURES Jul17 - 1356.00 Aug17 - 1355.00

0 0 0 0 0 0

10 0 0 0 6 0

SGX INR/USD FUTURES Jul17 Aug17

155.120 154.660

155.500 154.980

155.120 154.600

SGX KRW/USD FUTURES Jul17 Aug17 .8835 .8872 SGX USD/SGD FUTURES Jul17 Aug17 1.3710 1.3710

.8835 1.3696

155.190 154.710 .8864 .8874 1.3696 1.3675

25968 5984 0 119 0 65

32233 4242 566 652 130 1516

SGX USD/CNH FUTURES Jul17 Aug17

6.7827 6.7935

6.7838 6.7937

6.7613 6.7722

6.7657 6.7770

1295 2627

1090 2758

SGX USD/JPY FUTURES (STANDARD) Jul17 112.360 112.520 112.340 Aug17 -

112.655 112.310

462 0

0 0

SICOM RSS3 RUBBER FUTURES Aug17 175.0 177.5 175.0 Sep17 178.9 178.9 178.9

177.3 178.3

6 4

373 334

151.2 152.9

490 541

2499 8019

SICOM TSR20 RUBBER FUTURES Aug17 Sep17

151.8 152.8

151.8 153.8

150.0 152.0

July

SGX TSI IRON ORE CFR CHINA(62% FE FINES) INDEX FUTURES Jul17 65.04 66.06 64.53 5598 94760 Aug17 64.50 66.16 64.50 16622 93820 * Denotes an Opening Range has been established S'pore Exchange Derivatives Clearing Ltd (Co Reg No 200005878M)

Apr

May

June

July

BONDS, WARRANTS, PREFERENCE SHARES Most active Last Sale

+or-

Jul 17

Vol ('000)

Conv Ratio

Exer Price

Prem Disc %

Gearing

Expiry Mths Left

Offer

Bid

0vernight 0.25 1-month 1.0 2-months 1.0625 3-months 1.125 Overnight mode: 0.40

0.15 0.875 0.9375 1.0

US$

Offer

Bid

7 days 1 month 2 months 3 months 6 months 9 months 12 months

1.33 1.33 1.35 1.35 1.60 1.75 1.90

1.23 1.23 1.25 1.25 1.40 1.55 1.70

$Au

Offer

Bid

1 month 3 months 6 months 12 months

1.90 1.95 2.05 2.35

1.70 1.75 1.85 2.15

KrisEnergy Ltd. W240131

5.1

0.7 14923

0.0

-25

DBS MB eCW171016

7.9

1.4 3778

0.1 2200

SingTel MB eCW171002

3.2

0.1 3695

OCBC Bk MB eCW171201

6.5

0.4 2499

0.1 1120

Disa Limited W170802

0.8 unch 2231

1.88

Ntegrator Intl Ltd W181123

0.9 unch 2200

2.11

UOB MB eCW171016

7.3

0.6 2082

0.1 2450

DBS MB ePW171016

4.2

-1.1 1060

0.1 1950

2-Year

NX09100W

2.500

Viking Offshore and Ma W220701

0.5 unch

5-Year

N517100F

10-Year

NZ07100S

15-Year

876

3.40

0.1

713

5.30

KepCorp MB ePW171002

9.2

-0.6

578

0.2

650

China Star Food Group W180417

0.8

0.7

520

276 11.25

2.8

-0.1

408

9.82

24.5

2.5

260

0.1 2000

LifeBrandz Ltd W190602

UPP Holdings Limited W200212 DBS MB eCW171101

NIKKEI STOCK AVERAGE DIVIDEND POINT INDEX FUTURES Dec17 367.60 0 13726 Dec18 401.40 0 7367 MINI 10-YR JAPANESE GOVT BOND FUTURES Sep17 150.080 150.140 150.010 150.140 Dec17 - 150.140

June

Company

393.50 390.90

MINI NIKKEI 225 FUTURES Sep17 20083.00 20085.00 20015.00 20075.00 Dec17 - 19950.00 USD NIKKEI 225 INDEX FUTURES Sep17 Dec17 -

VOL

May

Jul 17 $S

Ezion Holdings W200424

3.8

0.2

232

6.58

Capitaland MB eCW171002

4.7

-0.1

220

0.2

355

OCBC Bk MB ePW171201

5.7

-0.5

200

0.1 1050

CSC Holdings W201229

1.1

-0.1

150

-5

2.00

3.2

-0.5

150

0.1 2150

11.6

0.4

141

0.0 1020

UOB MB ePW171016 OCBC Bk MB eCW171113

Jul 14

World Preliminary EAFE Preliminary Europe Preliminary Australia Austria Preliminary Belgium Preliminary Canada Preliminary Denmark Preliminary Finland Preliminary France Preliminary Germany Preliminary Greece Preliminary India Indonesia Ireland Preliminary Israel Preliminary Italy Preliminary Japan Korea Malaysia Netherlands Preliminary New Zealand Norway Preliminary Pakistan Philippines Portugal Preliminary Singapore Singapore Free Spain Preliminary Sweden Preliminary Switzerland Preliminary Taiwan Thailand UK Preliminary USA Preliminary EM Far East Preliminary Hong Kong Preliminary Pacific Preliminary Far East Preliminary

Index

1479.2 1113.3 1584.5 1164.5 613.4 1240.5 1934.4 8270.4 720.5 1874.4 1028.2 73.7 1167.1 6924.8 226.0 268.8 735.3 964.5 721.1 611.7 1617.5 132.2 2625.2 528.9 1347.0 87.8 1701.0 365.7 1018.9 13011. 1200.3 394.7 542.0 2144.0 2335.7 716.2 15850. 928.3 1100.4

In local curr % dy % yr Change Change

0.2 0.1 0.0 0.6 0.0 0.2 0.0 0.5 0.0 0.1 0.0 0.2 -0.1 0.0 -0.4 -0.4 -0.1 0.3 0.4 0.1 0.4 0.4 -0.3 1.4 -0.8 0.5 1.7 1.7 -0.1 0.3 0.4 -0.3 -0.2 -0.4 0.2 0.3 -0.1 0.4 0.4

8.4 7.3 7.8 1.6 24.5 3.4 -1.1 13.7 13.7 8.6 7.2 23.9 18.7 13.1 -0.1 9.2 9.2 5.7 24.2 6.8 13.2 2.8 4.0 -11.9 14.9 3.1 14.4 14.4 15.7 11.0 10.4 14.7 4.1 3.2 9.7 22.3 21.5 6.6 7.8

% dy Change

In S$ % yr Change

% dy Change

In US$ % yr Change

0.0 0.3 0.1 1.3 0.0 0.2 0.2 0.5 0.0 0.0 -0.1 0.1 -0.5 -0.3 -0.4 -0.9 -0.2 0.6 0.2 -0.3 0.3 0.3 0.0 1.0 -1.3 0.5 1.7 1.7 -0.2 0.2 0.2 -0.9 -0.3 0.3 -0.2 -0.1 -0.5 0.7 0.5

5.4 8.2 9.8 4.0 28.3 6.5 -0.6 17.1 17.1 11.9 10.4 27.6 18.7 8.5 3.0 6.8 12.5 3.9 25.7 6.0 15.8 2.7 3.6 -17.0 7.1 6.2 14.3 14.3 19.2 15.0 10.4 15.4 4.5 3.8 4.1 19.4 14.6 5.3 5.6

0.4 0.7 0.5 1.7 0.4 0.6 0.6 0.9 0.4 0.5 0.4 0.5 -0.1 0.1 0.0 -0.5 0.2 1.0 0.6 0.1 0.7 0.7 0.4 1.5 -0.9 0.9 2.1 2.1 0.2 0.6 0.6 -0.5 0.1 0.7 0.2 0.3 -0.1 1.1 1.0

11.1 13.9 15.7 9.6 35.1 12.2 4.7 23.4 23.4 17.8 16.3 34.4 25.0 14.3 8.5 12.5 18.5 9.5 32.4 11.7 22.0 8.2 9.1 -12.6 12.9 11.9 20.4 20.4 25.6 21.1 16.2 21.6 10.1 9.3 9.7 25.7 20.7 10.9 11.2

1 month 3 months 6 months 12 months

Offer

Bid

-0.35 -0.20 -0.05 0.05

-0.45 -0.40 -0.25 -0.10

$NZ

Offer

Bid

1 month 3 months 6 months 12 months

2.05 2.10 2.25 2.55

1.85 1.90 2.05 2.25

Yen

1 month 3 months 6 months 12 months

Offer

Bid

-0.15 -0.15 -0.05 0.05

-0.25 -0.25 -0.15 -0.05

Offer

Bid

1 month 3 months 6 months 12 months

0.30 0.40 0.60 1.00

0.20 0.30 0.40 0.80

Rates quoted by Icap (S) Pte Ltd

GOVERNMENT SECURITIES Jul 17

GOVERNMENT BONDS Period

Issue code

Coupon rate (%)

Maturity

Close Bid

High

Low

01-Jun-19

102.45

102.41

1.750

01-Apr-22

101.25

101.31

101.29

3.500

01-Mar-27

112.49

NZ10100F

2.875

01-Sep-30

106.72

20-Year

NZ16100X

2.250

01-Aug-36

98.92

30-Year

NA16100H

2.750

01-Mar-46

107.3

107.40

107.20

Note: Based on latest issue

Day's

Source: Monetary Authority of Singapore

COMMODITY FUTURES

AGRI METALS ENERGY

MORGAN STANLEY CAPITAL INTERNATIONAL INDICES

Euro

Jul-14

Price Net change

% change

Last Trade

1.31%

14/07/2017

Agricultural

Jul-14

CBOT Soybeans (US cents/bu)

985.25

CBOT Soybean Oil (US cents/lb)

12.75

33.06

0.05

0.15%

14/07/2017

CBOT Wheat (US cents/bu)

494.75

-0.75

-0.15%

14/07/2017

LIFFE Cocoa (£/tonne)

1505.00

5.00

0.33%

14/07/2017

LIFFE Coffee (US$/tonne)

2165.00

1.00

0.05%

31/07/2017

418.00

-0.20

-0.05%

14/07/2017

1226.60

10.30

0.85%

27/07/2017

15.94

0.25

1.59%

29/08/2017

Aluminium, 99.7% purity

1927.00

4.00

0.21%

Copper, Grade A

5926.00

50.00

0.85%

Lead

2316.00

22.00

0.96%

Nickel

9575.00

365.00

3.96%

19810.00

5.00

0.03%

2786.00

-17.50

-0.62%

Crude Oil - Brent/blend (1-Mth F)

48.91

0.49

1.01%

Crude Oil - WTI (Near Mth)

46.54

0.46

1.00%

Crude Oil - Dubai (1-Mth F)

47.64

0.51

1.08%

Crude Oil - Tapis Blend

49.86

0.78

1.59%

Crude Oil-Indonesia Minas FOB

54.54

0.67

1.24%

Naphtha Singapore Spot FOB

44.02

0.61

1.41%

Jet Kerosene-FOB Singapore

58.64

1.29

2.25%

Opec Oil Basket Price

46.40

0.74

1.62%

Naphtha (CFR Japan)

417.00

10.00

2.46%

Gas Oil EEC (CIF Cargoes NWE)

445.25

8.25

1.89%

Jul-14

LIFFE White Sugar (US$/tonne)

Metals

Jul-14

COMEX - Gold (100 oz) COMEX - Silver (US$/troy oz)

LME 3-Mths Contracts (US$/MT)

Tin Zinc. Sp High Grade

Jul-14

Energy and Oil

Jul-14

Source:Thomson Reuters

Jul 17

PALM OIL KLCE Palm Futures (RM/MT) Delivery Month

Aug 17 Sep 17 Oct 17 Nov 17

2642.0 2578.0 2560.0 2557.0

Opening Range

Sett Price

Av Price

High

Low

Vol Done

Open Position

2617.0 2557.0 2537.0 2536.0

2648.0 2590.0 2571.0 2567.0

2613.0 2555.0 2536.0 2535.0

875 10271 15208 5184

12486 57232 48245 45642

Source: Bursa Malaysia

| COMPANIES & MARKETS

The Bus ness T mes

SGX MAINBOARD H h

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5 50 15.4 65 36 30.7 15.4 110 124.5 22.5 11.5 2 24 62 0.8 22.5 2.9 19 112 39.5 22 220 69 95 105.5 16.9 5.4 37 24 0.2 3.5 152.5 21.5 30.5 260 16.2 8.3 10 57 48.5 54.5 17 36 7.1 49 0.1 58 118 75 59.5 96.5 9.8 28 441 67 62 1.8 123.2 26.5 26.5 20 10.1 72 22.5 1.7 40.5 11.1 187 79 0.1 81 143.5 296 187 133 44 6.5 30.5 44 65 1.9 63 19.1 130 0.3 40.5 57.6 3.3 1.1 0.9 9.2 76.5 2.5 14.5 2.6 38.5 2.8 18.5 14 0.5 61.5 23 57.8 803 101.5 77 31 57 40 220 1.2 94 69 24 10.8 25 38 91.5 82 10500 1472 660 0.1 32 79.5 19.3 18 30 199 26 44 0.6 32 42.5 23.6 8.7 20 69.5 52.5 80 36 4.5 81 40.5 3.7 30 21 1.1 203 3.5 7.3 15.5 4.2 57 142 22 125 152 120.5 140.5 28 0.7 1.2 830 14.7 123.5 147 186.5 63 89 81 22 17.8 16 23.5 13.8 80.5 69 74.5 52 20 27 11.4 3.7 25 71.5 9 13.1 177 21.5 2.4 102 13.1 34 38 20.5 22.5 2010 11.6 178 25 5.8 0.5 54 38 332 82 15.6 36 45 21 878 32.9 32 26 30.5 65.5 12.6 202 32 0.6 61.5 67 211 597 23.5 125.5 326 136 0.2 0.3 53 27.5 45 9100 59 20.3 180 30 0.1 71 17.1 0.4 44 10 0.1 14.5 4.5 19.2 346 23.5 5290 2933 7.3 1.8 51 3580 0.3 10.5 55.5 2.7 53

Transact on date Ju 17 Vo

Comp n

8Telecom ........................................... 5.4 A-Smart ............................................. 60 A-Sonic Aero ...................................... 22.5 ABR .................................................... 68 AEI ...................................................... 65 AEM ................................................... 256 AF Global............................................ 16.4 AIMS Property .................................. 162 AIMSAMP Cap Reit .......................... 148.5 AP Oil ................................................. 27.5 ASL Marine ........................................ 13.5 ASTI .................................................... 4.6 Abterra .............................................. 25 Accordia Golf Tr ................................. 72 Ace Achieve Info .............................. 1.2 Acma ................................................. 32.5 Addvalue Tech................................... 4.8 Advance SCT .................................... 0.1 Advanced........................................... 34 AliPictures HKD ................................ HK127 Amara Hldgs ...................................... 51 Anchun Intl ....................................... 25 Anwell Tech ....................................... 9 * Ascendas Reit ................................. 263 Ascendas-hTrust .............................. 82.5 Ascendas-iTrust................................. 116.5 Ascott Reit ........................................ 116.5 Asia Enterprises ............................... 17.5 Asia Fashion ..................................... 20.5 Asian Pay TV Tr.................................. 56.5 Aspial ................................................. 26 Attilan ................................................ 0.2 AusGroup .......................................... 5.1 AusNetServices ................................. 180.5 Avi-Tech ............................................. 46.5 Azeus ................................................. 30.5 B&M Trustees .................................... 330ce BBR .................................................... 21.5 BG Bluesky ........................................ 9.2 BH Global ........................................... 14.1 BHG Retail Reit ................................. 73 BRC Asia............................................. 79 Baker Technology ............................. 62 Ban Leong ......................................... 21cd Banyan Tree....................................... 55.5 Beng Kuang ...................................... 10.2 Berlian LajuTank ................................ 2.7 Best World ........................................ 136 Blumont ............................................. 0.1 Boardroom......................................... 68 Bonvests ........................................... 130.5 Boustead ........................................... 93cd Boustead Proj ................................... 92cd BreadTalk .......................................... 158.5 Broadway Ind ................................... 13.2 Brook Crompton ............................... 58 Bukit Sembawang ............................ 683cd Bumitama Agri ................................. 75 Bund Center ...................................... 78.5 C&G Env Protect................................ 1.9 CDL HTrust ........................................ 156.5 CDL HTrust R...................................... 27.5 CDL HTrust R1.................................... 27 CDW ................................................... 24 CEFC Intl ............................................ 11 CEI ...................................................... 106.5 CH Offshore ...................................... 24.5 CNA .................................................... 2.6 CSC .................................................... 2.2 CSE Global.......................................... 43.5 CWG Intl ............................................ 15.6 CWT ................................................... 217 Cache Log Trust................................. 93 Cacola ................................................ 0.1 Cacola R ............................................. Camsing Hc........................................ 95 * CapitaCom Trust ............................ 168.5 * CapitaLand ..................................... 365 * CapitaMall Trust ............................ 199 CapitaR China Tr ............................... 161.5 Captii ................................................. 61 Casa ................................................... 6.8 Celestial Nutri .................................... 17 Centurion .......................................... 50 Challenger.......................................... 45 Changjiang Fert ................................. 1.8 ChangtianPlastic .............................. 129 Chasen .............................................. 10.3 Chemical Ind...................................... 90 Cheung Woh ...................................... 21 China Aviation .................................. 176.5 China Bearing ................................... 2.6 China Env .......................................... 3.7 China Env Res.................................... 4.2 China Essence .................................. 1.4 China Everbright ............................... 51 China Fibretech ................................. 102 China Fishery ..................................... 7.6 China Flexpack .................................. 125 China Gaoxian .................................. 9 China Great Land .............................. 2.6 China Haida ....................................... 2.3 China Hongxing ................................. 11.5 China Intl............................................ 25.5 China Jinjiang..................................... 80.5 China Jishan....................................... 21.5 China Mining .................................... 47 China Paper ...................................... 2.4 China Sky Chem................................ 2.7 China Sun Bio ................................... 5.5 China Sunsine.................................... 79.5 China Taisan ..................................... 4.6 China Yuanbang ................................ 25 ChinaKangdaFood ............................ 37.5 ChinaSports ...................................... 1.5 Chip Eng Seng .................................. 73.5 Chuan Hup ........................................ 27.5 Citic Envirotech ................................ 79.5 * CityDev ........................................... 1097 CityDev NCCPS.................................. 113 Cityneon............................................. 96.5 Civmec ............................................... 61.5 Cogent ............................................... 74.5 Combine Will .................................... 82 * ComfortDelGro .............................. 226 Compact Metal.................................. 2.1 Cordlife............................................... 95 Cortina ............................................... 83cd Cosco ................................................. 31.5 CosmoSteel ...................................... 12.4 Courage Marine................................. 34 Courts Asia ....................................... 43cd Creative.............................................. 121.5 Croesus RTrust ................................. 118.5 DBS Bk 4.7% NCPS ............................ 10665 * DBS Grp .......................................... 2144 DMX Technologies ............................ 10.9 DairyFarm USD .................................. 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US152.5 Ellipsiz ................................................ 62 Emas Offshore ................................... 5 EnGro ................................................. 94 Envictus ............................................. 47.5 Enviro-Hub ........................................ 4.4 Enviro-Hub R333................................ 0.5 Europtronic ....................................... 0.2 Excelpoint ......................................... 64 Ezion .................................................. 25 Ezra ................................................... 1.1 F & N .................................................. 238 FJ Benjamin ....................................... 4 FSL Trust ............................................ 7.5 Fabchem China ................................ 15.5 Falcon Energy .................................... 4.5 Far East HTrust .................................. 67 Far East Orchard ............................... 157 Federal Int.......................................... 39.5 FibreChem NCPS............................... 11 Fibrechem Tech................................. 10.5 First Reit ............................................ 133.5 First Resources.................................. 189 First Sponsor .................................... 137 Fischer Tech....................................... 268cd Food Empire ..................................... 69 Foreland FabriT ................................. 0.9 Forise Intl .......................................... 1.2 Fortune Reit HKD ............................. HK945 Fragrance .......................................... 16.6 Frasers Com Tr ................................. 142.5 Frasers Cpt ........................................ 190.5 Frasers Cpt Tr ................................... 212 Frasers HTrust .................................. 73.5 Frasers L&I Tr..................................... 105.5 Frasers L&I Tr AUD ............................ A81 Frencken ........................................... 50 Fu Yu .................................................. 20.5 Full Apex ........................................... 20 Fung Choi Media ............................... 7.2 Fuxing China...................................... 68 G Invacom .......................................... 16.2 GK Goh .............................................. 96.5 GL ...................................................... 73 GP Batteries ...................................... 80cd GP Industries .................................... 60cd GRP .................................................... 21.5 GSH .................................................... 51.5 Gallant Venture ................................ 14.2 Gaylin ................................................. 6.6 Genting HK US$ ................................. US29.5 * Genting Sing .................................. 109 Geo Energy Res ................................ 24.5 Global Inv .......................................... 15.1 * Global Logistic................................. 331cd Global Palm Res................................. 40 Global Tech ....................................... 3.9 Global Testing .................................... 129.5 GlobalMaster US$ S ......................... USGlobalYellowPgs ............................... 16.8 * Golden Agri-Res .............................. 38 Golden Energy ................................... 39.5 Goodland ........................................... 26 Grand Banks ..................................... 29.5 Great Eastern..................................... 2458 Green Build ....................................... 20 GuocoLand Ltd ................................. 189.5 HG Metal ........................................... 53 HL Global Ent .................................... 38 HLH Grp ............................................. 0.8 HPH Trust SGD................................... 66 * HPH Trust USD ................................ US48.5 HPL ..................................................... 399 HRnetGroup ....................................... 83.5 Hafary ................................................ 18.6 Hai Leck.............................................. 58.5 Halcyon Agri ..................................... 58 HanKoreEnv 100 ............................... 89.5 Hanwell ............................................. 35 Haw Par Corp ................................... 1079 Health Mgt Intl ................................. 69.5 Heeton ............................................... 48 Hengxin Tech..................................... 33.5 Hi-P Intl .............................................. 101 Hiap Hoe ............................................ 70 HiapSeng............................................ 15cd Ho Bee Land ...................................... 237 Hock Lian Seng.................................. 51 Hoe Leong.......................................... 1.1 Hong Fok............................................ 80 Hong Leong Asia .............................. 112 Hong Leong Fin ................................ 265 * HongkongLand USD ....................... US758 Hor Kew ............................................ 31.5 Hotel Grand ....................................... 136 Hotel Royal......................................... 390 Hotung Inv ........................................ 223 Hu An Cable....................................... 1.1 Huan Hsin .......................................... 2.8 Hupsteel............................................. 81 Hwa Hong ......................................... 30.5 Hyflux ................................................ 55.5 Hyflux 6% CPS .................................. 10020 IFAST .................................................. 107.5 IFS Capital ......................................... 23 IHH Healthcare ................................. 188 IPC Corp ............................................ 42.5 IPCO Intl ............................................. 0.2 IREIT Global ....................................... 76.5 ISDN Hldgs ........................................ 22.5 ISR Capital.......................................... 0.7 Inch Kenneth .................................... Indiabulls Trust .................................. 25.5 Indofood Agri..................................... 48 Informatics......................................... 12 InnoPac .............................................. 0.1 InnoTek .............................................. 39.5 Interra Resource ................................ 6.2 Intraco ............................................... 25.5 Inv Bev Biz EURO S ............................ EUIsetan ................................................. 403 JB Foods ............................................ 31.5 JES Intl ............................................... 2.6 * JMH USD.......................................... US6375 JSH USD.............................................. 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D H h

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2.6 25.5 32 42 47 513 115 99 140 180 14 21 58.5 26.7 26 8 8.6 36 50 50 30 2.1 27 44.5 24 35 1.6 53 34 22.5 35 1.8 0.1 190 0.2 12.9 0.2 90.5 36 15.3 122 5.2 79.5 137 92 154 97.5 4.5 29 55 10 9 89 20 78 20.5 2.1 45 5.7 137 1.6 33 35.5 28.5 24 0.1 0.4 2 38 28.5 22 21 12.6 827 4 25 148.5 66 63 0.2 181 10 3 35 38 38 40.5 67.5 28.5 27.5 32 9.3 15.1 389 52.6 9 232 3.5 20.5 73 18.3 14.9 71.5 95.5 21.5 1600 63.5 109.5 7.9 5.8 71 126 10.1 17.6 5.5 7.3 2.3 81.5 35 6.5 38.5 16.7

Vo Comp n

KTL Global ......................................... 3.3 Karin Tech ......................................... 29 Kencana Agri .................................... 38 Keong Hong ....................................... 50 Kep Infra Tr ....................................... 57.5 * Keppel Corp ................................... 641 Keppel DC Reit ................................. 132 Keppel Reit ....................................... 116 Keppel T&T ........................................ 171.5 Khong Guan ....................................... 212 King Wan............................................ 16.1 Kingboard Copper ............................. 37 KingsmenCreative ............................ 60.5 Koda .................................................. 110 Koh Bros ............................................ 28.5 Koon .................................................. 8 KrisEnergy.......................................... 14.6 LCT ..................................................... 60 LHT ..................................................... 70 LTC Corp ............................................ 59 Lafe .................................................... 38.5 Lankom ............................................. 2 Leader Env ........................................ 2.7 Lee Metal .......................................... 30 Lian Beng .......................................... 62 Linc Energy ....................................... 8.9 Lion Asiapac ..................................... 45 Lippo Malls Tr ................................... 45.5 Lonza ................................................. 7997 Lorenzo Intl ........................................ 2.6 Low Keng Huat .................................. 65 Lum Chang......................................... 35 Lung Kee Bermuda ........................... 64 Luxking............................................... 44 Luzhou Bio-Chem .............................. 3.1 M Development ............................... 0.4 M1 ...................................................... 207 MDR ................................................... 0.6 MFG Intergration............................... 21 MMP Resources ............................... 0.5 MSC ................................................... 127 MTQ ................................................... 39 MYP ................................................... 17.6 Man Oriental USD ............................. US199 Manhattan Res .................................. 8.1 ManulifeReit USD .............................. US93.5 Mapletree Com Tr ............................. 162 Mapletree GCC Tr ............................. 109.5 Mapletree Ind Tr ............................... 185 Mapletree Log Tr ............................... 119 MarcoPolo Marine ............................ 5.9 Maruwa Yen1k.................................. JYMeghmani SDS.................................. 52cd Memstar Tech .................................. 0.1 Memtech Intl ..................................... 97 Mencast ............................................ 15 Mercator Lines ................................. 1.9 Mermaid Maritime ............................ 18.3 Metro ................................................. 119.5cd Mewah Intl ....................................... 30 Micro-Mechanics............................... 126 Midas ................................................. 22.5 Mirach Energy .................................. 4 Multi-Chem ....................................... 83 Mun Siong Engg ................................ 6.4 Murata Yen1k.................................... 54.5 NSL ..................................................... 144 Nam Cheong...................................... 2.1 Nam Lee Metal .................................. 36.5 NeraTel .............................................. 37 New Silkroutes .................................. 44.5 New Toyo........................................... 27 Next-Gen Sat .................................... 0.2 Nico Steel........................................... 1 Nippecraft.......................................... 4.6 Nobel Design .................................... 50 Noble ................................................. 55 Noel Gifts Intl ..................................... 23.5 Nomura ............................................. JY199 Nordic................................................. 40 NutryFarm ......................................... 18.5 * OCBC Bank...................................... 1109 OKH Global......................................... 4.7 OKP .................................................... 37 OUE .................................................... 196.5 OUE Com Reit .................................... 72.5 OUE HTrust ....................................... 76 Oceanus ............................................ 0.9 Olam Intl ............................................ 196.5 Ossia Intl ........................................... 13.8 Ouhua Energy .................................... 6.5 Overseas Edu..................................... 37.5 Oxley .................................................. 58 PCI ...................................................... 61.5 PEC ..................................................... 60.5 PNE Industries ................................... 103 POSH .................................................. 28.5 PSL ..................................................... 27.5 Pacific Andes .................................... 2.2 Pacific Century ................................. 36 Pacific Radiance ............................... 10.7 Pan Hong ........................................... 19.2cd Pan Ocean.......................................... 601 PanUnited ......................................... 57 Parkson Retail ................................... 9.8 ParkwayLife Reit .............................. 266 Pavillon............................................... 4.9 Penguin Intl........................................ 25 Perennial Hldgs ................................ 89.5 Pharmesis Intl.................................... 33 Plastoform ........................................ 16.6 Poh Tiong Choon ............................... 140 Powermatic Data ............................. 132 Procurri .............................................. 22.5 Prudential USD ................................. US2308 Q&M Dental ...................................... 67 QAF Ltd ............................................. 129 Qian Hu .............................................. 15 Qingmei.............................................. 1.3 RH PetroGas....................................... 5.8 RHT HealthTrust ............................... 89.5 Raffles Medical .................................. 127.5 Raffles United .................................... 14.7 RafflesEdu.......................................... 19.2 Ramba Energy .................................. 12.6 Regal Intl ........................................... 12 RickmersMaritime ............................ 2.6 Riverstone.......................................... 105 Rotary Engg ...................................... 36.5 Rowsley ............................................. 7.3 Roxy-Pacific........................................ 53.5 R K A B GX H H A A C C H HR

U R R m m m

C m m

M m HKD

A G H H M m & H H M

D H h

unch +1 unch +3 unch unch -0.5 -0.2 -0.5 unch +15 unch +1.2 -0.5 unch unch susp -0.5 unch +0.5 susp +1 -0.1 +1 unch +3 +0.1 +2 unch unch +0.2 -2 unch +0.8 -1 -1.9 +1 +3.5 +1 unch -1 susp -2 susp +2.5 susp +0.5 -0.5 +2 unch -1.5 +0.4 -1.5 unch -1 -0.5 -0.5 unch +0.1 +0.2 susp -12 +1 unch -0.5 +4 -0.1 -2.5 -1.5 unch unch +2.5 -2 unch unch unch +0.5 -0.5 -8 susp +0.5 +0.7 -1 -1 unch unch -1.5 -0.5 -0.5 +1 +2.5 -0.5 unch +2 +1.5 -0.9 susp -0.2 -0.5 unch -0.3 +2.1 susp unch -0.5 halt +1

171 602 1173 3239 1345 3364 255 231 41 29 202 20 45681 2 9 1 175 946 794 3203 257 50 86 11 3820 922 6230 45 6891 23 7 0 385 3 1114 5182 3304 1936 1737 25 736 11893 601 50 753 0 5 10 1760 4 409 1 60 300 274 30887 50 285 0 4980 150 6959 209 348 545 421 30 94 939 10 5 131 1 139 41 0 320 100 529 0 58 51 32 10 131 0 887 105 0 0 733 1092 282 50 295 214 2

29 50 57.5 644 132.5 116.5 172.5 16.2 37 61 111 28.5 15.1 71 59 38.5 2.7 30 62.5 45.5 2.7 65 35.5 64 0.4 209 0.6 21 0.5 129 39 17.6 201 8.2 93.5 162 110 185.5 120 52 98 18.5 121 126 22.5 83 6.4 145.5 2.1 36.5 46 27 0.2 1 4.6 68.5 23.5 40.5 18.5 1109 4.7 38 198 72.5 76 197 13.8 37.5 58 61.5 60.5 29.5 27.5 36 19.4 622 58 9.8 269 4.9 25.5 90.5 140 132 23 2308 67.5 129 15 5.8 90 129 19.6 12 105.5 36.5 53.5

29 49.5 57 639 130.5 115.5 171 16.1 36.5 60 98.5 28.5 13.6 70 59 38 2.7 29.5 61.5 44.5 2.6 63.5 35 64 0.3 206 0.6 20.5 0.4 126 39 17.6 198.5 8.1 92 158.5 108.5 184.5 119 52 94.5 17.9 119.5 124.5 22 83 6.4 144 2 36.5 43.5 27 0.2 0.9 4.6 55 23.5 40 18.5 1101 4.7 34 195.5 72 75 194 11.8 37.5 57.5 61.5 60.5 28.5 27.5 35 19.2 601 57 9.8 265 4.9 25 89 134.5 131.5 21.5 2308 65 127.5 15 5.8 89.5 127.5 19.1 9.9 104.5 36 53.5

D C

0.4 4.3 0.3 2.2 1 1 4.2 0.1 2 4.1 3.9 1.5 4.4 1.4 6.8 1 1.9 3.9 1.2 2.4 1.1 2.3 1.8 1 1 1 1 1 10.8 2 1.9 2.3 1.4 3.1 1.4 1.5 1.1 2.1 13.6 0.4 0.5 2.6 2.3 3.2 1 1.4 1.9 0.6 3.7 1.3 3.7 2.4 2 0.7 2.4 1 5.3 2.4 2.4 3.2 4.3 2 1.6 2.5 1.3 2.5

G Yd %

10.1 7 6.5 3.1 4.7 5.5 2.6 1.4 4.1 1.8 1.2 7.1 1.7 6.7 4.8 1.1 7.5 6.2 5.7 7 6.5 6.2 1.7 2 3.8 5.3 6.7 6.2 6.3 1.2 2.6 4.2 2.8 4.8 5.3 2.3 17.4 5.5 44.6 6.3 1 6.4 3.2 3.2 5.4 2.5 7.1 3.1 7.3 3.3 4.9 3.3 4.9 5.2 6.6 5.1 4.6 0.4 5.1 2 5.3 2.1 1.6 1.7 3.9 8.6 1.6 2 1.4 3.1

N P p

MC p m

8 26.1 62.2 109.1 3.3 120 2218 14.8 11663.8 - 1971.8 - 3872.6 9.1 956.8 963.6 54.7 56.2 1233.3 267.3 10 120.5 20.4 45.2 8.9 136.7 11.3 21 218.9 16.2 23.8 9.3 37.3 13.3 92.3 9.8 1.8 33.8 16.7 10.7 142.4 3 328.5 20.2 36.5 - 1201.5 19.4 5955.3 11.4 8.6 480.2 4.5 134.8 11.3 404.3 5.9 5.6 6.5 18.4 7.7 12.9 1940 30 75.2 47.6 1.9 7.7 127 60.3 280.3 45.2 2503 46 681 - 4659.6 - 3070.9 - 3334.5 - 2976.2 20.1 7.8 79.6 3.2 14.9 139.7 63.4 25 10.5 258.6 12.3 993.7 14.9 452.1 14.7 175.2 15.2 427.4 4.7 7.7 74.8 13.9 36.7 130.7 4 537.9 44.7 9.6 88.1 34.6 133.9 65 7.5 118.6 0.6 12.9 5.9 16.2 7 109.6 731.5 15.7 24.1 - 386649.3 12.5 160 11.9 13.5 46509.1 53.1 8 114.1 12.3 1928.8 - 1115.5 16.5 1369.5 41.5 17 5565.5 34.9 2.9 24.9 28.8 155.8 8.3 1710 15.8 122.4 8.2 154.4 5.3 86.4 518.7 12.8 0.7 189.7 11 1114.7 77.7 4.8 99.6 47.2 1118.3 14.4 400.1 2 66.4 - 1607.6 21.3 19.1 55 42.4 1490.3 7.6 6.7 21.4 302.1 11 47.1 10.2 63 26.4 59682.6 18.8 549.4 6 724.1 250 17 8.8 42.6 723 31.6 2257.5 34.4 11.8 201.4 69.3 24.7 22.9 19.3 779.6 18.3 207.3 345.9 12.8 638.5

Tuesday u y 18 2017

SGX CATALIST 52-Wk High Low

8.5 138 4.9 26.5 0.8 8.5 0.7 3.7 88.5 0.3 46.5 1.9 42.5 5.9 8 11.9 14.8 10 0.2 33 0.5 3.2 10.6 11.8 1.9 1.7 17.6 22.5 32 6 22 19.5 5.1 16 61 1.2 24 1.3 3 51.5 1.5 35 3.4 1.7 38.5 54 23.5 3.7 3.8 10.2 16 3.8 1.5 8.9 19.5 25.5 11 19.5 35.5 7.2 35 19.4 41 19.8 71.5 30 5.9 8.1 42 15.8 6.5 15.6 1.1 10.5 12 2.6 20.5 35.5 44 38 12.8 0.3 3.3 49 13.5 3.3 1 6.3 79 1.5 11.2 40.5 9 56.5 23 13.4 48 8.8 25 10 4 5.8 22 15.2 0.3 29.5 3.1 64.5 16 9 0.2 7.8 5 20.7 5.8 45 6.3 5.2 0.4 10.4 19.8 13.3 50 13 67.5 9.2 1.2 2.3 2 0.8 14.9 88 8.5 17.5 35.3 5 16.9 0.8 5.6 15 11.5 5.4 8 17.4 19.6 21.5 53.5 40.5 16.5 23 3.6 8 38.5 3.4 72.5 74 9.1 16.1 9.9 0.4 3.1 25.5 16.9 9 19.9 39 32 4.1 10 12.8 12.2 8 15.1 95 7 11.3 20.5 8.4 14.5 34.5 54 35 3.7 1.1 18.7 4.2 0.1 9.2 43 28 30 2.8 30.5

3.8 68 1.3 15.5 0.3 2.3 0.3 1.7 31 0.1 27.5 0.9 7.6 1.5 2.1 0.5 8.3 4.4 0.1 20.5 0.2 1.3 5.5 7.2 0.6 1 6 9.2 14.4 3.7 7.6 2.3 2 3.5 25 0.3 10.8 0.5 1 24 0.4 5.5 1.4 0.6 30 40 11.5 0.2 1.4 5.6 5 2.3 0.7 4 8 11.2 1.8 14.1 21.5 2.9 22.5 8.5 25 4.8 53.5 15 2.6 2.4 13.9 5 3.5 10.5 0.6 4.2 3.6 1.4 8 27.5 30.5 25 5.7 0.1 1.7 35 10.5 1 0.3 2.5 55.5 0.8 5.5 19 6 35 2 3.6 39 4.7 13 3.2 0.5 1.3 10 2.2 0.1 20 1.2 32.5 7.3 8 0.1 4.4 1.6 14 4.6 28 0.6 3.5 0.1 2.1 14 3.1 6.5 3.5 52.5 2 0.5 1.2 0.6 0.3 6 68 3 10 16.7 2.6 8.2 0.3 2.1 6.5 2.3 2.4 4.3 7.4 4.5 8 18.8 30 12 13 1 0.2 29.5 0.1 14.2 47 1.6 7.3 5.1 0.1 0.7 14.2 12 4.8 7.6 18.3 15.5 0.8 2 5.1 9.1 4 2.4 49.5 3 2.6 14.1 6 8.9 21.5 40 24 1.4 0.1 11.8 1.5 0.1 6 21.5 25 25 0.7 26

Company

Last Sale

3Cnergy ........................................... 5.2 800 Super ........................................ 127.5 AA .................................................... 3.6 AGV ................................................... 18 APAC Strategic................................. 0.4 Abundance Intl................................. 4.8 Accrelist............................................ 0.7 Acesian Partners.............................. 2.1 Acromec .......................................... 34.5 Advanced Systems .......................... 0.1 Advancer Global............................... 28.5 Adventus ......................................... 1.4 Alliance Mineral .............................. 30 Allied Tech ........................................ 4.7 Alpha Energy ................................... 7.8 Amplefield Ltd ................................. 4.9 Anchor Resources ........................... 9 AnnAik ............................................. 9 Annica .............................................. 0.1 Aoxin Q & M ..................................... 20.5 Arion Ent........................................... 0.2 Artivision Tech ................................. 1.7 AsiaMedic......................................... 7.8 AsiaPhos ........................................... 9.8 Asian Micro ..................................... 1.4 Asiatic .............................................. 1.3 Asiatravel.com ................................. 7.4 Astaka .............................................. 10 Atlantic Nav ..................................... 22 Avic ................................................... 4.6 Axcelasia ......................................... 9 BlackGoldNatural ............................ 13 CFM Hldgs ........................................ 5 CMC Infocomm ............................... 9.4 CNMC Goldmine ............................. 28.5 CPH .................................................. 0.8 Capital World ................................... 11.3 Charisma Energy.............................. 0.6 ChasWood Res ................................ 1.4 Chew's ............................................. 48 China Med Intl ................................. 0.4 China Star Food ............................... 9 ChinaKundaTech.............................. 2 Chinese Global ................................. 1.1 Choo Chiang .................................... 37 Colex Hldgs ..................................... 47 DeClout ............................................ 11.6 Disa ................................................... 1.5 EMS Energy ...................................... 2.2 ES Grp ............................................... 7 ETC Singapore ................................. 8.6 EcoWise ........................................... 3.1 Edition .............................................. 1 Eindec ............................................... 5.4 Epicentre ......................................... 13.9 EuroSports Gbl ................................ 24 Far East ............................................ 7.5 Figtree............................................... 18.5 Fuji Offset ........................................ 30 Fujian Zhenyun................................. 14.9 GCCP ................................................. 3.4 GDS Global ....................................... 30 GKE .................................................. 16.5 GS Hldg ............................................ 31 GSS Energy ....................................... 17.2 HC Surgical ....................................... 68 Hatten Land ..................................... 22 Healthway Med................................ 5.2 Heatec Jietong ................................. 6.4 Hengyang Petro .............................. 19.9 Hiap Tong ........................................ 15.2 Hosen ............................................... 5 Huationg Global................................ 13.4 ICP ..................................................... 0.8 IEV ..................................................... 7.6 IHC ................................................... 9.8 IP Softcom ........................................ 1.8 IPS Securex ...................................... 9.5 ISEC ................................................... 33.5 ISOTeam .......................................... 34 IX Biopharma ................................... 26 Imperium Crown.............................. 10 Infinio ............................................... 0.1 Infinio Group 1.................................. JEP ..................................................... 2.8 Japan Foods .................................... 46.5cd Jason Hldg ....................................... 6.2 Jason Marine .................................... 13.5 Jiutian Chemical .............................. 3.2 Joyas Intl ........................................... 0.5 Jubilee Ind ....................................... 3.9 Jumbo ............................................... 61 KLW Hldgs ....................................... 1 KOP .................................................. 7 Katrina .............................................. 21 KimHeng Offshore .......................... 8 Kimly ................................................. 38 Kitchen Culture ............................... 19 Koh Eco............................................. 7.9 Kori ................................................... 45 Koyo Intl ........................................... 7.3 LHN .................................................. 21.5 Lasseters Intl .................................... 5 Lereno Bio-Chem ............................ 3 Ley Choon ........................................ 5.6 Libra .................................................. 17.9 LifeBrandz ........................................ 5.3 LionGold............................................ 0.1 Logistics ........................................... 21 Loyz Energy ...................................... 2.2 MM2 Asia ........................................ 54.5 MS Hldgs ......................................... 8.3 MSM Intl .......................................... 8 Magnus Energy ............................... 0.1 Mary Chia ........................................ 4.7 Matex Intl ........................................ 2.5 Maxi-Cash Fin .................................. 17.1 Medtecs Intl ..................................... 4.9 MegaChem....................................... 38 Mercurius ........................................ 3.8 Metal Comp R .................................. 2.4 Metal Component ........................... 3.9 Metech Intl ....................................... 0.3 Miyoshi ............................................ 7 MoneyMax Fin ................................. 17.5 Moya Asia......................................... 12.2 Moya Asia R ..................................... 0.6 Moya Asia R200 .............................. 0.4 Natural Cool .................................... 10 NauticAWT ....................................... 9.2 Neo ................................................... 58 Net Pacific Fin .................................. 5.4 New Wave ........................................ 1 Ntegrator Intl ................................... 1.9 OEL .................................................... 1.1 OLS .................................................... 0.4 Ocean Sky Intl .................................. 7 Old Chang Kee ................................. 83 Oriental ............................................ 11.4 P99 .................................................... 3.1 PS Group ........................................... 10 Pacific Star Dev ............................... 24 Pan Asian.......................................... 3 Plato Capital ..................................... 11.5 Polaris ............................................... 0.7 Pollux Prop ...................................... 4.1 Progen .............................................. 8.6 QT Vascular ...................................... 2.5 Renewable Energy .......................... 2.2 RenewableEne R .............................. 0.1 RenewableEne R250 ....................... 0.1 Resources Prima ............................. 2.6 Rex Intl ............................................. 4.9 SBI Offshore .................................... 9 SHC Capital Asia ............................. 4.7 SMJ Intl ............................................ 10 Samurai ............................................ 51 Sanli Env .......................................... 34 Santak .............................................. 16 Secura .............................................. 13 Sen Yue ............................................ 3 Serrano ............................................ 3.1 Shopper360...................................... 31 Sincap ............................................... 3 SingMedical ..................................... 71.5 Singapore O&G................................. 58 Singapore eDev................................ 6.3 SingaporeKitchen ........................... 14 Sinjia Land ....................................... 6.6 SinoCloud ........................................ 0.2 Sitra .................................................. 1.8 Sitra R200 ........................................ 0.1 Smartflex .......................................... 21 Soo Kee............................................. 12.5 Soon Lian .......................................... 7.8 Spackman ........................................ 13.3 Starburst........................................... 37.5 Starland ........................................... 19.5 SunlightGrp ..................................... 3.2 Sunrise Shares ................................. 4.6 Sysma ............................................... 12.2 TLV ................................................... 10 TMC Education ................................ 7.1 TSH.................................................... 2.8 TalkMed ........................................... 68 Teho Intl............................................ 6.6 Transcorp.......................................... 3.6 Trendlines......................................... 14.6 Tritech .............................................. 7 Tung Lok Rest .................................. 13 UG Healthcare ................................. 25 UnUsUaL .......................................... 51 United Global ................................... 33.5 Vallianz ............................................. 1.5 Vashion ............................................ 0.1 Versalink........................................... 12.7 Viking Offshore ................................ 1.7 Viking R............................................. 0.1 Viking R1........................................... Wilton Resources ............................. 7.3 Wong Fong Ind ................................ 23 World Class Gbl ............................... 25 Y Ventures ........................................ 25 Zhongxin Fruit ................................. 1 Zico Hldgs ......................................... 27.5

+/-

+2.5 unch unch +2 unch unch susp -0.3 unch +0.5 -1 unch -0.1 -0.3 unch +2 +0.1 +0.5 +0.1 +0.2 unch +1 unch +0.9 unch unch -0.8 unch susp -0.4 +0.1 -0.3 +1 susp unch -0.1 unch unch -1.5 unch +0.1 +0.3 unch +0.6 unch -1.5 +0.5 +0.1 unch susp +0.3 unch -0.1 -0.5 +0.1 -0.1 unch -0.2 +0.5 unch +0.1 +0.1 unch -0.5 +0.1 +0.5 -0.1 +0.1 -0.1 +0.1 -0.2 unch unch -0.2 -0.2 -0.5 -0.1 unch unch unch +0.5 susp halt -2 unch +0.1 +0.1 susp susp +0.1 +2 +0.5 unch unch susp +0.5 +0.5 +2 +2.5 -0.4 +0.2 unch +0.3 +0.5 unch +0.1 unch +0.1 +1 unch unch -0.2 unch -0.5 unch -0.1 -0.7 -1 -1 -0.5

Vol (’000)

High

Day Low

Div GrYld C’vr %

Net P/E

MCap

126 2500 100 39 200 3369 4753 1180 11147 895 100 6945 708 490 5 12572 1040 13390 2329 1240 84 250 2256 850 6 2190 50128 164 122 65 40 255 3298 300 10278 254 2314 15427 144 48 31159 563 165 339 12836 100 33020 1300 70 940 1000 50 1 173 302 150 17074 3883 1200 62 3240 5630 920 200 424 223 180 1326 13196 23637 40 5 2314 1010 4350 400 2 30 5370 22 1979 7513 62 771 94 200 208 179690 4205 874 70 14752 109 32239 1438 60 2384 160 25 77 150 3810 30 0 171 3027 4350 100 38 1594 30

128 3.6 0.7 34.5 29 1.6 4.9 4.9 9.1 22 0.2 1.8 10.1 1.4 22 13.3 29 0.8 11.5 0.6 48 0.4 9.9 1.1 47.5 12.2 1.6 8.8 3.1 5.4 24 3.9 16.8 17.5 69.5 22.5 5.4 15.4 0.8 7.6 34 35.5 27.5 10 2.8 3.3 0.5 3.9 62 1 7 21 8.2 38 21.5 5.6 5.4 0.1 21.5 2.2 55.5 0.1 2.5 17.1 4.9 3.8 0.3 7.4 12.4 10 58 5.4 1.1 2 1.1 83 10 0.7 8.6 2.5 5.1 51 34.5 13.6 3 31 3.4 72.5 58.5 6.3 1.9 21 13.6 38 19.5 3.2 12.2 7.1 68.5 14.6 7.3 13.3 25 51.5 1.5 1.8 7.4 25.5 25.5 27.5

125 3.5 0.7 32.5 28.5 1.4 4.6 4.8 8.6 20.5 0.2 1.6 9.8 1.4 22 13 28 0.8 11 0.6 46.5 0.4 8.3 1.1 47 11.5 1.5 8.5 3.1 5.4 22.5 3.3 16.5 17.2 68 22 5 15.2 0.8 7.1 33.5 34 25.5 9.5 2.8 3 0.5 3.9 61 0.9 7 21 7.9 37.5 21.5 5.4 5.2 0.1 21 2.1 54 0.1 2.5 17 4.9 3.8 0.3 6.9 12 10 58 5.2 1 1.9 1.1 82 10 0.7 6.5 2.4 4.7 50 33.5 13 2.9 30 2.5 70 56 6.3 1.7 21 13.1 36 19.5 3 11.9 5 67 14.6 7 13 25 50 1.5 1.7 7.3 25 25 27.5

3.7 2 2.8 67.4 2.6 4.4 2.6 18.7 3.2 1.5 3.3 6.7 1.9 1.3 5.6 0.4 1.3 1.4 1.7 13.7 25.6 3.9 6.4 1 1.1 1.3 0.6 3.5 4.2 5.2 2.9 0.5 0.8 2.4 2.3 0.3 2.3 2.5 1 2.5 4.9 2.8 7.1 5.1 -

2 0.9 2.7 2.2 3.3 1 2.7 2.3 6.8 1 2.1 2.7 3.6 3.1 3 2.6 2.3 2.2 1 1.1 4.3 2.8 2.9 0.9 0.8 0.2 1.4 3 1.9 5.8 3.2 5.7 2.9 1.7 1.3 5.3 3.6 3.1 2.3 5.3 5.4 45.2 4 0.7 1.6 57.1 6.7 5.6 2.4 3 1.3 -

13.6 10.1 18.5 4.7 14.2 27.2 42.7 130 2.9 8.8 60 1.5 5.3 11.8 14.3 9.8 9.4 2.9 5.5 2.6 11.9 18.5 8 31.5 9.7 9.8 15.2 5 20.2 25.6 10.5 140 17.4 31 38.6 320 25.4 12.5 4.8 18.7 36.2 7.2 15 18.3 5.1 11.6 17.1 54.5 20.8 160 9.2 18.1 24.8 28 9.9 110.9 17 13.9 19.3 6.3 7.4 57.6 25 4.1 70 15.2 27.4 15.4 52 7.9 85.1 31 8.2 7.8 7 10.9 1.9 18.8 25.6 1.7 23.9 59.1 8.6 79.7 10.5 2.5 15.1 21.6 50 56.1

79.5 228 47.5 22.7 14.6 61.7 36.7 7.8 42.3 15.8 52.9 27.3 144.2 31.7 27.7 16.9 27.9 22.4 13.4 72.9 7.5 30.6 30.5 100.5 8.8 17.4 33.3 186.9 57.3 13.1 14.4 121 5.4 14.3 116.2 9.8 143.3 86.6 3.5 40.6 9.9 27.3 8.2 10.1 77 62.3 75.2 191.5 9.9 9.9 82.7 29.7 25.2 7.8 22.2 63.6 8.5 62.4 15 17.1 40.6 33.6 114.6 40.9 98.4 101.8 305.5 166.3 7.9 40.5 46.8 17.9 20.3 21.5 21.6 162.6 7.9 46.2 173.2 97.2 166.2 49 2.5 40.7 81.1 137.4 14.3 58.2 9.6 26.8 391.3 55.8 62 48.6 56.8 440 19 59.1 44.6 14.3 77.8 24.3 2.2 66.3 21.7 9.7 6.4 35.7 36.5 616.6 8.5 7.2 8.2 7.7 6.7 151.7 26.9 50.7 42 14.6 12.7 34.8 61.9 341.7 25 17.6 84.6 28.4 16.1 19.8 7.4 9.8 22.7 100.7 60.2 6.7 6.8 120.6 6.4 22.4 119.4 25.7 23.4 33.6 16.4 47.7 62.9 22.5 14.4 7.8 51 91.3 17.2 52 25.9 8.4 35.5 27 319 276.5 69.3 21 12.7 20.4 13.5 26.6 70.3 8.4 61.6 94.1 28.2 17.8 8.2 31.8 56.6 11.9 6.7 893.7 15.4 8.6 74.3 63.6 35.7 47.9 328.1 94.7 68.6 1.1 17.1 18.8 177.9 54.1 226.4 50 10.6 82.2

Vol (’000)

High

Low

Div C’vr

GrYld %

Net P/E

MCap

35 0 2 0 21 3 70 0 3 108 83 196 1 20 48 522

116.7 3580 416 1163 199.3 2193 2770 11766 1477 1488 844 339 107.2 309.5 130 95 335

116.3 3560 416 1163 199.3 2185 2770 11698 1476 1479 842 337 106.7 309.5 130 94.8 333

532.7 9.6 144.8 9.8 6.6 10.6 15.9 15.7 61 105.4 8.2 58.4 4.8 -

w C B R R

SGX ETF A

m m

52-Wk High Low

m H G

120.1 129 93.2 1300 929 3580 132 453 1615 7334 1195 222.5 561 2193 2770 28621 22280 13400 1529 1588 1148 1126 1150 844 340 110.3 311.9 135.6 98.4 335

G M V C m w C R R A B w H

w w w w w A

M M

H V

H O &G m w C B H G XU D A R A R

W G G C

U UC UM UOA UOB UOB K H UO UO U U G U A G U U U U R V M V V V C V G V w V m V V W H W W W A W m W W XMH X A m m YH Y RMB Y GD Y m G R Y Y H Y Y m Y m Y m Y Y O H m B w

112.1 108.8 75.9 1153 809 2904 109.3 345 1215 5334 978 166 485 1794 2165 28060 21086 10756 1475 1467 1060 1031 919 441 286 101 290 119.9 84 281

Counter

Last Sale

ABF SG Bond ETF .................................. 116.7 CIMB APAC Div S$D ............................. 127.9 CIMB APAC Div US$..........................US91 CIMBASEAN40 S$D .............................. 1287 CIMBASEAN40 US$ ..........................US923 DBXT China50 US$ ............................US3574 DBXT MS SING US$ ...........................US132 DBXT MSBrazil US$ ...........................US416 DBXT MSCHINA US$ .........................US1615 DBXT MSKorea US$ ..........................US7334 DBXT MSMSIA US$ ...........................US1163 DBXT MSPHILS US$ ..........................US199.3 DBXT MSPacXJp US$ ........................US551 DBXT MSTHAI US$ ...........................US2189 DBXT MSTaiwan US$ .......................US2770 DBXT USDIGInfl US$ .........................US28060 DBXT iBoxxUSTr US$ ........................US21402 GLD US$ ............................................US11766 IS ASIA BND S$D .................................. 1477 IS ASIA HYG S$D ................................... 1479 IS ASIA HYG US$ ..............................US1078 IS Asia BND US .................................US1071 IS MS INDIA S$D .................................... 1142 IS MS INDIA US$................................US843 Nikko AM STI ETF .................................. 339 NikkoAM-STC Asia REI ......................... 107.2 ONESTOXXASEAN US$ ....................US309.5cd Phll Ap Div Reit S$D .............................. 130 Phll Ap Div Reit US$ ..........................US94.8 STI ETF ................................................... 334

+/+0.4 +35 +4 -2 +10 +11 +171 -3 -9 +7 +1 +0.3 +0.9 +0.3 +2.1 +2

Day

REAL ESTATE | 13

The Business Times | Tuesday, July 18, 2017

China property investment growth eases in Q2 as cooling measures kick in Rules targeting speculators in biggest cities appear to be paying off but market unlikely to suffer hard landing, say analysts Beijing CHINA’S real estate investment growth slowed slightly in the second quarter from the first, suggesting government curbs to rein in the red-hot property market are starting to hit speculators even though underlying demand remains resilient. As part of a broader effort to temper financial risks stemming from a build-up of debt since the 2009 financial crisis, Chinese authorities have slapped a flurry of cooling measures over the past year to defuse a housing bubble. Those steps targeted at speculators in the biggest cities appear to be paying dividends. Growth in property investment, which mainly focuses on residential but also in-

cludes commercial and office space, eased to 8.2 per cent in April-June from a year earlier, compared to a 9.1 per cent expansion in the first three months of the year, according to Reuters calculations based on data from the National Bureau of Statistics (NBS). The increase in the area of property sold also slowed to 14.1 per cent in the second quarter year-on-year, from a 19.5 per cent gain in the first quarter, Reuters calculations showed. Real estate investment is a major driver of the economy affecting more than 40 other sectors. China’s economy grew a faster-than-expected 6.9 per cent in the second quarter from a year earlier, matching the robust first quarter rate.

However, buyer demand appeared to be more resilient than expected, reinforcing analysts’ views that China’s property market is unlikely to suffer a hard landing as some have worried. “The property market has cooled a bit but there may not be a big correction, we don’t think there are systemic risks. We are not as worried as when the curbs were put out in March and April,” said ANZ economist Betty Wang. Indeed, real estate investment growth sped up in June after slowing in May, suggesting investment in the sector remained strong, likely due to more robust demand in smaller centres that are encouraged to reduce inventory and not subject to strict curbs seen in the bigger cities. It accelerated to 7.9 per cent in June from a year earlier, compared to a 7.3 per cent expansion in May, according to Reuters calculations based on NBS data.

Property sales, measured by floor area, grew 21.4 per cent, more than double the 10.2 per cent increase in May, Reuters calculations showed. New construction starts measured by floor area, a telling indicator of developer confidence, rose 14.0 per cent in June, the highest since October 2016, according to Reuters calculations. Policymakers have prioritised stabilising an overheated property market ahead of a Communist Party reshuffle later this year, reiterating the need to avoid dramatic price volatility that could threaten the financial system and harm social stability. In spite of government efforts to curb property prices, household loans – mostly mortgages – rose to 738.4 billion yuan (S$149.3 billion) in June from 610.6 billion yuan in May, according to Reuters calculations based on data recently released by China’s central bank. REUTERS

Malls getting mauled, but there’s money to be made New York REAL estate funds, market stars since the financial crisis ended in 2009, have faltered, dragged down by the closing of big stores at malls across the United States. The unanswered question now is whether investors in malls can successfully adjust to a threatening environment. Real estate mutual funds and exchange-traded funds hold real estate investment trusts (Reits) that must deliver at least 90 per cent of after-tax earnings to investors. Reits own all sorts of income-producing property: shopping malls, apartment complexes, industrial warehouses and medical buildings, for example. Coveted for their yield (2.18 per cent over the past year) in a low-rate environment, Reit-owning mutual funds have returned 8.5 per cent annually over the past half-decade. But in the 12 months through June, they actually produced a negative return of 0.61 per cent, hamstrung by a 17 per cent average negative return among retail Reits, according to David Kathman, an analyst at Morningstar. Leading real estate ETFs like Vanguard Reit and iShares Cohen & Steers Reit have also produced diminished returns over the past year. Some real estate sectors continue to thrive. But mall Reits like Simon Property Group, GGP (formerly General Growth Properties) and CBL & As-

sociates have suffered as numerous retail outlets have folded. Simon, for example, closed June just under US$162 a share. A year earlier, shares fetched about US$217. Recent closures and fears of wider surrender to online rivals like Amazon weigh heavily on Reits. Kingpin retailers like Macy’s, JC Penney and Sears have been shuttering stores, as have Foot Locker, Office Depot and Abercrombie & Fitch. Once-omnipresent chains like Payless ShoeSource and RadioShack have filed for bankruptcy. The malls and shopping centres that host fading retailers are scurrying to find replacements, but there are some signs of success. The Natick Mall, west of Boston, lost one of its anchor tenants in JC Penney but found a replacement for most of that space in Wegmans, the upscale supermarket. Wegmans could eventually produce 10 times the revenue of the departed JC Penney, estimates Russ Devlin, a research director with AEW Capital Management. Still, problems for brick-and-mortar stores could worsen. Garrick Brown, director of retail research for the Americas at Cushman & Wakefield, expects 9,000 retailer closures this year. Next year, there could be as many as 13,000, he estimates. Apparel stores in particular have been hit hard by online competition, but Amazon’s US$13.4 billion proposed acquisition of Whole Foods

could put food outlets – until now mostly resistant to online incursions – into play. Industry optimists say malls can successfully adjust. The Columbia Real Estate Equity fund’s top holding is Simon Property Group, which holds numerous prime properties: malls in densely populated high-income areas. But for malls that have lost a major tenant, finding replacements is crucial. New targets include restaurants and entertainment venues with novel themes. Sacramento’s Downtown Plaza has been redeveloped after it “went through a death spiral,” according to Mr Brown of Cushman & Wakefield, bottoming out with a vacancy rate of about 50 percent. The mall is now called Downtown

Commons and has a new major tenant: the Sacramento Kings basketball team. With apparel retailers in free-fall, night spots were signed up. Malls are also looking for new ways to entertain and amuse. Table tennis is the lure at SPiN, co-founded by Oscar-winning actress Susan Sarandon. The chain, which will soon open its seventh location, could appeal to malls “chasing entertainment concepts”, Mr Brown said. In either case, online retailing’s growth has benefited one Reit sector: industrial real estate that hosts distribution centres and warehouses. NYTIMES

Ageing, tired malls in the US are losing both kingpin and smaller retailers. Garrick Brown, director of retail research for the Americas at Cushman & Wakefield, expects 9,000 retailer closures this year. Next year, there could be as many as 13,000. PHOTO: AFP

UK house prices stabilise, but buyers still wary London ASKING prices for houses and apartments in England and Wales stabilised after a drop in June, but home-buyers remain cautious as wage growth falls behind inflation, a survey by property website Rightmove showed on Monday. The figures were based on property advertised between June 11 and July 8, covering the weeks after Prime Minister Theresa May unexpectedly lost her majority in parliament, creating uncertainty for investors who were already on edge about Britain’s exit from the European Union. Rightmove said average asking prices for property sold on its website increased by a monthly 0.1 per cent in July, a month that usually sees slight falls in prices. In annual terms, prices were up 2.8 per cent compared with a 1.8 per cent rise in June. Other house price measures have shown a slowdown in growth this year, mirroring a weakening of the economy as consumers feel the pinch of rising inflation. Rightmove director Miles Shipside said the market remained very price sensitive with some properties hitting a price ceiling. He also said that an eventual rise in mortgage costs would be a shock to buyers. The Bank of England is considering when to raise interest rates although most of its top officials have suggested now is not the time. “Price rises are muted despite high housing demand, indicating we have left the stage of the cycle where price rises exceed the rate of inflation,” Mr Shipside said. A jump in inflation to nearly 3 per cent has hurt the spending power of many people in Britain, contributing to a slowdown in the economy and in house price rises. Rightmove said asking prices in most of England fell, but the overall average inched up due to gains in London contrasting with a sharp fall in June in the capital. Rightmove says more than 90 percent of British estate agents use its website to advertise property. REUTERS

| BANKING & FINANCE

The Business Times | Tuesday, July 18, 2017

New UK listing rules to woo state companies spark concerns The move may lower the quality of firms on the UK stock exchange and leave shareholders with less protection London PROPOSED changes to Britain’s listing regime are likely to attract a series of state-backed companies to London’s stock markets as governments in oilrich states prepare for a wave of asset sales. However, some investors and corporate governance groups say Britain’s move to make its capital markets attractive to state-controlled firms by loosening some of the rules may lower the quality of companies on its stock exchange and leave shareholders with less protection when things go wrong. The UK financial regulator proposed a new “premium” listing category for state-owned companies on Thursday, intended to make the market more attractive for oil giant Saudi Aramco as it plans what is expected to

be the world’s largest initial public offering (IPO). The move was applauded by Britain’s financial lobby groups as helping to make sure the country’s capital markets remain attractive once it leaves the European Union. Capital markets lawyers say that as well as Saudi Arabia, the changes will appeal to a number of countries that are also in the midst of asset privatisation plans. “This broadens the appeal of London for companies in countries such as Saudi Arabia, Kazakhstan and Russia,” Raj Karia, partner at law firm Norton Rose, told Reuters. “There are a lot of companies globally which are state-owned and will be privatised and in the run-up to Brexit, London is appealing to the world outside of Europe.”

Falling oil prices have spurred privatisations across the Middle East, with Saudi Arabia, Oman and Abu Dhabi all announcing plans in the past year to float some of their oil assets. Government asset sales are also expected from Romania and Greece. Nicholas Holmes, a partner at law firm Ashurst, said it was clear the proposed rules were aimed at attracting further sovereign business in London beyond Aramco. However, he cautioned that the changes risked undoing some reforms made to Britain’s listing rules in 2014 following a number of scandals. London-listed mining companies Eurasian Natural Resources Corporation (ENRC) from Kazakhstan and Bumi from Indonesia both left minority investors nursing heavy losses which were both blamed on dealings involving company insiders and controlling shareholders. That led to the rule changes, with such companies forced to ensure that

all transactions between a controlling shareholder or their associates and the company are conducted on an arm’s length basis and on normal commercial terms. These rules will not apply to sovereign-controlled companies under the new proposed listing structure when dealing with the parent state, provided it holds at least 30 per cent of the shares. “The fear is that we are rolling back a portion of sensible reforms which came as a result of past scandals such as ENRC. The risk is a dilution of the premium listing brand,” Mr Holmes said. Shareholder groups and investors agreed. “Our initial reaction is that investors and savers should be nervous about any dilution of existing protections which were specifically introduced to avoid a repetition of the governance issues associated with Bumi and ENRC,” said Catherine Howarth, chief executive of ShareAction.

“The fear is that we are rolling back a portion of sensible reforms which came as a result of past scandals ... the risk is a dilution of the premium listing brand.” Nicholas Holmes, a partner at law firm Ashurst

Euan Stirling, head of Stewardship and ESG (environmental, social and governance) Investment at Standard Life, one of the biggest investors in the British stock market, said the move sent the wrong signal. “We would prefer to see listing rules tightened rather than loosened,” he said. Sources said Kazakh energy company KazMunaiGas is one of the most likely state-backed companies aside from Aramco to take advantage of Britain’s proposed new listing rules. It is currently selecting advisers for its

planned 2019 initial public offering and is expected to consider London. Kazakhstan is listed as No 131 out of 176 on the Transparency International corruption perception index. The company was not immediately available to comment. Reeling from the collapse of its merger with Deutsche Bourse and a slowdown in large domestic listings, the London Stock Exchange is targeting emerging markets, and the Middle East in particular, as a source of new IPOs. Including Saudi Aramco, Riyadh aims to raise around US$200 billion in the next several years through privatisation programmes in 16 sectors. Fighting a budget deficit, Kuwait is also considering privatising some assets. The United Arab Emirates could raise US$1.5 billion to US$2 billion for Abu Dhabi’s national oil company. That is initially expected to be a local listing which does not rule out the company tapping the London market in future. For investors, the next step to watch will be whether any companies listed under the new rules will be eligible for inclusion in any stock market indices, meaning they can raise money from passive index-tracking funds. REUTERS

Stability of China’s markets making borrowers bold, while analysts brace for storm Liquidity is returning to the market amid warnings that actions taken to deleverage are far from over Beijing A SENSE of steadiness that has descended on China’s markets after a flurry of regulatory activity has emboldened investors. Analysts, though, are waiting for the storm. Liquidity has come roaring back after a dry spell during April and May, when President Xi Jinping ordered a check of China’s financial system and an intensified focus on deleveraging saw mainland debt and equities tumble. That, coupled with what seems like a lull in Beijing’s regulatory fervour, has sparked a resumption in corporate bond buying and a return to borrowing as speculation takes hold that the worst of the crackdown may be over. To market watchers from Pacific Investment Management Co to Australia & New Zealand Banking Group Ltd and Standard Chartered, that’s a concern – not least because the efforts so far have barely budged leverage levels. “The market should be more cautious, as such complacency is not what policymakers want to see,” said Ding Shuang, chief China economist at Standard Chartered in Hong Kong. “The government won’t easily give up on deleveraging. It still has some way to go.” Mr Xi said at a two-day National Financial Work Conference that ended last Saturday the central bank will play a stronger role in defending against risks, calling for more work on safeguarding the financial system and modernising its regulatory framework. The authorities will proactively prevent and resolve systemic financial risks, and step up efforts to reduce leverage in the economy, the official Xinhua news agency reported, citing Mr Xi’s comments at the gathering. In the latest sign of how intensified delever-

aging could spook investors, China’s equities went through the worst sell-off this year during morning trading on Monday before paring almost all the losses. The central bank’s biggest net cash injection in a month pushed the 10-year government bond yield down one basis point to 3.56 per cent. The yuan is up for a sixth day, the longest run of gains since 2015, amid data showing China’s economy beat expectations in the second quarter. With the economy in recovery mode, China has set its sights on tackling a shadow-banking sector that has flourished amid a wider increase in overall debt. That has taken the form of clampdowns on everything from wealth-management products and property investing to stock speculation and illegal trading. Since the start of June, however, the banking regulator has largely been quiet, and the People’s Bank of China has acted to bolster liquidity after aggressively driving up money-market rates at the start of the year. That doesn’t mean their work is done, and authorities are just assessing their progress, says Gene Frieda, a global strategist at Pimco in London. Deleveraging hasn’t really begun if China’s

“The market appears to be quite confident that it could force policymakers to ease when there’s volatility. This isn’t normal and I’m sure the government has noticed this inclination.” David Qu, a market economist at ANZ in Shanghai

end-game is to cut total credit, so it’s likely to ramp up again once the twice-a-decade Communist Party congress concludes later this year, he said. What’s more, Mr Frieda suggests the market may underestimate Beijing’s intentions. “If there’s complacency, it’s around having mistaken shadow banking system deleveraging as the end goal, rather than control of total leverage,” he said. “If the latter is the target, then Chinese aggregate credit growth is set to slow more sharply in late 2017, which in turn would potentially unsettle markets globally.” Meanwhile, market players are focused on the here and now. Government bond yields and money-market rates have fallen from multi-year highs and local firms such as Citic Securities Co and China Merchants Securities Co were recommending investors buy debt again. Yields on three-year AAA-rated corporate bonds have dropped half a percentage point from a two-year-high reached in mid-May, just after the communication from regulators on deleveraging was at its most intense. The borrowing cost was at 4.5 per cent on Friday, according to ChinaBond data. This means the market could be set for a shock, with the next round of moves potentially “more drastic” than anticipated, says David Qu, a market economist at ANZ in Shanghai. “The market appears to be quite confident that it could force policymakers to ease when there’s volatility,” he said. “This isn’t normal and I’m sure the government has noticed this inclination.” Some seem to have registered that possibility and are preparing for an uptick in interest rates. Chinese companies are picking up the pace of bond issuance, which may indicate they are locking in lower borrowing costs while they still can. Small-cap stocks slumped last week, while shares in large companies surged, suggesting investors may have been shifting to safer bets on concern about renewed deleveraging zeal, according to KGI Securities Co.BLOOMBERG

Emerging market currencies looking up as central banks roll back easy credit Mumbai AS global bonds reel under hawkish rhetoric by major central bankers, AllianceBernstein and Amundi Asset Management say emerging-market currencies will weather the storm better than 2013. Improvements in external balances, higher reserves and subdued inflation are among factors making developing-nation economies from India to Mexico appear less vulnerable to the risk of outflows when their advanced peers begin to taper, they say. Recent stability in exchange rates and a gauge of price swings near a three-year low are signs of their resilience. “This episode of rising developed-market yields is unlikely to be as negative as it was in the 2013 taper tantrum selloff,” said Abbas Ameli-Renani, a London-based portfolio manager for EM bonds and currencies at Amundi, which oversees US$1.2 trillion. “We continue to be comfortable with currency exposure on higher yielding EM currencies with ongoing external rebalancing, such as the Mexican peso and Brazilian real.” Central banks led by the US Federal Reserve are preparing to roll back easy credit policies as their economies recover and borrowing costs rise. Canada raised rates last week for the first time since 2010, becoming the first Group of Seven country to join the US in doing so, while the European Central Bank and the Bank of England have hinted at the need to tighten. The phasing out of stimulus is an unprecedented challenge that may be more disruptive than people think, JPMorgan Chase & Co chairman Jamie Dimon said on Tuesday. The ECB’s Governing Council is scheduled to meet in Frankfurt on July 19-20, with respond-

ents in a Bloomberg survey split on whether officials might set the tone by dropping a pledge to boost quantitative easing if needed. Even so, the MSCI Emerging Markets Currency Index is up in July, and higher from a month earlier, when the Bank of Canada surprised investors with a strong signal that it’s ready to raise rates. The JP Morgan Emerging Market Volatility Index fell last week, reversing a two-week advance, and still trades near its lowest level since 2014. Further, the case for dollar bears is growing stronger as weaker-than-forecast economic data raises doubts about the prospect of additional Fed tightening this year. The greenback sank to a 10-month low Friday, rounding out its worst week since May, after a consumer price index report that showed continued weak pricing power in June across a range of goods and services. Emerging-market currencies have been a bright spot for investors amid a global hunt for

HSBC Holdings says it is bullish on local-currency government bonds in Mexico, South Africa, India, Indonesia, Malaysia and Russia . . . Asian currencies topped a recent Bloomberg survey of EM watchers for their resilience to the risks looming ahead.

yields. Higher rates have attracted inflows from overseas, helping improve the nations’ external balances. Slowing inflation has added to the appeal of many of these markets, while governments in India and Indonesia have taken steps to boost the economy. HSBC Holdings plc says it is bullish on local-currency government bonds in Mexico, South Africa, India, Indonesia, Malaysia and Russia, citing an expected decline in inflation risk premiums that will likely trigger flatter yield curves. Asian currencies topped a recent Bloomberg survey of EM watchers for their resilience to the risks looming ahead. “What’s really different today is that EM vulnerability is more concentrated in a narrow set of countries that do not constitute large parts of major equity or debt indexes,” said Morgan Harting, a New-York based portfolio manager at AllianceBernstein. Brazil, Turkey, Indonesia, India and Thailand, which were among the worst affected during the taper tantrum in 2013, have improved their fundamentals, he said. A growing stockpile of foreign-exchange reserves has left developing nations with “greater firepower” than four years ago to absorb global shocks, giving investors “greater confidence in the macro stability of an EM country or region,” said Viraj Patel, a London-based foreign-exchange strategist at ING Groep NV. Even so, money managers and strategists don’t expect emerging-market assets to be completely insulated when central banks begin to tighten. “We remain more cautious on the lower yielding, lower beta currencies in Asia that are most exposed to Chinese growth. These include the likes of South Korea, Thailand and Taiwan,” Kamakshya Trivedi, co-head of global foreign exchange and EM strategy at Goldman Sachs Group Inc said. BLOOMBERG

The move represents an unprecedented setback for China’s second-richest man Wang Jianlin, who was among the country’s most prominent dealmakers up until last year. PHOTO: AFP

Beijing to punish Wanda for breach of investment rules Beijing CHINA plans to punish billionaire Wang Jianlin’s Dalian Wanda Group Co for breaching the nation’s restrictions on overseas investments by cutting off funding and denying the conglomerate the necessary regulatory approvals, according to people familiar with the matter. The government has found violations of China’s restrictions in six investments, four of which have been completed and two are still pending, according to the people, who asked not to be identified because the matter is private. The deals being scrutinised include a Wanda unit’s purchase of Nordic Cinema Group Holding and Carmike Cinemas Inc, the people said, without identifying the remaining transactions. A Wanda representative declined to comment. China’s banking regulator didn’t immediately respond to requests for comment. The move represents an unprecedented setback for China’s second-richest man, who was among the country’s most prominent dealmakers up until last year by gobbling up Hollywood assets such as Kong: Skull Island producer Legendary Entertainment. For the government, targeting one of the country’s top businessmen represents an escalation of its broader efforts to crack down on capital outflows. Wanda Properties International Co’s 2024 notes declined as much as 4.8 US cents on the US dollar to 100.2 US cents in afternoon trading in Hong Kong on Monday, according to Bloomberg-compiled data. Wanda Hotel Development Co shares fell as much as 7.3 per cent. According to the people, the four completed deals will be subject to

punitive measures including the withdrawal of financing from domestic banks. Assets will be barred from being injected into any listed entity in China. Wanda will be barred from injecting capital into those assets from within China or involve them in any restructuring with any of Wanda’s domestic units. No government approval will be given if Wanda attempts to sell those assets to any Chinese company. On the two pending deals, related authorities won’t provide support with financing or foreign-exchange-related approvals needed to move money out of China, according to the people. Wanda is among conglomerates including Fosun International Ltd, HNA Group Co and Anbang Insurance Group Co whose loans are under government scrutiny after China’s banking regulator asked some lenders to provide information on overseas loans to the companies, people familiar with the matter said in June. Though cutting off funding may pressure Wanda, the group is poised to get some relief after it agreed to sell hotels, land and projects to Chinese developer Sunac China Holdings Ltd in a 63.2 billion yuan (S$12.8 billion) deal announced last week. For Mr Wang, the sale of the bulk of his “Wanda City” projects – massive multibillion-dollar complexes with theme parks and lodgings – represented a departure from the billionaire’s past predictions that he would build a tourism empire bigger than that of Walt Disney Co. The Wall Street Journal earlier reported that China is restricting the completion of six overseas deals by Wanda Group following the government’s broader crackdown on offshore investments, citing documents. BLOOMBERG

The government has found violations of China’s restrictions in six investments ... the deals include a Wanda unit’s purchase of Nordic Cinema Group Holding and Carmike Cinemas, sources said.

ENERGY & COMMODITIES | 15

The Business Times | Tuesday, July 18, 2017

China’s metal makers a crucible for records as output surges

China’s steel mills are running at very high rates and electric furnaces are ramping up production amid good margins, says Yu Chen, an analyst with Mysteel Research. “Demand has also beaten expectations. We see property sales, infrastructure, auto sales all pretty good in June.”

A 4.6% increase in steel production in H1 runs counter to expectations output will at best level off in 2017 Shanghai CHINA’S old economy is displaying greatly renewed vigour. Output of steel and aluminium hit records last month, with mills and smelters boosting run-rates of the products used to make buildings, cars and appliances just as the Trump administration in the United States weighs steps to roll back imports. Output of crude steel was 73.23 million tonnes in June, 5.7 per cent more than a year earlier, and up 4.6 per cent to 419.75 million tonnes in the first half, the statistics bureau said on Monday. Supply of aluminium rose 7.4 per cent to 2.93 million tonnes last month, and gained 8.8 per cent to 16.84 million tonnes over the six months. China is the world’s biggest maker of both.

The unprecedented performance from the country’s metals industry comes as China’s gross domestic product topped estimates in the second quarter. The nation’s steel mills are in a sweet spot, with larger suppliers ramping up output after a crackdown on the informal sector triggered a shortage of some products, aiding prices. Aluminium has also gained this year, with China’s policymakers seeking to cut outdated capacity even as more plants are added. “Steel mills are running at very high rates and we can see electric furnaces are ramping up production amid good margins,” Yu Chen, an analyst with Mysteel Research, said from Shanghai. “Demand has also beaten expectations. We see property sales, infrastructure, auto sales all pretty good in June.”

Fuel prices in North Korea surge after China cuts oil sales

Mining firms set for fresh investment wave as prices rally

Seoul PETROL and diesel prices surged in North Korea in the weeks after a Chinese state oil company suspended fuel sales to the reclusive state, according to data reviewed by Reuters and an interview with a North Korean defector. China National Petroleum Corp (CNPC), a state-controlled company, halted diesel and petrol sales to North Korea “over the last month or two”, amid international pressure on Pyongyang to curb its nuclear and missile programmes, Reuters exclusively reported on June 28. Scrutiny of China’s commercial ties with its isolated neighbour intensified further following North Korea’s first test of an intercontinental ballistic missile two weeks ago. The price of petrol sold by private dealers in Pyongyang and the northern border cities of Sinuiju and Hyesan jumped to US$2.18 per kg as of July 5, up 50 per cent from US$1.46 per kg on June 21, according to Reuters analysis of data collected by the Daily NK website. Daily NK is run by North Korean defectors who collect prices via phone calls with fuel traders in the North. Kang Mi-jin, a defector who speaks regularly to market sources inside North Korea and reports commodity prices for Daily NK, said the price spikes in recent weeks were caused initially by the rumours – later confirmed – that China was restricting the flow of oil to North Korea. North Korea gets most of its fuel from China, with some coming from Russia. A prolonged cut by China would threaten critical supplies of petrol and diesel and force North Korea to find alternatives sources of refined fuel products. “After North Korea’s frequent missile tests including its very first ICBM test, the international community has vowed to tighten sanctions and China simply cannot exclude itself from the recent movement, although it probably does not want to indefinitely cut off fuel sales to the North,” Mr Kang said. Although petrol prices eased to US$2.05 per kg by July 12, they are still more than double from the beginning of the year, when they were averaging just under US$1 per kg, the data shows. Diesel prices rose to US$1.45 per kg as of July 12, up 20 per cent from three weeks ago. Oil products are sold by weight in North Korea. Prices stabilised after the sharp spikes through the first week of July, likely because North Korea encouraged fuel smuggling across its border with China, Mr Kang said. Last year, China shipped to North Korea more than 96,000 tonnes of petrol and nearly 45,000 tonnes of diesel, worth a combined US$64 million. REUTERS

Sydney MINING companies in Australia, the world’s biggest exporter of iron ore and coal, are poised to approve fresh investments in projects, driven by rallying commodity prices and the need to replace depleting deposits, according to global equipment supply giant Komatsu Ltd. “They’re looking at new fleets of equipment,“ Sean Taylor, chief executive officer of Komatsu’s Australian unit, said in an interview in Sydney. The miners have to reinvest in output “because otherwise they can’t maintain production at the levels that they’re at,” he said. Australia’s commodity exports are set to hold above A$200 billion (S$214.5 billion) over the next two fiscal years and there’s a pipeline of about A$25 billion of projects approved for construction, according to government estimates. The Bloomberg Commodity Index has advanced more than 12 per cent since slumping to a quarter-century low in January 2016. “The level of the commodity prices is pretty good now for the miners to consider reinvestment,” Mr Taylor said in the June 29 interview. “It feels like to me we’ve got more discussion around decision making.”

PHOTO: REUTERS Steel prices have been on a roll in China. Reinforcement-bar futures have surged 27 per cent on the Shanghai Futures Exchange this year, and traded on Monday near the highest close since 2013, while coil futures have jumped 12 per cent since the end of 2016. In London, three-month aluminium, a global benchmark, have gained 14 per cent and last traded at US$1,934.50 a tonne. President Donald Trump’s admi-

Conversation about greenfield sites, which can take up to 10 years to be approved, have “certainly increased a little bit in the last six months – whereas before that, it was zero,” he said. The nation’s top iron ore exporters have already given the go-ahead for new mines amid a potential US$8 billion of investment to replace at least 170 million tons of capacity that’ll be lost as exhausted pits are closed. BHP Billiton Ltd last month approved US$184 million in initial spending for its A$4 billion South Flank mine in Western Australia, while Rio Tinto Group last year sanctioned development of the US$338 million Silvergrass operation. Komatsu, the world’s second-biggest supplier of equipment to the construction and mining sectors, last year agreed a US$2.89 billion deal to acquire Joy Global Inc to add expertise in rope shovels and underground mining equipment. Komatsu and competitors are positioned to benefit from a slow recovery in mining equipment demand, particularly across Asia, according to Bloomberg Intelligence. BHP could boost annual earnings by about US$500 million from mining cost savings by adding more

One of worst droughts in decades devastates South European crops Rome ITALIAN durum wheat and dairy farmer Attilio Tocchi saw warning signs during the winter of the dramatic drought to come at his holding a mile away from the Tuscan coast. “When it still hadn’t rained at the beginning of spring we realised it was already irreparable,” he said, adding that he had installed fans to try and cool his cows that were suffering in the heat. Drought in southern Europe threatens to reduce cereal production in Italy and parts of Spain to its lowest level in at least 20 years, and hit other regional crops including olives and almonds. Castile and Leon, the largest cereal growing region in Spain, has been particularly badly affected, with crop losses estimated at around 60 to 70 per cent. “This year was not bad, it was catastrophic. I can’t remember a year like this since 1992 when I was a little child,” said Joaquin Antonio Pino, a cereal farmer in Sinlabajos, Avila. Mr Pino said many of his fields had not even been harvested, because crop revenues would not cover the wages of labourers who gathered them. While the EU is collectively a major wheat exporter, Spain and Italy both rely on imports from countries including France, Britain and Ukraine. Spanish soft wheat imports are expected to rise by more than 40 per cent to 5.6 million tonnes in the

2017-2018 marketing year, according to Agroinfomarket. The drought has helped support EU wheat futures, which have risen around 6 per cent since the beginning of June, although the prospect of a larger harvest in France this year should ensure adequate overall supplies in the trading bloc. Spain and Italy are also among the world’s top producers of olive oil. Production in both countries is expected to fall, but the decline is likely to be particularly steep in Italy, where drought is the latest headache for olive growers already plagued by insects and a bacterial disease in recent years. A 60 per cent drop in Italian output is forecast by the International Olive Council. “We expected good production this year, but it hasn’t turned out like that,” said Francesco Suatoni, who tends about 4,000 olive trees on the fringe of the ancient town of Amelia, in Umbria, central Italy. Other crops have been damaged, and Italy’s agricultural association Coldiretti has estimated the drought could cost the nation’s farmers more than 1 billion euros (S$1.57 billion). Some scientists have said heat waves like this year’s are becoming more frequent, and are linked to man-made climate change. “This is the first year we have watered the plants. There was never any need before,” said olive grower Mr Suatoni. REUTERS

nistration has decisions pending on both steel and aluminium, blaming China for overproducing and creating global gluts. Earlier this month, Mr Trump told reporters that China as well as other countries are “dumping steel and destroying our steel industry, they’ve been doing it for decades, and I’m stopping it. It’ll stop”. That stance comes even as trade data shows divergent trends for

autonomous trucks to cover most of its fleet in the Pilbara iron ore region and about a third of its 350 vehicles at coal operations in the Bowen Basin, Deutsche Bank AG said in a July report. Still, even with a rebound in projects, imports of mining equipment into Australia are likely to be at about 50 per cent to 60 per cent of levels in

shipments of the two metals. While China’s overseas sales of steel contracted 28 per cent to 41 million tonnes over the first six months, exports of aluminium increased 5.9 per cent to 2.41 million tonnes. The increase in steel production, which has helped to support iron ore in recent weeks, runs counter to widespread expectations that output would at best level off in 2017. Earlier this month, Australia forecast

2012, at the height of an investment boom, Mr Taylor said. Capital expenditure by miners in Australia is forecast for a fifth annual decline in the year to July 2018, the country’s industry department said last month. With lead times for new equipment – including trucks to excavators – expected to lengthen over

Chinese steel supply of 805 million tonnes in 2017, down from 808 million tonnes last year. Iron ore futures rallied in Asia on Monday after the steel production data, with the SGX AsiaClear contract in Singapore rising as much as 2.2 per cent to US$65.59 a tonne. The benchmark spot price for 62 per cent content ore added 4.7 per cent last week to US$65.74 a dry tonne, according to Metal Bulletin. BLOOMBERG

the next 12 to 24 months and supply of used machinery in decline, miners need to take decisions on adding new equipment, Ernst & Young LLP said in a May report. “Some players will be looking to take advantage of the recent recovery in commodity prices,” the accountancy firm said. BLOOMBERG

NOTICES

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| TECHNOLOGY

The Business Times | Tuesday, July 18, 2017 ●

Major tech firms urge US to retain net neutrality rules They say dismantling the regulations creates significant uncertainty in the market and harms consumers Washington A GROUP representing major technology firms including Alphabet Inc and Facebook Inc urged the US Federal Communications Commission (FCC) on Monday to abandon plans to reverse the landmark 2015 rules barring Internet service providers from blocking or slowing consumer access to web content. The Internet Association said in its filing with the FCC that dismantling the net neutrality rules “will create significant uncertainty in the market and upset the careful balance that has led to the current virtuous circle of innovation in the broadband ecosystem”. The rollback will harm consumers,

said the group, which also represents Amazon.com Inc, Microsoft Inc, Netflix Inc, Twitter Inc and Snap Inc. In May, the FCC voted 2-1 to advance Republican FCC chairman Ajit Pai’s plan to reverse the former Obama administration’s order reclassifying Internet service providers as if they were utilities. Mr Pai has asked if the FCC has authority or should keep its rules barring Internet companies from blocking, throttling or giving “fast lanes” to some websites, known as “paid prioritisation”. Mr Pai, who argues the Obama order was unnecessary and harms jobs and investment, has not committed to retaining any rules, but

said he favours an “open Internet”. The Internet Association said there was “no reliable evidence” provider investment had fallen. More than 8.3 million public comments have been filed on the proposal. Mr Pai will face questions on Wednesday on the issue at a US Senate hearing. Broadband providers AT&T Inc, Verizon Communications Inc and Comcast Corp opposed the 2015 order, saying it discouraged investment and innovation. Providers say they strongly support open Internet rules and will not block or throttle legal websites even without legal requirements. They separately plan to file comments with the FCC on Monday. But some providers have said paid prioritisation may make sense at

times, citing self-driving cars and healthcare information. Internet firms say opening the door to prioritisation could enable providers to “destroy the open nature of the Internet that allows new or smaller streaming video providers to compete with larger or better-funded edge providers”. Internet providers want Congress to resolve the decade-old dispute and pass open Internet protections, but narrowly tailor rules to exclude a future FCC from imposing rate regulations. The Internet Association said it was “open to alternative legal bases for the rules, either via legislative action codifying the existing net neutrality rules or via sound legal theories offered by the commission”. But it said Mr Pai’s proposal “offers no clear alternatives”. REUTERS

In urban China, cash is increasingly becoming an obsolete commodity By Paul Mozur Shanghai THERE is an audacious economic experiment happening in China. It has nothing to do with debt, infrastructure spending or the other major economic topics du jour. It has to do with cash – specifically, how China is systematically and rapidly doing away with paper money and coins. Almost everyone in major Chinese cities is using a smartphone to pay for just about everything. At restaurants, a waiter will ask if you want to use WeChat or Alipay – the two smartphone payment options – before bringing up cash as a third, remote possibility. Just as startling is how quickly the transition has happened. Only three years ago there would be no question at all, because everyone was still using cash. “From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment it’s only in China,” said Richard Lim, managing director of the venture capital firm GSR Ventures. There are certain parts of the Chinese internet that have to be seen to be believed. Coming from outside the country, it’s hard to comprehend that Facebook or Google can be completely blocked until you are forced to do without them. It’s tough to fathom how critical the messenger app WeChat is for everyday life until the sixth person of the day asks to scan your QR code – a sort of bar code – to connect the two of you. What’s happening with cash in China is similar. For the past three years, I have been outside mainland China covering Asian technology from Hong Kong, which has a very different internet culture from the mainland. I knew that smartphone payments were taking over in China, as the statistics were stark: In 2016, China’s mobile payments hit US$5.5 trillion, roughly 50 times the size of America’s US$112 billion market, according to consulting firm iResearch. Even so, the attendant cultural shift was graspable only in person. I recently moved to Shanghai and felt the change with cash acutely because my first few weeks in the metropolis of more than 20 million were spent cut out of the system. Because of an issue with my bank, I couldn’t immediately link my account to WeChat, which has become a virtual wallet for so many. That meant I had to navigate China the way I would have three years ago: with a stack of red 100-renminbi notes. At coffee shops and restaurants, I held up lines as I fumbled out my wallet and peeled off the bills to give the cashier. If I was hungry I had to go outside and find a restaurant, while bowls of noodles, groceries and coffee materialised at our office, ordered by my colleagues and paid for on the phone. If I had to get somewhere, I couldn’t use my phone to unlock one of the ubiquitous bicycles that are a part of China’s bike-sharing craze. Even the buskers were apparently ahead of me. Enterprising musicians playing on the streets of a number of Chinese cities have put up boards with QR codes so that passers-by can simply transfer them tips directly. “It has become the default way of life now,” said Shiv Putcha, an analyst with the research firm IDC. “Literally every business and brand in China is

China’s mobile payments hit US$5.5 trillion, roughly 50 times the size of America’s US$112 billion market, according to consulting firm iResearch. PHOTO: NYTIMES plugged into this ecosystem.” Some Scandinavian countries have also weaned themselves from cash but still use cards frequently. In China, the change has been to phones. One friend didn’t realise how reliant she had become on mobile payments until her bank called her. She had left her ATM card in the machine three weeks earlier and had not noticed its absence. In practical terms, this means that two Chinese companies – Tencent, which runs WeChat, and Alibaba, whose financial affiliate, Ant Financial, runs Alipay – are sitting atop a gold mine of staggering proportions. Both companies can make money off the transactions, charge other companies to use their payment platforms and all the while collect the payments data to be used in everything from new credit systems to advertising. Mr Lim said that according to recent data, Ant Financial and Tencent were set to surpass the likes of Visa and Mastercard in total transactions per day in the coming year. The key is that both companies are able to provide payments on the cheap, partly by allowing smaller vendors to make use of a simple printout of a QR code or their phone, instead of an expensive card reader. A back-end system that stores a record of user accounts, instead of having to commu-

nicate with a bank, also keeps costs down. While Tencent does not break out what it makes from mobile payments, in the fourth quarter of 2016 the “other services” item in its earnings almost tripled from a year earlier to 6.4 billion renminbi (S$1.29 billion) driven largely by mobile payments. There are some potential future problems with China’s sweeping embrace of online payments. As the country builds its entire consumer economy around two private smartphone payment platforms, it is slowly locking out people unable to get onto those networks, and locking itself into those companies. At the simplest level, that makes life difficult for tourists and business travellers who are unlikely to open a bank account in China and so will find it hard to turn their phones into wallets. More broadly, it means things could get harder for foreign and local businesses alike. Foreign companies hoping to sell to Chinese consumers now must deal with Alibaba and Tencent or risk being unable to take payments. Likewise, Chinese companies reliant on Alibaba and Tencent have to build out separate structures to deal with the world of Facebook, Google and credit cards that still dominate elsewhere. There is a corollary for what could

happen here. In Japan in the early 2000s, flip phones could do everything from stream cable TV to pay at stores. But because the phones were so advanced, Japan was slow to adopt smartphones, and it went from tech giant to tech laggard in 15 years. Now in Japan those flip phones, which are still being used, are called Galápagos phones because they evolved perfectly for an isolated environment. No doubt aware of this, Alibaba and Tencent are pushing to expand beyond China to ensure their newest innovation doesn’t go the way of the dinosaurs. Still, competition is most likely looming. “The million-dollar question is: Will Western firms decide to build a system and compete?” Mr Lim said. “The answer is probably yes.” Until then, new arrivals like me have to deal with being locked out of China’s online payments infrastructure. Earlier this month, though, I lucked out using cash. As I was trying to get a pile of stuff from Ikea back to my new apartment, a cabdriver looked sceptically at the huge rolled-up mattress pad I was planning to load into the back of his car. “I’m not sure I can take you,” he said to me. “I can only take cash.” “That’s all I have,” I said to my fellow Luddite, who grumpily agreed to ferry me home. NYTIMES

Why smart speakers have not taken off in China in a big way Beijing WHEN it comes to Web businesses, China has created its own versions of a search engine (Baidu), e-commerce platform (Alibaba) and video-streaming service (iQiyi) with resounding success. Yet there’s a conspicuous absence of smart speakers such as the Amazon Echo or Google Home. The market for devices using audio to deliver artificial-intelligence services is so nascent in China that few researchers track sales. Counterpoint Research estimates that two million smart-speaker units will be shipped in China this year, compared with 14 million in the US. The question of adoption is about more than the devices – it’s about which enterprises will control the delivery of AI-based services. In the US, Amazon.com Inc, Google, Microsoft Corp, Apple Inc and Facebook Inc are all battling to determine which will cement a place at the centre of the digital revolution. Amazon said last week that the heavily discounted Echo was the best-selling product during its Prime Day shopping event. “The overall understanding and response for Chinese natural language in a conversational way is still not mature,” Tracy Tsai, a Gartner Inc analyst, said. Poor audio recognition on devices produced by some Chinese makers is a key reason for the lack of adoption, she said. There are also other factors why smart speakers aren’t taking off in the world’s biggest retail market, according to Kai Yu, chief executive officer of Horizon Robotics and founder of the Institute of Deep Learning at Baidu Inc, China’s biggest search engine. Many people, especially younger workers, tend to spend less time at home, where smart speakers are meant to be used. “If you look at the popularity of the food delivery business, it shows people don’t have much time; young people spend most of their time either at work, or going to work,” Mr Yu said, adding that there is still some speculation on whether smart speakers will be popular in China. Beijing resident He Tianran doesn’t see a compelling reason to buy a smart speaker, and hasn’t heard of any of his friends or family members talking about getting one. “Having a speaker in the house and knowing it could pick up all the audio feels a bit weird to me,” he said. Chinese consumers also tend to spend more time consuming content on mobile devices as they move around, instead of in living rooms and bedrooms. Baidu’s iQiyi, the most popular streaming service in the country by time spent viewing, saw almost 70 per cent of users watching shows and movies on smartphones and tablets, according to data from early 2016. By contrast, most Netflix Inc viewers consume their content at home on TVs, according to a speech last year by Scott Mirer, vice-president for device partner ecosystems. While smart speakers haven’t become a hit in China, web companies there intend to sell them. Online retailer JD.com Inc is the biggest brand to offer one, with shipments of speakers using its technology forecast to reach one million units by the end of the year. Counterpoint predicts 22 million of the devices to be sold in China in 2022.

The Amazon Echo on display at CES 2016 in Las Vegas. Counterpoint Research estimates two million smart-speaker units will be shipped in China this year. PHOTO: AFP Alibaba Group Holding Ltd and Tencent Holdings Ltd have unveiled plans to make voice-activated speakers. Baidu, whose Mandarin-speaking digital assistant DuerOS is being integrated into a myriad of products, demonstrated a smart speaker at its AI conference this month by asking Beijing’s most common question: “What’s the air quality today”? Conexant Systems Inc, which develops the technology used to capture and process audio, is working with more than 60 companies in China looking to introduce audio-based smart devices, compared with about 20 US-based smart speaker makers including Amazon, according to its president Saleel Awsare. “In China, there are way more startups on this; money just seems to come easier,” Mr Awsare said. “It feels like when the smartphone first came out.” One possibility is that AI-based audio services won’t be delivered via speakers in China, but rather via home appliances. Chinese consumers bought 65 per cent of the world’s smart-connected major home appliances last year, according to IHS Markit, which projects that number to reach 95.1 million units annually by 2020. Midea Group and JD’s latest fridge will be able to remind their owners to eat more greens, because they’re equipped with image-recognition cameras and software that can tell what foods and vegetables are inside. While the smart refrigerator has become a cliche to a certain extent, it could be a viable way to get AI into homes, according to Chen Zhang, JD’s chief technology officer. “They key to the fridge isn’t the technology, it’s how the technology fits your life,” Mr Chen said. “AI needs real, practical applications.” BLOOMBERG

Artificial intelligence systems in use to prevent heatstroke Tokyo MAJOR corporations have introduced systems utilising artificial intelligence (AI) and information technology to prevent heatstroke among employees, including construction workers. The systems are thought to prevent heatstroke by analysing data on workers’ physical condition and the air temperature, among other data, and transmitting the results to workers and their supervisors. Fujitsu has developed a system integrating AI into wristwatch sensors. The sensor monitors a worker’s heart rate, number of steps and how much the person has worked, as well as the air temperature and humidity. The data is then analysed by AI. When the risk of heatstroke increases, the worker’s wristwatch vibrates and a message is sent to the supervisor’s smartphone recommending the worker rest or drink water. The AI calculates the risk of heatstroke based on data collected last summer from 27 men in their 20s to 40s, including their heart rate while working outdoors. The risk of heatstroke is indicated through a fourstage scale. Fujitsu introduced the system on a

trial basis at the end of June, when it was used to monitor the condition of security guards at its Kawasaki factory. The company plans to begin selling the system to construction firms and other companies at the end of this month. Plans are also underway to develop a version for elderly residents of nursing facilities. Obayashi, a major construction company, has developed a system that analyses heart rate data sent from a sensor attached to workers’ underwear. It will be introduced at about 20 construction sites across Japan from July 20. Obayashi also plans to sell the system to other construction companies. “Some people may not realise they’re suffering heatstroke,” said Kazuya Suzuki, a senior researcher at the Ohara Memorial Institute for Science of Labor. “We can prevent heatstroke by utilising systems that properly monitor one’s physical condition.” According to the Health, Labor and Welfare Ministry, roughly 500 people die or become extremely sick as a result of heatstroke during work. In 2010, a year of record-high average summer temperatures, the figure reached 656. WP

CONSUMER | 17

The Business Times | Tuesday, July 18, 2017

Big-spending Aussies embody Thailand’s new tourism strategy Bangkok eyes a minimum increase in revenue instead of arrival numbers, longer stays and higher daily spending

A man playing video games in a ‘husband rest booth’ at the enormous Global Harbor mall in Shanghai. PHOTO: AFP

Shopping-weary Chinese men find refuge in souped-up man caves Shanghai IT’S A familiar sight in shopping malls around the world – weary-looking men dutifully following their wives from store to store. But China may have the solution: so-called “husband rest booths”. While their partners shop, users can retire to the glass-encased kiosks, which contain a comfortable massage chair and an elevated screen for playing computer games or watching television. Its makers say the futuristic mini man-caves are a first in China and they have installed four in a high-end mall in Shanghai at a cost of 40,000 yuan (S$8,000) each. You can reserve the pod in advance via a mobile phone app, and it costs nothing to use at the moment. In English, each has the words: “Private Lounge. Waiting for you in the bar.” Owen Wei, project manager at makers Ingrem, a Shanghai company, said if the first batch proved popular they would roll out more at malls in the city. “Some men don’t like to go shopping or stay with their wives, and prefer to play games or watch television,” he said at the enormous Global Harbor mall, where one husband lay slumped in a nearby booth shooting aliens. Not everyone is a fan, however. On one recent day most of those visiting the pods were teenagers, members of the media and curious onlookers. One husband said he preferred his wife’s company, while Liu Tianguo said his partner did not approve of the scheme. “I told my wife, ‘I’ll be here. You go shopping and you’ll find me here,’” said Mr Liu. “It’s comfortable and I can have a rest while she spends my money. She was ok with it – as long as I don’t stay here too long.” AFP

Discounts doing little to lift Americans’ spirits and spending Washington AMERICANS experienced lower costs in June for some services as well as cheaper merchandise that limited receipts at retailers and showed a weaker trajectory for consumer spending entering the third quarter. While economists projected a slight increase, consumer prices were little changed in June and held back by cheaper home furnishings, cars and clothing. Households also enjoyed modestly priced airfare and hotel stays at the start of the summer, Labour Department data showed on Friday. The back-to-back decline in retail sales, the first since July-August of last year, also showed consumers remained hesitant to ramp up their spending as the economy enters its ninth year of expansion. “Consumers are cautious to spend despite the positive backdrop of upbeat job gains, rising – albeit sluggish – wage growth and low interest rates,” Gregory Daco, chief US economist at Oxford Economics, wrote in a research note. “Weak consumer spending in June means that momentum heading into the third quarter is fairly soft.” Evaporating consumer optimism suggests moderation at the cash register as well. Sentiment weakened in early July to a nine-month low, according to figures released on Friday from the University of Michigan. BLOOMBERG

Bangkok THAILAND is now so popular for holidays that almost 35 million foreign tourists – equivalent to half the country’s population – are expected this year. As the influx gets harder to manage, the government is shifting strategy. It’s now targeting a minimum increase in tourism revenue of about 5 per cent annually instead of a particular number of visitors, Tourism Minister Kobkarn Wattanavrangkul said. That means encouraging longer stays and higher daily spending, a mix the typical Australian holidaymaker exemplifies, she said. “Maybe they’re the ones who are like: this is my time – I eat, I shop, and I eat, and I shop,” Ms Kobkarn, 56, said in an interview. Australian visitors were among the top 10 biggest spenders in terms of per capita daily expenditure last year, forking out 5,831 baht (S$237), Tourism Ministry data shows. Their average length of stay of almost 14 days was the highest in that group. Some nationalities take even longer holidays but tend to be more parsimonious. British tourists, for instance, stayed for just over 18 days on average while spending 4,376 baht daily. Tourism is a bright spot for Thailand’s economy, which faces challenges such as political uncertainty and sluggish consumer demand. The sector makes up about 18 per cent of

gross domestic product, Ms Kobkarn said in the interview in Chiang Mai last month. “We no longer have a target for number of tourists,” she said. “We shouldn’t go beyond the limit that we can cope. But there’s no statistic on that yet. When people say that Phuket may be too crowded, or Bangkok is too crowded, we have to make sure that we are introducing new destinations too.” Arrivals from overseas more than doubled in the past decade, powered by a surge in Chinese holidaymakers who contributed 28 per cent of 1.6 trillion baht in foreign tourism receipts in 2016. Affordability is one reason why Thailand has usurped Malaysia as South-east Asia’s most popular destination, but Ms Kobkarn said the nation must focus on quality as well as cost to tackle emerging competitive threats from the such as of Myanmar and Vietnam. Quality doesn’t just mean targeting wealthy tourists as Thailand needs travellers on a variety of budgets, Ms Kobkarn said. Instead, it refers to offering good value experiences that encourage return visits, increase the average length of stay and bolster daily spending per head, she said. Visitors from the Middle East are the biggest per capita daily spenders, according to the Tourism Ministry data. Chinese tourists stood out for

Tourist arrivals in Thailand, which have more than doubled in the past decade, are likely to pick up in the second half of this year. The Bank of Thailand forecasts 34.9 million tourist arrivals in 2017 and 37.3 million in 2018. PHOTO: BLOOMBERG above-average expenditure and sheer number of arrivals – 8.8 million, dwarfing other nationalities and making China the most important single country for tourism receipts. Thailand’s years-long tourism boom slowed somewhat in recent months. That’s partly because of terrorist bombings in resort towns in August last year and a clampdown by the military government on some operators of large Chinese tour groups, which were judged to generate insufficient local spending. Arrivals are likely to pick up in the second half of 2017 as security concerns fade and Chinese visitors embrace independent travel over

package tours, according to Bloomberg Intelligence. That signals more strain for the country’s airports, some of which are already stretched beyond capacity. State-run Airports of Thailand pcl is planning to invest about US$6 billion over a decade to try to ease the bottlenecks. Even as Ms Kobkarn tries to focus on revenue targets rather than visitor numbers, arrivals are projected to climb, whether drawn by the allure of white-sand beaches in resorts such as Krabi, the gastronomic delights of Bangkok or the perennially notorious sex capital Pattaya. The Bank of Thailand forecasts 34.9 million tourist arrivals this year,

a climb of about 7 per cent from 2016, and 37.3 million in 2018. That’s projected to help South-east Asia’s second-largest economy expand 3.5 per cent in 2017 and 3.7 per cent next year. Thailand needs to be a quality tourism destination since a range of factors can prevent it from being seen as the cheapest, such as rising wages or an appreciating exchange rate, Ms Kobkarn said. “We’re working very hard for people not to think only of the cost,” she said. “We’re not the best. We still have many negative things. But we’re very sincere in improving ourselves.” BLOOMBERG

Australian malls turn to village life as retailers feel pinch Sydney AS Australia’s local merchants struggle with an influx of global names, leading malls are considering returning to their village centre roots to woo new tenants by moving away from shops and offering medical facilities, more restaurants and even amusement parks. Several top retailers have recently succumbed to pressure from foreign giants such as Japan’s Uniqlo and Sephora of France and with Amazon plotting its debut in the country, the future looks tough. The response from developers has been to redefine the mall away from a “shopping” focus to become a more community-driven service and entertainment space. While cafes and restaurants have long helped attract shoppers to malls, they are now filling shopping centres, providing some buzz even as an eerie quiet fills some nearby clothing stores. With the big global names pouring huge sums of cash into the country, once popular clothing chains such as David Lawrence, Pumpkin Patch, Herringbone, and Rhodes & Beckett have bitten the dust, while others scramble to reduce costs. This has included cutting back on brick and mortar stores, and steering centre owners towards food, entertainment, healthcare and childcare providers. Major landlords such as Vicinity and Westfield spin-off Scentre, which this year have seen their share prices slip to one or two-year lows, are already redeveloping their arcades. Vicinity’s Chadstone Shopping Centre in Melbourne, Australia’s largest mall, is now the site of the southern hemisphere’s first massive amusement park Legoland. The company is also tapping newer technologies such as facial recognition to identify consumers through their age and gender and analyse their shopping habits. “What we are seeing is the malls starting to pivot away from commodity-type products . . . towards retailers that offer a service which isn’t physical,” Nick Potter, retail investment head of real estate firm Cushman & Wakefield, told AFP. “Shopping centres are the modern village, it’s where everyone comes together. These centres are typically located in the centre of towns, they’ve got strong infrastructure . . . and that offers up the ability to move with the times.” The move is a return to the vision of Victor Gruen, an Austrian-born American who in the 1950s developed the concept of the arcade as a public space akin to the market place of centuries past, where civic life played a central role. Adding to the shift is the growth of online shopping, which offers shoppers the same options but with the ad-

The move is a return to the vision of Victor Gruen, an Austrian-born American who in the 1950s developed the concept of the arcade as a public space akin to the market place of centuries past, where civic life played a central role. PHOTO: AFP ded bonus of not being subject to goods and services tax (GST) for anything below A$1,000 (S$1,070). Canberra has sought to end the loophole by imposing a 10 per cent levy from next July but the lower margins for online store such as eBay and ASOS still makes them attractive. While online shopping is estimated to make up a little more than 10

per cent of total retail sales, future arrivals such as Amazon could change that. “If (online shopping) jumps up in a big way, how does that affect bricks and mortar? Maybe all shopping centres just become cafes,” David Bond, a University of Technology Sydney accounting expert, told AFP. “You’ll probably see it move more

towards just products being sold online, versus services, cafes, cinemas, game centres and creches (at malls).” The University of Canberra’s Lisa Scharoun, who analyses the cultural role of shopping centres in societies, has seen the changes first-hand, with more than half of a local mall now filled with restaurants and cafes. Ms Scharoun said that developers

were moving away from hosting consumption-driven stores and were more willing to lease space to other users such as churches and libraries. “I think that the mall is evolving back to what it was actually intended to be when it was first conceived,” she told AFP. “It was supposed to be like an enclosed community space . . . a utopian vision of Victor Gruen.” AFP

| TRANSPORT

The Business Times | Tuesday, July 18, 2017

Air France to launch new lower-cost airline after pilot backing Paris

A Toyota factory in Derby, Central England. The document has sparked public and lawmaker concern about secretive deals. Toyota said on March 16 it would install its new car platform at its Burnaston plant. PHOTO: REUTERS

UK govt gives Toyota assurance to bag £240m investment Sources say the British business ministry has refused to make public the contents of a letter to Toyota London THE British government helped to secure a more than £240 million (S$429 million) investment from Toyota in its English plant with a letter reassuring the Japanese carmaker over post-Brexit trading arrangements, two sources told Reuters. Toyota said on March 16 it would install its new car platform at its Burnaston plant. One source, who is familiar with the letter, said that Toyota delayed the decision due by the end of December while it weighed up a number of factors including Brexit. The business ministry has confirmed the existence of a letter but refused to release it. The source said the letter was similar to one sent to Japanese carmaker Nissan last year when it decided to build two new models at its northern English plant. The document sparked public and lawmaker concern about secretive deals. The source, who did not say when the letter was sent, said it contained several reassurances. “They received a similar set of warm words as Nissan on electric vehicles, commitment to further training and to ensure the competitiveness of the UK automotive industry,” the source said.

A Toyota spokesman declined to comment on whether it had received such a letter. He referred to the company’s March 16 statement which said the British government was providing funding for training and research and development. Toyota also said at the time that “continued tariff-and-barrier free market access... will be vital for future success”. Britain said in March it would back up the investment from Toyota, which builds roughly 10 per cent of Britain’s 1.7 million cars, by spending £21.3 million to support skills and training, research and development and innovation, subject to an independent assessment. A spokesman at the business ministry declined to provide any comment for this story. Business minister Greg Clark said last year that assurances offered to Nissan were available to other firms. Reuters made a freedom of information (FOI) request to the business ministry to see documentation relating to the investment decision, which the ministry said included a letter. In its response, an official at the ministry refused to release the letter and a company briefing note, saying the information was “both highly commercially sensitive” and “would be likely to cause harm to the company’s commercial interests if disclosed”.

On third MH17 anniversary, families unveil ‘living memorial’ Vijfhuizen, Netherlands THREE years after Flight MH17 was shot down by a missile over war-torn Ukraine, nearly 2,000 relatives gathered on Monday to unveil a “living memorial” to their loved ones. A total of 298 trees have been planted in the shape of a green ribbon, one for each of the victims who died on board the Malaysia Airlines flight en route from Amsterdam to Kuala Lumpur. Dutch King Willem-Alexander and Queen Maxima joined government and international officials at a solemn ceremony to dedicate the memorial in the park of Vijfhuizen, close to Amsterdam’s Schiphol airport where the flight took off from on July 17, 2014. The names of all the 298 passengers and crew killed in the disaster were read out by their families, and 17 local children laid flowers. While most of the victims were Dutch, there were 17 nationalities on board including Australians, Britons, Malaysians and Indonesians. “A tree symbolises ‘hope’ and ‘future’ in many cultures,” the victims families association said in a statement. “We not only want to honour the MH17 victims, but also want to create a place where everyone can keep their memories of the 298 passengers alive.” Funded by donations, the project was designed by artist Ronald Westerhuis and landscape architect Robbert de Koning after it was chosen out of

three proposals by relatives in late 2015. As the third anniversary of the tragedy dawns, no suspects have been arrested although it was announced this month that any trials will be held in The Netherlands. About 100 people are wanted in connection with the disaster, after Dutch-led investigators concluded the plane was shot down by a Russian-made BUK missile transported from Russia into areas held by pro-Russian rebels. In Kiev, Ukrainian President Petro Poroshenko on Monday insisted Moscow must be held to account over the tragedy. “It was a barefaced crime that could have been avoided if not for the Russian aggression, Russian system and Russian missile that came from Russian territory,” Mr Poroshenko wrote on Facebook. The trees in the memorial will be surrounded by sunflowers, which bloom in July, and will “radiate a golden glow” over the trees, the foundation said. The flowers also represent “the sunflower fields in eastern Ukraine where some parts of the plane wreckage were found”. Each of the trees bears the name of one of the victims. And at the heart of the forest of 11 different tree varieties is a steel memorial shaped like an eye, turned upwards looking at the skies. The 16-metre-long steel eyebrow above the eye represents “the burden of the loss,” the Trouw daily said. AFP

Mr Clark has refused to publish the Nissan letter. He said he will release the information when it is no longer commercially confidential. Many of the world’s biggest car firms are worried about the long-term viability of their British plants and are using their upcoming investment decisions to push for promises to maintain free trade after Britain’s exit from the EU, which is due to take place in March 2019. Toyota finalised its decision at a meeting between its Europe president and chief executive Johan van Zyl and Mr Clark on March 15, the day before the official announcement, a third source, who is close to the company told Reuters. In response to the FOI request, the business ministry said there were three documents relating to discussions between the firm and top government officials since Mr Clark was appointed in July last year: a letter, a confidential company briefing and an email exchange. It initially refused to publish all three but after Reuters appealed the decision, the department released a redacted email exchange. Reuters asked for correspondence between the company and Mr Clark, a special adviser, a junior minister and the ministry’s automotive team. The email exchange included

three messages which were written after a meeting between Mr Clark and Dr van Zyl. The emails are redacted so that it is not possible to know who received them. “We picked up from the recent meeting with Greg Clark that Toyota has a significant investment decision coming up before the end of the year, for a new European ‘architecture plant’,” according to official correspondence dated Sept 9. “Dr Zyl noted that uncertainties over future trade arrangements are a worry, and Secretary of State Clark sought to reassure on the alignment of company and HMG (Her Majesty’s government) goals.” “It would (be) great to understand more about the decision, and if there are any ways in which HMG could help,” the email from the official said. Mr Clark had meetings with Toyota officials in September, November and March, according to an official government log. Japan’s Nissan, Toyota and Honda account for around half of British car output. Japanese Prime Minister Shinzo Abe met with British Prime Minister Theresa May in April and called for a smooth Brexit to allow Japanese firms to continue to operate. Toyota has yet to say which models it will build in Burnaston over the next decade. REUTERS

AIR France said it will move forward with plans to launch a new lower-cost airline this autumn after the project won approval from the main SNPL pilots’ union on Monday. The plan, dubbed “Boost”, is Air France’s response to pressure from Gulf carriers. It will operate 10 longhaul and 18 short-haul aircraft at lower costs than its main brand in a bid to restore some routes to profitability and gain new customers. The company will begin offering the lower-cost medium-range flights in the autumn and follow up with a new long-range service in mid-2018. The chief executive of parent group Air France-KLM said last month that the new airline would attract not only younger customers on vacation, but also business customers. Air France-KLM CEO Jean-Marc Janaillac praised the pilots’ “spirit of responsibility” after they agreed to the creation of a cheaper medium and long-haul service on condition that they would receive the same pay and conditions. The hiring of stewards, hostesses and part of the ground personnel for the new Boost service will, by contrast, be outsourced. Mr Janaillac said the agreement was a “balanced compromise that serves the interest of the company and all its employees”. The pilots were initially hostile to the plan, fearing that they would be forced to accept lower wages. In September 2014, they went on strike for two weeks over the expansion of Air France’s low-cost European subsi-

diary Transavia, grounding thousands of flights. Monday’s accord ends seven months of negotiations on a new cost-cutting deal. The move comes as other traditional carriers launch their own budget, long-haul airlines to meet competition on the north Atlantic from the likes of Norwegian and Wow. Lufthansa offers low-cost, longhaul flights via its Eurowings budget subsidiary while British Airways parent IAG launched new airline Level this year. The trade union approved Air France’s plans on Monday by a majority of just over 78 per cent. The deal also includes efforts to increase productivity by around 40 million euros (S$62.9 million) annually across the Air France operations, as part of the group’s “Trust Together” programme. The agreement comes just days after cabin crew also agreed on a new collective agreement, thus removing two sources of uncertainty for Air France as it seeks to bring costs down and battle competition from the Gulf carriers on one side and budget rivals on the other. Air France-KLM shares, which have already more than doubled this year in light of improving traffic and revenue trends, were up 2.5 per cent in late session trading on Monday. Air France’s head of human resources said that the airline aimed to recruit 250 pilots per year over the next three years. Air France-KLM is due to report its second-quarter results on July 28. REUTERS, AFP

Emirates signs partnership deal with discount carrier FlyDubai Dubai EMIRATES, the world’s biggest longhaul airline, will form a partnership with low-cost sister carrier FlyDubai aimed at allowing the companies to feed passengers onto each other’s flights. The deal will include network collaboration and coordinated scheduling at Dubai International Airport, where both airlines are based, Emirates said in a statement on Monday. It will be rolled out from the fourth quarter starting with enhanced codesharing arrangements. Dubai has been looking at placing the two government-owned carriers under a single structure for several months. The move means FlyDubai’s regional flights will help fill Emirates jets, while the discount operator gets access to a global network of 157 des-

tinations. New city pairs are set to be opened up and duplicated routes eliminated, while frequent-flyer programmes may be aligned. The partnership unites two complementary models and will unlock “immense value”, said Sheikh Ahmed bin Saeed Al Maktoum, chairman and chief executive officer of Emirates Group and chairman of FlyDubai. The airlines will continue to be managed independently, he said. Emirates suffered a 70 per cent drop in profit in the year ended March 31 as the low price of crude clipped growth in oil-based Persian Gulf economies, terrorist attacks hurt demand for travel and the company faced US-imposed travel restrictions. Tim Clark, the carrier’s president, has also expressed concern about the threat from discount long-haul rivals in Asia and Europe. BLOOMBERG

EasyJet CEO resigning to run UK broadcaster ITV London EASYJET Plc chief executive officer Carolyn McCall is stepping down from the discount carrier to take up the same role at ITV Plc, the UK broadcaster that’s dealing with a slowdown in advertising amid recurrent takeover speculation. Ms McCall will leave EasyJet around the end of the year and join ITV on Jan 8, the companies said in separate statements on Monday. A search for a successor has already begun, the Luton, England-based airline said. The 55-year-old CEO told the airline’s board of her decision on Sunday, a person familiar with the matter said before the announcement. “After seven years, the opportunity from ITV felt like the right one to take,” Ms McCall said in the EasyJet statement. “It is a fantastic company in a dynamic and stimulating sector. EasyJet is a structural winner in a brilliant position, and I look forward to being a loyal customer in the years to come.” As the replacement for outgoing ITV CEO Adam Crozier, Ms McCall will inherit a business that is cutting jobs and slimming costs as it faces declines in advertising sales with retailers wary over the short-term outlook for Brexit and rising inflation. Mr Crozier took over the top job in 2010 and has worked to rejuvenate the UK’s biggest free-to-air broadcaster, building up its ITV Studios production arm to reduce its reliance on advertising. Ad sales made up 47 per cent of

Ms McCall took over at EasyJet in July 2010. Since then she has helped transform the European aviation industry along with rival Ryanair Holdings Plc through the rapid expansion of low-cost carriers. PHOTO: BLOOMBERG ITV’s overall revenue in 2016, compared to 64 per cent in 2010, the year Mr Crozier joined. ITV’s shares have almost tripled since Mr Crozier became CEO, giving the company a market value of £7 billion (S$12.6 billion). Billionaire John Malone’s Liberty Global Plc owns about 9.9 per cent of ITV, which is a perennial subject of takeover speculation, talk that has intensified since the Brexit vote. Ms McCall took over at EasyJet in July 2010 after rising to the helm of the Guardian Media Group. Since then she has helped transform the European aviation industry along

with rival Ryanair Holdings Plc through the rapid expansion of lowcost carriers. More recently the airline has struggled with the impact of Britain’s vote to exit the European Union, the collapse of oil prices and a string of terror attacks which has driven a slump in ticket prices. The next EasyJet CEO must “increase focus on cost management and possible restructuring”, Daniel Roeska and Caius Slater, analysts for Sanford C Bernstein, wrote on Sunday in a note to investors. “We think bringing in an external candidate, given the required qualifications, with

fewer ties to the organisation and a fresh view, may be beneficial for shareholders.” EasyJet shares closed little changed at 1,411 pence on Friday in London, valuing the company at £5.6 billion. The shares are down 8 per cent since the Brexit vote in June 2016, after having lost about a third of its value after the referendum. Sky News reported on Saturday that Ms McCall was resigning. Last year she was linked to a possible move to become the boss at Londonbased retailer Marks & Spencer Group Plc. BLOOMBERG

GOVERNMENT & ECONOMY | 19

The Business Times | Tuesday, July 18, 2017

UK’s Davis resumes Brexit talks as cabinet rows turn ugly

Merkel’s rival takes a leaf from Macron’s election playbook

He is in a rush to move the talks towards the crucial issue of future trade relations Brussels UK Brexit Secretary David Davis returned to Brussels on Monday to resume Brexit talks with the European Union, as infighting among ministers in London over the future of Prime Minister Theresa May gathered pace. Mr Davis and the EU’s chief Brexit negotiator, Michel Barnier, shook hands before the start of four days of talks on the priority issues identified by the bloc, including the rights of EU citizens in the UK and Britain’s financial obligations. Mr Davis left Brussels around three hours later, leaving lower-ranking officials to carry out technical work. He plans to go back to the Belgian capital on Thursday. In a tacit acknowledgment that last month’s opening of negotiations had achieved little, Mr Davis said it was now crucial to “get into the substance of the matter”. “For us it’s incredibly important that we now make good progress,” Mr Davis told reporters. It’s time to “negotiate through this and identify the differences so we can deal with them, and identify the similarities so we can reinforce them”. Mr Davis is in a rush to move talks towards the crucial issue of future trade even as open divisions in the cabinet back home make it difficult for Europe to know what Britain wants. A Sunday Times photo montage illustrated Mrs May’s tenuous grip on power with an image of Chancellor of the Exchequer Philip Hammond, Mr Davis and Foreign Secretary Boris Johnson – all names touted as potential successors – aiming pistols at each other. Mrs May will remind her cabinet on Tuesday of the need to keep their meetings private, her spokesman, James Slack, told reporters in London on Monday. The EU has made much of the early running by stating its positions on the issues up for debate as well as forcing the UK into its schedule of discussing “divorce” issues such as citizens’ rights and financial obligations before moving on to a future trade arrangement.

The European Union's chief Brexit negotiator Michel Barnier and his delegation (left) and Britain’s Brexit Secretary David Davis and his delegation attending a first full round of talks on Britain's divorce terms from the European Union, in Brussels on Monday. PHOTO: REUTERS Mr Davis is also now echoing Mr Barnier’s refrain that the time left to get a deal is slipping away and common ground must be found swiftly. Mrs May’s Brexit point person is among the members of her cabinet said to be unhappy about the prime minister’s policy towards the EU. He has warned Mrs May repeatedly that the uncertain fate of citizens after the UK’s withdrawal in 2019 was souring his meetings with member states, two people familiar with the matter told Bloomberg this month. Even so, she rejected his pleas to make an unconditional pledge on their rights. Amid dismay at Mrs May since she lost the government’s parliamentary majority in last month’s general elec-

Thai junta grants king full control of palace wealth Bangkok A NEW law giving Thailand’s king direct control over royal assets worth billions of dollars went into force on Monday, the latest move by an increasingly assertive monarch to consolidate his power. King Maha Vajiralongkorn inherited one of the world’s great fortunes when he ascended the throne in October following the death of his father Bhumibol Adulyadej who ruled for seven decades. Thailand’s monarchy is shielded from both criticism and scrutiny by a draconian lese majeste law and does not declare its wealth. But analysts say the Chakris are one of the world’s wealthiest royal dynasties, with estimates varying between US$30-60 billion. Most of this wealth is controlled by the opaque Crown Property Bureau (CPB), a vast portfolio that includes massive property ownership and investments in major companies. On Sunday the Royal Gazette published a new law governing the CPB that was passed by the junta’s rubber-stamp legislature last week and went into effect on Monday. The main change gives the king power to appoint all members of the committee that oversees the CPB. Under the previous law, the committee’s chairman was the finance minister, a move meant to ensure some semblance of government oversight. That requirement has now been removed, allowing King Maha Vajiralongkorn free rein to appoint who he likes to head the committee.

It is the first time that law has been changed in 69 years. On paper the monarchy has little constitutional power. But under the late king Bhumibol Adulyadej’s long and charismatic reign it came to wield huge political and economic clout behind the scenes. Academics often dub Thailand a “network monarchy” in which major aristocratic families, businesses and state bureaucracies, including the military, all benefit from royal patronage. The country’s first succession in 70 years stirred anxiety among powerbrokers about how the new monarch would manage those complex relationships. Since King Bhumibol Adulyadej’s death, a series of legal changes have been made which analysts say strengthens King Maha Vajiralongkorn’s power. At the request of the new king’s office the junta waved through constitutional amendments earlier this year. Among these was a provision allowing the king to travel overseas without having to appoint a regent in his stead, and an end to the need for all royal decrees to be countersigned by a government official. King Maha Vajiralongkorn also took direct control of five state agencies overseeing royal affairs and palace security that were previously under government or military control. In the past Thailand has responded to published estimates of the monarchy’s wealth by pointing to the previous law governing the CPB, arguing that it was the government which had ultimate say over the royal wealth. AFP

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tion, some 30 Conservative Party lawmakers would back a leadership bid by Mr Davis, the Sunday Telegraph reported, citing unidentified allies of the Brexit secretary including two former cabinet ministers. The Telegraph reported an unidentified cabinet minister using expletive-filled language to accuse Mr Hammond of treating colleagues who supported the Leave campaign, such as Mr Davis, like “pirates who have taken him prisoner”. Mr Johnson is also in Brussels on Monday, discussing foreign policy with his 27 EU counterparts in a separate EU building. When he spoke to reporters about 30 minutes after Mr Davis, he ignored questions about the conflict in the cabinet.

“In another part of town today I am very pleased that negotiations are beginning; as you know a very fair serious offer has been put on the table by the UK,” Mr Johnson said. He added that Britain’s proposal to safeguard the rights of European citizens is “good” and “I hope very much that people will look at that offer in the spirit it deserves”. That hasn’t happened yet and the EU wants the UK to go further on the 3.2 million EU citizens in Britain and another one million Britons living across the EU. Mr Barnier appeared exasperated last week as he said that the UK’s offer on citizens reduced their current level of rights, and said that he was astounded that some members of the British government still did not ac-

cept that the country has to pay its dues. The UK tried to allay those concerns on Thursday with a written statement to Parliament referring explicitly to a “financial settlement” for the first time. Mrs May’s decision to activate the EU’s exit clause three months ago means that the UK will leave the bloc with or without a deal in March 2019. The EU has said that it will only allow talks on a future relationship once there’s “sufficient progress” on citizens’ rights and the UK’s financial obligations. “We need to examine and compare our respective positions in order to make progress,” Mr Barnier told reporters before talks started on Monday. BLOOMBERG

Xi says China will accelerate market opening, expand imports He says foreign firms should be treated fairly and the yuan currency will be kept basically stable Beijing PRESIDENT Xi Jinping said on Monday China will accelerate market opening and clear administrative hurdles to boost foreign investment, while stepping up financial regulation to fend off risks. China should quicken the pace to eliminate restrictions on foreign capital in areas such as baby products, elderly care, architecture design, accounting, auditing, logistics, and

e-commerce, Mr Xi told the Communist Party’s financial and economic leading group in a regular meeting, as reported by state radio. “We need to continue to utilise foreign investment to push forward supply-side reform and elevate our economy to catch up with the global innovation pace,” Mr Xi said. “We must push forward market opening faster in areas that protects consumer rights, increase financial competition and fend off financial risks.” Foreign companies have long complained about a ban on them entering certain strategically important sectors and requirements to hold a

minority share in the form of a joint venture with local firms even in sectors they are allowed to participate in. Mr Xi said China should create a new basic law governing foreign investment and set a deadline to get rid of existing rules that are against market-opening principles. “Foreign firms should be treated fairly,” Mr Xi was reported as saying. He stressed excessive checks and penalties against foreign firms should be cleared and reduced. China will also expand imports while keeping exports steady, Mr Xi said. It would keep its yuan currency basically stable and its exchange rate within a “reasonable” range, he was reported as saying. REUTERS

India votes for next president from the lowest Dalit caste New Delhi INDIAN lawmakers voted on Monday for a new president certain to come from the bottom of the Hindu caste system, in an election seen as strengthening Prime Minister Narendra Modi’s grip on power. Some 4,900 legislators nationwide voted in what Mr Modi termed a “historic” election to choose the titular head of state. Ram Nath Kovind, the candidate of Mr Modi’s right-wing Bharatiya Janata Party (BJP) and a former lawyer and state governor from the Dalit community, is certain to win. His main rival is Meira Kumar, the nominee of the Congress-led opposition and also a Dalit. But the BJP, which won a landslide in a general election in 2014, has for the first time assembled enough electoral college votes across the country to push through its presidential candidate. Congress has traditionally dominated the post. “There is no rocket science, Ram Nath Kovind will win today,” Praful Patel, a leader of the small opposition Nationalist Congress Party, conceded as he cast his vote.

Mr Modi was among the first to vote, using a specially approved violet ink pen. The Election Commission barred the use of personal pens to ensure clean voting. The result will be announced on Thursday. “The presidential poll this time is historic. Probably for the first time no party has made any undignified or unwarranted comment on the rival candidate,” Mr Modi tweeted on the eve of the poll. “Every political party has kept in mind the dignity of this election.” India’s prime minister wields executive power, but the president can send back some parliamentary bills for reconsideration and also plays a guiding role in the process of forming governments. Analysts said the election of Mr Kovind, 71, would help Mr Modi tighten his grip on power and accrue political capital by sending an important message to the Dalits, a longdisdained electoral group once known as “untouchables”. Dalits, who number around 200 million in the nation of 1.3 billion, are

Berlin CHANCELLOR Angela Merkel’s main domestic challenger, Martin Schulz, joined international criticism of Germany’s budget surplus as he sought to gain an opening 10 weeks out from federal elections. Mr Schulz, a Social Democrat whose party has been Ms Merkel’s coalition partner for the past four years, pledged on Sunday to guarantee that surplus revenue would go toward spending on infrastructure if he wins the Chancellery on Sept 24. That sentiment echoed French President Emmanuel Macron, who last week called Germany out for doing too little to address its trade surplus. Ms Merkel’s response in both cases has been to say that her Christian Democratic-led coalition with the SPD has already increased spending “massively” on roads, broadband expansion and pre-schools. She says the greatest challenge to allocating more funds to new projects lies in removing bureaucratic barriers, specifically in the planning process. “At this point, we can’t spend the money that we have,” Ms Merkel said in an interview with ARD television on Sunday. “I don’t see the main problem as the question of whether there should be more money – you can and you must do that – but rather in accelerating planning.” Ms Merkel, whose public appointments dry up this week before she goes on summer vacation, holds a lead over Mr Schulz’s SPD of 13-17 percentage points. With a short campaign only due to begin from about mid-August, the former European Parliament president is left seeking a silver bullet to topple the chancellor and stop her from winning a record-tying fourth term. Ms Merkel reprised the spending theme in front of a business group on Monday, telling them in the Baltic port city of Stralsund, home to her constituency, that she’ll press ahead with her trade agenda and seek full employment in Germany by 2025. “Whoever disrupts global supply chains, or even breaks them, will eventually harm all those involved,” Ms Merkel said. In her ARD interview, Ms Merkel also said that she planned to serve a full four-year term if re-elected. “I made clear when I announced my re-election bid that I would run for four years,” Ms Merkel told ARD. A full fourth term would extend her chancellorship to 16 years through 2021. Germany’s current-account surplus has been on the receiving end of persistent criticism, including most recently from the International Monetary Fund and the administration of US President Donald Trump. The IMF says the imbalance has sapped Europe’s economic recovery and created global risk, while Mr Trump says it is simply “unfair”. Mr Schulz sees redressing the distortion partly in promoting fiscal spending to create jobs, an issue which he is deploying as a campaign cudgel. Hours before Ms Merkel’s interview, Mr Schulz unveiled a campaign plan that would include “much higher” infrastructure investment. He riffed off Ms Merkel’s common theme that ensuring a balanced budget and restraining debt are a matter of “justice” for future generations. BLOOMBERG

Analysts say the election of Mr Kovind (left) will help PM Modi tighten his grip on power and accrue political capital by sending an important message to the Dalits. PHOTO: REUTERS

among India’s poorest communities and relegated to the margins of society. Despite legal protection, discrimination is rife and Dalits are routinely denied access to education and other advancement opportunities. On the day of the vote, media reported the case of a Dalit labourer allegedly beaten to death by uppercaste attackers, highlighting the plight of the “untouchable” caste. Mr Modi’s rivals have protested at Mr Kovind’s nomination, citing his association with the radical right-wing Rashtriya Swayamsevak Sangh, the ideological power behind the BJP.

The opposition nominee Ms Kumar, the daughter of freedom fighter Babu Jagjivan Ram, was a diplomat before entering politics in 1985 and became India’s first woman speaker in 2009. Her nomination, which followed Mr Kovind’s, was seen by many as an opposition attempt to counter Mr Modi’s move to woo Dalits. Congress president Sonia Gandhi rallied opposition ranks before the vote, calling the contest a clash of ideas and a conflict of disparate values. “We cannot and must not let India be hostage to those who wish to impose upon it a narrow-minded, divisive and communal vision.” Votes from the BJP’s traditional Hindu base propelled Mr Modi to his 2014 legislative victory, especially in the battleground states of Uttar Pradesh and Bihar. Dalit support will be key for the BJP before the 2019 general election as the party has been largely shunned by Muslims, who make up about 14 per cent of the population. AFP

| GOVERNMENT & ECONOMY

The Business Times | Tuesday, July 18, 2017

Mr Le Maire says Brexit could bring “thousands of jobs to Paris”, a prospect which he welcomes.

Brexit puts financial trade tax on ice as banks start plans to relocate Brussels A SIX-YEAR push to impose a tax on financial transactions in Europe may have run its course, with Germany and France dragging their feet as they prepare for Brexit and a redrawing of the financial map that has already begun. French Finance Minister Bruno Le Maire said earlier this month that Brexit could bring “thousands of jobs to Paris”, an opportunity that could be lost if the tax were imposed. His German counterpart, Wolfgang Schaeuble, said that “quite a bit speaks in favour of the French argument to look first at how the Brexit negotiations are going”. With the heavyweight boosters among the 10 countries pursuing the tax getting cold feet, the plan’s future looks bleak. “Some had said Brexit could prompt further interest” in the financial-transaction tax, said Dan Neidle, a partner at Clifford Chance in London. “In fact, it looks like the opposite is the case. Brexit has prompted impressive efforts from the French and others to attract the financial sector – those efforts would be completely undermined by the tax.” The European Commission, the EU’s executive arm, proposed the tax in 2011 to make sure the industry made a “fair contribution” after taxpayers bore the costs of the financial crisis. When some member states opposed the levy, a smaller group sought a compromise under “enhanced cooperation” rules. Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain are still at the table. A decision to impose the tax could benefit Ireland and Luxembourg, which have also actively courted the big banks and are not part of the group pursuing the tax. Finance ministers of the 10 nations haven’t met in months after they hit a snag over the treatment of pension funds. Other open issues include intra-group transfers, tax rates and collection methods, according to an internal document seen by Bloomberg. Governments have recently grown increasingly wary of pushing the tax while banks in the UK are deciding where to move staff to keep servicing clients inside the single market. President Emmanuel Macron’s new French administration has also changed gear and made luring firms to Paris a priority. “Sure I want the tax, I just want us to take into account this change that is the UK exiting the EU,” Mr Le Maire said. “And I want these decisions to be taken collectively.” Mr Schaeuble said the pause “doesn’t mean a suspension until the end of the Brexit negotiations, but one should be a bit more generous on the time horizon”. German politicians are already pushing to relax the country’s restrictive labour laws to make them more appealing to foreign banks. Frankfurt has emerged as the biggest winner in the fight for thousands of London-based jobs that will have to be relocated to the EU after Britain quits the bloc. Standard Chartered, Nomura Holdings and Daiwa Securities have picked the German city for their EU headquarters. Citigroup, Goldman Sachs and Morgan Stanley are weighing a similar decision, said people familiar with the matter, asking not to be named because the plans aren’t public. HSBC is the biggest non-French bank so far to opt for Paris. National elections after Europe’s summer break are creating even more uncertainty. Germans go to the polls in September, followed by Austria a month later. Both have the possibility of bringing a centre-right government to power. BLOOMBERG

No one is suggesting that sub-prime car loans will unleash the next crisis. But since the Great Recession, business has exploded. In 2009, US$2.5 billion of new sub-prime auto bonds were sold. In 2016, US$26 billion were, topping average pre-crisis levels, according to Wells Fargo. PHOTO: BLOOMBERG

Car loans zooming into sub-prime trouble; but financial crisis not likely For investors, the allure of sub-prime car loans is clear as the securities composed of such debt can offer 5% yields New York IT’S classic sub-prime: hasty loans, rapid defaults and, at times, outright fraud. Only this isn’t the US housing market circa 2007. It’s the US auto industry circa 2017. A decade after the mortgage debacle, the financial industry has embraced another type of sub-prime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide. Sub-prime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great Recession, business has exploded. In 2009, US$2.5 billion of new sub-prime auto bonds were sold. In 2016, US$26 billion were, topping average pre-crisis levels, according to Wells Fargo & Co. Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as US car sales soared, the two have built one of the industry’s most powerful sub-prime machines. Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s sub-prime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into US$1 billion of bonds, according to Moody’s Investors Service. The largest portion were for Chrysler vehicles. Some of their dealers, meantime, gamed the loan application process so low-income borrowers could drive off in new cars, state prosecutors said in court documents. Through it all, Wall Street’s appetite for high-yield investments has kept the loans – and the bonds – coming. Santander says it has cut ties with hundreds of dealerships that were pushing unsound loans, some of which defaulted as soon as the first payment. At the same time, Santander plans to increase control over its US sub-prime auto unit, Santander Consumer USA Holdings Inc, people familiar with the matter said. Santander, subpoenaed or ques-

tioned by a group of about 30 states regarding its auto loan underwriting and securitisation activities, declined to comment on “active legal matters”. In May, Santander agreed to pay US$26 million to settle allegations brought by Delaware and Massachusetts as part of ongoing investigations into the auto industry’s lending practices. Santander, whose partnership with Chrysler goes by the Chrysler Capital brand name, neither admitted nor denied wrongdoing. Reid Bigland, Chrysler’s US sales chief, said Santander has been a “good partner”. In recent years, lending practices in the sub-prime auto industry have come under increased scrutiny. Regulators and consumer advocates say it takes advantage of people with nowhere else to turn. For investors, the allure of sub-prime car loans is clear: securities composed of such debt can offer yields as high as 5 per cent. It might not seem like much, but in a world of ultra-low rates, that’s still more than triple the comparable yield for Treasuries. Of course, the market is still much smaller than the sub-primemortgage market which triggered the credit crisis, making a repeat unlikely. But the question now is whether that premium, which has dwindled as demand soared, is worth it. “Investors seem to be ignoring the underlying risks,” said Peter Kaplan, a fund manager at Merganser Capital Management. Asset-backed securities based on auto loans are engineered to keep paying even when some loans sour. Still, some cracks have emerged in the US$1.2 trillion market for auto financing. Delinquencies have picked up, as have losses on sub-prime loans. Auto loan fraud, meantime, is approaching levels seen in mortgages during the bubble. Auto finance “is not going to bring down the financial system like the mortgage crisis almost did, but it does signal more stress with the consumer”, said Stephen Caprio, a credit strategist at UBS Group AG. Whatever the case, the SantanderChrysler relationship has opened a rare window into an industrywide race to the bottom that may have lasting consequences. In the years after its 2009 bank-

ruptcy, Chrysler looked for a dedicated lender to help customers finance their cars quickly. One reason it picked Santander was the Spanish lender’s expertise in “automated decisioning”. At the time, a Chrysler executive said the process helped Santander “take a little bit more risk and approve more deals because they mine the data” in sub-prime. Becoming Chrysler’s preferred lender made sense for Santander. It was aggressively expanding in the US sub-prime loan market, and Chrysler, the perennial third wheel among the “Big Three”, relied more on buyers with lower credit scores than General Motors Co or Ford Motor Co. Problems surfaced almost from the start. Many of them, detailed in the settlement between Santander and the authorities in Delaware and Massachusetts, recall some of the excesses of the sub-prime housing era. Attorneys-general in both states alleged Santander enabled a group of “fraud dealers” to put buyers into cars they couldn’t afford, with loans it knew they couldn’t repay. It offloaded most of the debt, which often had rates over 15 per cent, reselling them to yield-hungry ABS investors. State authorities also said an internal Santander review in 2013 found that 10 out of 11 loan applications from a Massachusetts dealer contained inflated or unverifiable incomes. (It’s not clear whether this particular case involved a Chrysler dealer.) Santander kept originating the dealer’s loans anyway, even as they continued to default “at a high rate”, the authorities said. Some dealerships even asked Santander to double-check customers’ incomes because they didn’t trust their own employees, the authorities said. They also said the lender didn’t always oblige because that would put it at a “competitive disadvantage”. At the time of the settlement, Santander said it was “totally committed to treating its customers fairly”. In some ways, the laissez-faire mindset reflects how competition squeezed Santander as demand for new cars – and loans to finance them – soared. Without a deposit base, Santander’s auto finance unit had a tough time competing with banks for the most creditworthy buyers. Private equity firms also poured in, vying for many of the same sub-prime borrowers Santander targets, but often with more relaxed underwriting. And Santander doesn’t get the same prefer-

ences that carmakers’ wholly owned finance units typically receive, Mr Bigland said. The irony is that what got Santander into hot water did little to help it reach the lofty goals set at the outset of the 10-year venture with Chrysler. As at April, Santander financed about 19 per cent of the carmaker’s sales, short of the 64 per cent they targeted by that time. While Santander takes pains to avoid criticising Chrysler, the lender launched a special loyalty and rewards programme to vet the carmaker’s dealerships. Those that aren’t deemed fraudulent during the process are labelled “VIPs”. Santander also cut ties with over 800 dealers across its network since 2015 as it

Auto finance “is not going to bring down the financial system like the mortgage crisis almost did, but it does signal more stress with the consumer”. Stephen Caprio, a credit strategist at UBS Group AG

tries to boost business without exposing itself to more bad loans. “Chrysler continues to represent an opportunity for growth for us,” Richard Morrin, chief operating officer of Santander’s auto finance arm, said during an investor presentation in February. Still, “it can’t be growth at any cost”. Chrysler declined to comment on instances of fraud at its dealer network. Indeed, with US auto sales falling after a record 2016, many lenders including Santander say they’re tightening standards. Santander’s underwriting practices, however, continue to raise eyebrows. In May, Moody’s drew attention to the fact that Santander verified incomes on only 8 per cent of loans it bundled into bonds, based on data that auto-debt issuers have recently started to disclose. Yet when it comes to due diligence, there’s no industrywide stan-

dard. Unlike the mortgage market, stated-income loans – also known as “liar loans” – are perfectly legal in car buying. Last month, Jeff Brown, Ally Financial Inc’s chief executive, said verifying income isn’t the norm. Ally, he said, checked incomes on 65 per cent of its sub-prime car loans. GM Financial’s AmeriCredit unit checked roughly the same percentage. The industry has little reason to change given the success of Wall Street’s securitisation machine. Protections built into the bonds have largely insulated investors from losses even as delinquencies pile up. Most securities are upgraded over their lifetimes. The losers, of course, are people who go into debt for cars they can’t afford. Jerry Robinson, who worked in Santander’s debt collection unit, has seen the trouble firsthand. Mr Robinson, who retired in August after six years with Santander, says one of his responsibilities was to get cars the lender repossessed back into their owners’ hands. Often times, he found dealers listed non-existent features such as sunroofs or alloy wheels to inflate a car’s value and win credit approval. Although Mr Robinson’s job was to make sure dealers reimbursed Santander for any loan fraud, borrowers didn’t see their debts reduced, he said. Instead, their loans were usually extended, increasing the compound interest consumers would ultimately pay after their repossessed car were reinstated. More often than not, those payments wind up going to ABS investors. Bonuses were tied to how many borrowers could be reinstated, said Mr Robinson, now a Dallas-based member of the Committee for Better Banks, a worker and consumer advocacy coalition backed by a union seeking to organise bank employees. The same cars were often repoed multiple times. Santander spokeswoman Laurie Kight disputed Mr Robinson’s account and said it was part of a union campaign to discredit the lender. Santander is “unaware” of the type of conduct he described and money reimbursed by dealers for non-existent features is used to reduce borrowers’ loan balances, she said. Mr Robinson contends it was more profitable for Santander to keep cash-strapped borrowers in their cars rather than auction off the vehicles. “The business makes money putting people in the car.” BLOOMBERG

Firms under pressure as labour drought grows: US survey More firms having trouble hiring skilled employees in the last 3 months compared with January Washington A GROWING number of companies are finding it difficult to recruit skilled workers, which threatens to curtail profits and growth, according to a quarterly survey conducted by the Washington-based National Association for Business Economics. The results reinforce data coming out of the US this year, which show a tightening labour market amid low in-

terest rates and an economic expansion. Many economists expect the jobs market to start putting pressure on wages and inflation, though that phenomenon has yet to fully materialise. The results of NABE’s July Business Conditions Survey published on Monday showed that 34 per cent of respondents have had trouble hiring skilled employees over the last three months, up from 27 per cent in January. The Washington-based association polled 101 panellists, who are economists from companies and industry associations. NABE survey analyst Patrick

Businesses in Houston are under pressure to find workers with more than a high-school diploma but less than a four-year university degree to fill vacancies in the oil and construction industries.

Jankowski said businesses in Houston, where he’s based, are under pressure to find workers with more than a high-school diploma but less than a four-year university degree to fill vacancies in the oil and construction industries. “When you cannot bring in the workforce you need, it’s going to affect your sales and affect your profits,” Mr Jankowski said. In response, companies are sponsoring foreign workers, expanding their search and hiring more independent contractors, according to the survey. They’re also boosting automation, stepping up internal training

and in some cases improving pay, Mr Jankowski said. Perhaps at least partially as a result, more than a third of respondents cited labour costs as having the largest negative impact on their profits so far this year. Still, more firms are experiencing higher sales and profit margins, and an increased number are boosting investments. While expectations for economic growth have been tempered a bit, 60 per cent of respondents still expect gross domestic product to climb faster than 2 per cent over the next year, which is in line with market estimates. BLOOMBERG

GOVERNMENT & ECONOMY | 21

The Business Times | Tuesday, July 18, 2017

US recipe for Nafta revamp: reheat with a dash of TPP? The Trump administration wants to modernise the pact to account for digital trade, tackle labour and IP issues Washington SOME provisions of the Trans-Pacific Partnership (TPP) which President Donald Trump quit as part of his pledge to protect American workers from “bad trade deals” may still serve to shape a revised Nafta trade pact, US officials and trade experts say. Mr Trump threatened to ditch the 1994 North American Free Trade Agreement too, but eventually decided to renegotiate the pact in talks with Mexico and Canada due to begin in mid-August. On Monday, US Trade Representative Robert Lighthizer will offer first insights into the administration’s strategy when he presents Congress its objectives for the Nafta negotiations. Several US administration officials, speaking on condition of anonymity, said Mr Lighthizer will out-

line plans for updating Nafta rather than seek a major overhaul of the agreement. While the administration has said it hopes to complete Nafta negotiations by the end of the year, the strategy will not set a timeline, they say. Thus far, the Trump administration offered few specifics, other than expressing its desire to modernise the pact to account for digital trade that was in its infancy in the early 1990s and to tackle festering issues on labour, environment, intellectual property rights and state-owned enterprises. Since those areas have already been addressed in the TPP negotiated under former president Barack Obama and agreed by Canada and Mexico, the pact provides a useful template that could help speed up the

Nafta negotiations, US officials say. They warn, however, that no final decision has been made on using TPP language. TPP requires members, for example, to allow independent unions, set working hours and safety standards and deter forced labour and has set higher environment standards than any other previous US trade deal. The pact also sets a 70-year copyright term and eight years of patent protection for costly biologic drugs, significantly less than the 12 years applied in the United States. Lawmakers from the US industrial heartland particularly want to see enforceable labour standards that would lift Mexico’s chronically low wages, which they blame for US factories migrating south of the border. “A lot of the negotiators were just in the room a few years ago doing this stuff. They know where the bodies are buried,” said one business executive with knowledge of Nafta delibera-

tions. Some lawmakers want a more ambitious deal than TPP. “Donald Trump promised to get a better deal than TPP, and Americans are going to be deeply disappointed if he doesn’t follow through on Nafta negotiations,” said Senator Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee and an influential voice on trade matters.

“A lot of the negotiators were just in the room a few years ago doing this stuff. They know where the bodies are buried.” A business executive with knowledge of Nafta deliberations

In particular, Canada and Mexico should be able to agree to US proposals on digital trade and environment that got watered down in the final TPP text, Mr Wyden told Reuters. The demands the Trump administration makes in the talks could have far-reaching implications for US trade relations across the globe, with China keen to make inroads with Mexico and Canada if the United States is seen to be pulling back. One area to watch will be the so-called rules of origin that determine how much regional content a product must have to be exempt from tariffs. US Commerce Secretary Wilbur Ross has frequently said Nafta needed to tighten those rules to prevent China from using the trade bloc as a tariff-free “back door” to the US market. Analysts say any US demands for more specifically US rather than broadly North American content for cars or other manufactured goods would be a tough sell, though Mexico has indicated it could be ready for some concessions to strengthen the region’s defences against Asian competition. Christopher Padilla, former US undersecretary for international trade at the US Commerce Department now at IBM, believes that merely “tweaking” the rules of origin would be enough to

satisfy Mr Trump’s political agenda, but it still may require companies to alter their supply chains. The clarion call from US business groups in the lead-up to the talks is “do no harm”. US and international companies have invested hundreds of billions of dollars building integrated North American supply networks and Mr Trump rang alarm bells in corporate boardrooms in April when he threatened to terminate the pact. Mr Trump backed off after a furious lobbying effort, but analysts say he may still choose a “hard exit” if the talks fail to achieve his goal of shrinking the US trade deficit with Mexico. Nafta has quadrupled trade between the three countries, surpassing US$1 trillion in 2015. Over a decade through to 2010, however, the United States lost nearly six million manufacturing jobs, a figure that resonates with Mr Trump. US trade balance with Mexico also swung from a small surplus in 1994 to deficits that have exceeded US$60 billion for most of the past decade. Fred Bergsten, a senior fellow at the Peterson Institute for International Economics, said the administration would risk derailing the talks if it focused on reducing the trade imbalance with Mexico, like it has threatened to do. REUTERS

Americans feel good about the economy, but not so good about Donald Trump Chicago ALMOST six months into Donald Trump’s presidency, Americans are feeling fairly optimistic about their jobs, the strength of the US economy, and their own fortunes. That should be welcome news for the president, except for one thing: The public’s confidence largely appears to be in spite of Mr Trump, not because of him. The latest Bloomberg National Poll shows 58 per cent of Americans believe they’re moving closer to realising their own career and financial aspirations, tied for the highest recorded in the poll since the question was first asked in February 2013. A majority expect the US stock market to be higher by the end of this year, while 30 per cent anticipate a decline. Yet they don’t necessarily think Mr Trump deserves credit for rising markets and falling unemployment. Just 40 per cent of Americans approve of the job he is doing in the White House, and 55 per cent now view him unfavourably, up 12 points since December. Sixty-one per cent say the nation is headed down the wrong path, also up 12 points since December. Mr Trump scored his best numbers on his handling of the economy, but even there the news for him isn’t great. Less than half of Americans – 46 per cent – approve of Mr Trump’s performance on the economy; 44 per cent disapprove. He gets slightly better marks for job creation, with 47 per cent approving. “If you take the president’s scores out of this poll, you see a nation increasingly happy about the economy,” said pollster J Ann Selzer, who oversaw the survey. “When Mr Trump’s name is mentioned, the clouds gather.” In nearly every measure of his per-

formance, the poll indicates that Mr Trump’s tumultuous presidency is not wearing well with the public. A 56 per cent majority say they’re more pessimistic about Mr Trump because of his statements and actions since the election. That’s a huge swing since December when 55 per cent said his statements and actions made them more optimistic about him. The public has grown more sceptical that Mr Trump will deliver on some of his most ambitious campaign promises. Two-thirds don’t think he’ll succeed in building a wall along the Mexican border during his first term. More than half say he won’t be able to revive the coal industry. A majority – 54 per cent – believe Mr Trump will manage to create trade deals more beneficial to the US, but that’s down from 66 per cent in December. There’s division on whether he’ll be able to bring a substantial number of jobs back to America, or significantly reform the tax code. And despite his assurances that he and congressional Republicans will repeal Obamacare and replace it with a “beautiful” new health care bill, 64 per cent of Americans say they disapprove of his handling of the issue. That’s especially significant because health care topped unemployment, terrorism and immigration as the issue poll respondents chose as the most important challenge facing the nation right now. There are at least two areas where Americans say they believe Mr Trump will deliver: Almost two-thirds say he will make significant cuts in government regulation, though it’s not clear whether most think that’s a good or bad thing. Likewise, 53 per cent believe he will succeed in deporting millions of immigrants living in the US illegally.

Activists marching through downtown Los Angeles in June as part of a peaceful nationwide demonstration aimed at restoring faith in American democracy and the US electoral system. Just 40 per cent of Americans approve of the job Mr Trump is doing in the White House. PHOTO: AFP The public is also sceptical about Mr Trump’s abilities as a world leader, with 58 per cent saying they disapprove of the way he handles relations with other countries and 46 per cent disappointed in his actions on trade agreements. Americans are more pessimistic about foreign policy than they were in December. Fifty-five per cent now say they expect dealings with Germany to get worse during the next four years, up 22 points. The share of poll respondents who anticipate worsening relations with the UK, Mexico, Cuba and Russia also increased by double digits. The public is also wary of Mr Trump’s motives in his negotiations with other countries. Just 24 per cent said they were “very confident” that Mr Trump puts the nation’s interests ahead of his businesses or family when dealing with foreign leaders.

“If you take the president’s scores out of this poll, you see a nation increasingly happy about the economy. When Mr Trump’s name is mentioned, the clouds gather.” Pollster J Ann Selzer

Americans have plenty of other worries about the world. Majorities believe it’s realistic that terrorists will launch a major attack on US soil (68 per cent) and that North Korea will launch a nuclear weapon aimed at the US (55 per cent). Mr Trump has called the expanding investigations into possible connections between his presidential campaign and Russia a “witch hunt.” But the public isn’t necessarily taking his side. Since the president’s decision to oust former FBI director James Comey, the Federal Bureau of Investigation’s standing has improved. It’s now viewed favourably by 68 per cent, up 10 points since December. Mr Comey is viewed positively by 43 per cent, while 36 per cent see him negatively. Meanwhile, most Americans don’t

share the president’s apparent soft spot for Vladimir Putin: 65 per cent view the Russian president negatively – and 53 per cent say it’s realistic to think Russian hacking will disrupt future US elections. There is one notable bright spot for Mr Trump. Though views of the White House as an institution are at the lowest level ever recorded by the poll – with 48 per cent now viewing it unfavourably, up 21 points since December – Mr Trump’s voters are still sticking with him. Among those who cast ballots for him, 89 per cent still say he’s doing a good job. The telephone poll of 1,001 American adults has a margin of error of plus or minus 3.1 percentage points, higher among subgroups. It was conducted July 8-12 by Iowa-based Selzer & Co. BLOOMBERG

South Korea’s new government proposes military talks with North Korea Seoul SOUTH Korea on Monday proposed military talks with North Korea, the first formal overture to Pyongyang by the government of President Moon Jae-in, to discuss ways to avoid hostile acts near the heavily militarised border. There was no immediate response from the North to the proposal for talks later this week. The two sides technically remain at war but Mr Moon, who came to power in May, has pledged to engage Pyongyang in dialogue as well as bring pressure to impede its nuclear and missile programmes. The offer comes after the North claimed to have conducted the first test of an intercontinental ballistic missile (ICBM) earlier this month, and said it had mastered the technology to mount a nuclear warhead on the missile. South Korea and the United States dispute the claim. “Talks and cooperation between

the two Koreas to ease tension and bring about peace on the Korean peninsula will be instrumental for pushing forth a mutual, virtuous cycle for inter-Korea relations and North Korea’s nuclear problem,” Seoul’s Unification Minister Cho Myoung-gyon told a news briefing. The South Korean defence ministry proposed talks with the North on July 21 at Tongilgak to stop all activities that fuel tensions at the military demarcation line. Tongilgak is a North Korean building at the Panmunjom truce village on the border used for previous inter-Korea talks. The last such talks were held in December 2015. Mr Cho also urged the restoration of military and government hotlines across the border, which had been cut by the North last year in response to the South imposing economic sanctions after a nuclear test by Pyongyang. In all, the North has conducted five nuclear tests and numerous missile tests.

The South also proposed separate talks by the rival states’ Red Cross organisations to resume a humanitarian project to reunite families separated during the 1950-53 Korean War in closely supervised events held over a few days. The South Korean Red Cross suggested talks be held on August 1, with possible reunions over the Korean thanksgiving Chuseok holiday, which falls in October this year. The last such reunions were held in October 2015 during the government of Mr Moon’s predecessor under a futile push for reconciliation following a sharp increase in tensions over border incidents involving a landmine blast and artillery fire. China, which has close ties to Pyongyang despite Beijing’s anger over the North’s missile and nuclear tests, welcomed the proposal, saying cooperation between the two Koreas was good for everyone and could help ease tensions.

In the proposal for talks, South Korea did not elaborate on the meaning of hostile military activities – the South usually refers to loudspeaker propaganda broadcasts by both sides, while the North wants a halt to routine joint US-South Korea military drills.

The proposals come after Mr Moon said at the G-20 summit in Hamburg earlier this month that he was in favour of dialogue with the North despite the “nuclear provocation” of its latest missile test. When Mr Moon visited Washington after being elected president, he and US President Donald Trump said they were open to renewed dialogue with North Korea but only under circumstances that would lead to Pyongyang giving up its weapons programmes. “The fact that we wish to take on a leading role in resolving this (North Korean) issue has already been understood at the summit with the United States and the Group of 20 summit meetings,” Mr Cho said on Monday. In the proposal for talks, South Korea did not elaborate on the meaning of hostile military activities, which varies between the two Koreas. South Korea usually refers to loudspeaker propaganda broadcasts by

both sides, while the North wants a halt to routine joint US-South Korea military drills. Mr Moon suggested earlier this month hostile military activities at the border be ended on July 27, the anniversary of the 1953 armistice agreement that ended the Korean War. When asked if South Korea was willing to “be flexible” on military drills with the United States should North Korea be open to talks, Mr Cho said the government had not discussed the matter specifically. Pyongyang has repeatedly said it refuses to engage in all talks with the South unless Seoul turns over 12 waitresses who defected to the South last year after leaving a restaurant run by the North in China. In an act to rein in the North, the United States is preparing new sanctions on Chinese banks and firms doing business with Pyongyang possibly within weeks, two senior US officials said last week. REUTERS

OPINION

The Business Times | Tuesday, July 18, 2017

EDITORIAL

Malaysia needs to make a firm stand on illegal workers – once and for all MALAYSIA is once again conducting raids against illegal foreign workers. And once again, business leaders are asking for more time to get their labour affairs in order. This time, Malaysia’s Immigration Department is targeting those who have failed to obtain their Enforcement Cards (E-Cards). The E-card allows continued employment for these illegal workers and replaces valid travel documents from their home countries. The card will be valid until February 15 next year, when presumably these people can become fully documented workers. In February, Malaysia announced what was effectively a partial amnesty for foreign illegal workers: they could change their status by registering their presence with the department and obtaining an E-card. Only about 155,000 of the estimated 600,000 to one million illegally employed foreign workers availed themselves to the offer before the amnesty ended on June 30. Many of those picked up during the current raids claim they were not aware of the amnesty or the deadline. If critics are to be believed, the crackdown is disrupting the economy in several important sectors. For instance, it has been reported that the furniture-making industry is so short of workers that shipments are down by as much as 28 per cent this year. The rural sector – which includes farming, fishing and forestry – contributes only about 7 per cent to Malaysia’s overall GDP but in terms of employment, it accounts for no less than 13 per cent of all jobs in a workforce of about 15 million. In the less urbanised states, agriculture’s share of GDP can be as high as 25 to 30 per cent of the local economy. Farmers and forestry companies say they are facing difficulty finding local workers. Oil palm plantation companies insist that they stand to lose more than one billion ringgit (S$319 million) because there are not enough workers to collect the fruit. Yet, it is abundantly clear that this rural labour shortage is chronic. About 66 per cent of the local workforce in farms are over 50 years old. Few young Malaysians think that the rural sector offers a reasonable livelihood. Some of the criticism of the crackdown is decidedly unfair. No country can afford to lose control of its borders. Moreover, illegal workers are paid a pittance and many of them are trafficked by people smugglers. They are forced to live in appalling conditions. In any case, no other country in this region lets in so many foreign workers: Malaysia has 2.1 million legally registered foreign workers. Over the years, there have been many crackdowns on illegal workers but the government has backed away from using all the powers on its statute books against recalcitrant employers because of a perceived threat to economic growth. In the face of this, employers – including some foreign investors – have become indifferent to labour laws. Worse, the presence of illegal workers may indicate a conscious preference for low-wage foreigners over locals who would demand more, including legally mandated contributions to their pension fund. The authorities have also tried to persuade employers, particularly in plantations and the construction industry, to automate and cut back on the use of labour. Few, if any, have tried anything other than stick to the old methods. In the face of this, it is only reasonable to expect Malaysia to use all the tools in its statute books – including charging employers with offences that include caning – to force a change in attitudes.

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‘Russiagate’ to hang over Washington for the foreseeable future Growing political storm over “Russian Collusion” would make it difficult for White House to advance its agenda, making the president more politically dependent on Republicans It’s yet to be proved that Mr Trump (left, with Mr Putin in Hamburg) had conspired with the Kremlin to influence the 2016 US election and its outcome. PHOTO: REUTERS

INCE the “Russian Collusion” story started dominating the American and global news cycles, the response to the evolving political scandal has been mixed, and reflected to a large extent one’s position on the Donald Trump love/hate scale. Hardcore Trumpists rejected the accusations as “fake news” produced by the malevolent Mainstream Media (MSM) collaborating with the “Shadow State” conspirators, the Democrats and the rest of the globalist elites, to deliver a political coup aimed at ousting a democratically elected president from power. These guys hated President Trump so much that, even if informed that he’d discovered a cure for cancer, they would respond with, “So what?” But if you were part of the anti-Trump “resistance”, then the notion of Candidate Trump and his crooked election campaign aides allying themselves with Russian President Vladimir Putin to sabotage what was seen as Democrat Hillary Clinton’s inevitable election victory would fit exactly into your political narrative. As you see it, even if shown a picture of the White House occupant strangling someone, the fanatic Trumpists would label it as “fake news”. And then there were those somewhere in the middle of the love/hate Trump scale, such as yours truly, call them the Doubters, who were a bit perplexed by the unconfirmed reports and unproven rumours about encounters between Trump campaign aides and officials and businessmen with ties to the Kremlin, but who remained sceptical when it came to accusations of a Trump-Putin collusion/conspiracy. For the Doubters, much of the reports in the MSM and the accusations by Democratic politicians, which in many cases were based on leaks from unnamed sources, were seen as an attempt by Clintonites and their liberal fans to excuse their electoral defeat. “The fault is not in ourselves. It’s the Russians, Stupid!” The Doubters were a bit uncomfortable with Mr Trump’s unrelenting defence of the Russian autocrat and some of his responses to the accusations, including the firing of FBI director James Comey, and suspicious of some of the excuses for the meetings his relatives and business partners held with shady Russian figures. The Russians may have hacked into the Democratic Party’s computer servers, but there was no “smoking gun” proving that the Donald and his buddies were complicit in this effort. And in any case, the press and Congress, not to mention Special Counsel Robert Mueller, were investigating anything and everything connected to the Russia Collusion allegations. Perhaps they’ll come up with something, although the conventional wisdom has been that

they would probably not discover any impeachable evidence against the president. While it still remains to be seen whether Mr Mueller would be able to prove that Mr Trump had conspired with the Kremlin to influence the 2016 presidential election and its outcome, last week’s explosive disclosures of emails between Mr Trump’s oldest son and an intermediary for the Russians showed that Trump campaign aides and family members were prepared to work together with a foreign entity to ensure that the Democratic presidential candidate would lose the election. “I love it!” was the way, according to the released email chain, Donald Trump Jr responded to a proposed meeting with a lawyer representing the Russian government, that was supposedly interested in having his father win the election and was willing to provide the campaign with “official documents” that “would incriminate Hillary” and that “would be very useful to your father”. The offer was “part of Russia and its government’s support for Trump”, explained the British intermediary that arranged the meeting. That Mr Trump Jr – joined by his By Leon Hadar brother-in-law Jared Kushner and then-campaign manager Paul Manafort – were eager to meet the Russian lawyer may not amount to a full-blown “collusion” with the Kremlin, especially since nothing came out of the brief encounter. Mr Trump Jr was not provided with any documents that incriminated Mrs Clinton. Instead, the Russian lawyer, Natalia Veselnitskaya, was apparently seeking the Trump team’s assistance in her campaign against a 2012 congressional legislation sanctioning Russian human rights abuses. But coming a week after Mr Trump told reporters covering the G-20 meeting in Hamburg that “nobody really knows” whether the Russians dabbled in the US presidential election, or whether they did that as part of an effort to help him and hurt Mrs Clinton, Mr Trump Jr’s emails would probably change the direction of the debate over the so-called Russian Collusion allegations and, in the process, transform the political balance of power in Washington. In fact, before the email chain became public last week, White House officials were arguing

that the MSM was recycling the same old Russia allegations and expressing their hope that the American public was getting tired of the story, and that Mr Trump and congressional Republicans would be able to move ahead with their ambitious legislative and policy agendas. But even ardent Trumpists are getting nervous, although they try to put the best spin on the latest developments, suggesting that the meeting with the Russian lawyer demonstrated once again that Mr Trump Jr and other Trump campaign aides were political amateurs who were not ready to play in the prime time of a presidential race. They were incompetent; not criminals. After all, Candidate Trump had bragged that unlike his Democratic adversary, he wouldn’t be spending a lot of money on hiring high-paid professional political consultants who knew how the game worked. In retrospect, that is proving to be a big mistake. It’s likely that after meeting the British intermediary, a shady entertainment publicist, and vetting the Russian lawyer, a political professional would have advised Mr Trump Jr not to rush into a meeting with Ms Veselnitskaya. As the editorial board of the Murdoch-owned and pro-Trump New York Post responded to bombshell news about the president’s eldest son: “Donald Trump Jr is an idiot” calling his decision to meet the Russian lawyer and the different explanations he provided for it: “Dumb. Dumb. Dumb”. Democrats and the media “are frothing to find something criminal in it all, with the most unhinged talking treason”, the editorial stated. “What it clearly was, was criminally stupid.” Mr Trump (who apparently disagreed with that assessment) defended his son by describing him as a “high quality person” before leaving Washington to go to Paris for meetings with French President Emmanuel Macron. But then Mr Trump Jr’s travails continued to dominate the front pages of the newspapers while his father’s talks in Paris were relegated to the inside pages. Indeed, even under the best-case scenario from the White House’s perspective, it’s now becoming clear that the cloud of the Russia investigation would continue to hang over the Trump presidency for the foreseeable future and certainly until Mr Mueller issues the conclusions of his investigation.

POLITICAL STORM Or to put it another way – in the aftermath of last week’s explosive revelations, the number of Russian Collusion Doubters is expected to fall, perhaps in a dramatic way, with the cloud of the political scandal having the potential to turn into a growing political storm. That kind of stormy political weather would make it even more difficult for the White House to advance its agenda, and make him more politically dependent on the GOP establishment that controls the Republican congressional contingency. That could mean that the president will be more likely to pursue the economic and foreign policy orthodoxy of his party and will be less inclined to pursue new and risky populist initiatives on issues such as international trade or infrastructure spending, which could antagonise his electoral base. Another possible casualty: The evolving bromance with Mr Putin.

COMMENTARY

Why robots won’t steal all our jobs By Robert Samuelson

The study found that every 10% gain in productivity resulted in a 2% gain in employment spread over four years.

Washington ON'T worry, the robots won’t destroy all our jobs. History suggests just the opposite – that new technologies inspire new jobs. So concludes a study from leading labour economists. It’s a useful antidote to widespread fears that robots and “artificial intelligence” will displace millions of workers and lead to permanently high joblessness. No doubt, the anxiety is real. Despite a low unemployment rate, 4.4 per cent in June, roughly a quarter of Americans (26 per cent) think their present job will be eliminated by new technologies within the next two decades, according to a recent Gallup poll. Half those jobs supposedly would vanish within five years. The Gallup report mentioned truck drivers (vulnerable to self-driving trucks), taxi drivers (already threatened by Uber) and surgeons (facing robotic operating machines). The new study doesn’t deny that jobs will be lost. But that’s not the end of the story, say David Autor, a well-known labour economist at the Massachusetts Institute of Technology, and his collaborator, Anna Salomons of the Utrecht

University School of Economics. Jobs have been lost before to new technologies, but these very same technologies also create productivity increases – efficiency gains – that usually generate more jobs than were initially lost. Although that’s long been accepted economic theory, the study’s contribution is to confirm that the theory works in practice. Prof Autor and Prof Salomons focused on 19 advanced nations – the five largest were the United States, Japan, Germany, France and the United Kingdom – over the period from 1970 to 2007. Generally, employment declines initially triggered by productivity gains were later offset by larger job increases. A simple example shows why the theory works. Consider (hypothetically) widgets. Assume that new technologies cut widget production costs by 20 per cent. These savings must go somewhere, and the chances are that they will be spent, thereby creating new jobs. The major candidates to receive the windfall are: (a) consumers, who could benefit from lower widget prices; (b) widget workers, whose salaries might be boosted; or (c) the shareholders of widget

makers, which might raise dividends or build factories. This logic could be thwarted if the windfall were saved and not spent. Prof Autor and Prof Salomons checked that possibility and found it untrue. Across all countries – there were obviously differences among nations – the study found that every 10 per cent gain in productivity resulted in a 2 per cent gain in employment spread over four years. This was an important contribution to job growth, though the largest employment gain came from old-fashioned population increases. The main takeaway is this: Trying to save jobs by protecting old jobs from new technologies and other productivity-enhancing changes is self-defeating; employment may benefit temporarily, but the diffuse process of creating jobs and raising living standards will be frustrated. (We leave aside the trickier issue of whether all new technologies are socially useful. Do video games contribute to our national well-being?) All this good news comes with a few sobering caveats. One is the fate of manufacturing. In all the major countries, its productivity has grown the fastest, leading – somewhat paradox-

ically – to a shrinking share of total employment. Although it makes little economic sense to try to reverse this, the political temptation to do so is considerable. What's occurring, say Prof Autor and Prof Salomons, is a historic shift to a more service economy. That raises another caveat. Jobs in the service sector are polarised between the high-productivity and well-paid positions and low-productivity and poorly paid positions. “The primary societal challenge posed so far by these advances” is not total employment but its “skewed distribution” with too many low-skilled workers, write Prof Autor and Prof Salomons. In an ideal world, the robots would do most of the repetitive and monotonous work, while a better-educated and better-paid work force would concentrate on jobs that can’t be outsourced to machines. We may not know precisely what those jobs will be, but we can be reasonably confident that – as long as we don't discourage job creation though bad economic policies – the American labour market isn’t a doomsday machine that no longer can reach full employment. THE WASHINGTON POST WRITERS GROUP

OPINION | 23

The Business Times | Tuesday, July 18, 2017

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COMMENTARY

Loyalty and limitation for professionals in family firms By Marleen Dieleman N the management of Asian family firms, owners often rely on trusted professionals to handle the execution of day-to-day business. These so-called loyal lieutenants spend years working with the firm’s owners, becoming intimately familiar with both the business and the values of the family owners. This has many advantages: a clear family leader with an army of experienced non-family executors is a very efficient way to run a business. Long tenures also build consistency and deep experience, as well as closely knit teams that can move fast. In this context, most loyal lieutenants become excellent managers. There is however also an argument that this model can be a bar to attracting the most capable outside talent. Since decision-making is often in the hands of family members, even the best managers can face career limits. Another risk is that less talented loyal lieutenants may use the family’s trust to block the ascent of capable middle managers whom they see as a threat. Of course much can depend on the context of the firm in question. Stable businesses that are not especially complex or technologically advanced can find that management by experienced, loyal lieutenants works well for their needs. One drawback of relying too much on a few loyal lieutenants comes from the limitations it poses on growth, especially growth that brings new levels of complexity. For example, family firms that expand over-

I In situations where family owners embark on an ambitious strategic transformation, taking the firm into new territory, top management is therefore immediately stretched, posing a serious challenge to achieving stable growth.

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seas or that enter industries requiring more advanced technology or coordination, can often find themselves losing their way. This is because trusted insiders possess only the same experience as the firm’s owners – having served them for so many decades. Despite a general lack of familiarity with the new initiatives, the inclination is usually to leave decision-making and execution in the hands of insiders. Inevitably this means top management spending considerable time and effort catching up, irrespective of whether they have the capacity to adapt themselves to the new ways of doing things. In situations where family owners embark on an ambitious strategic transformation, taking the firm into new territory, top management is therefore immediately stretched, posing a serious challenge to achieving stable growth.

TALENT SHORTAGE The talent shortage is often most pressing at headquarters. In my research I always find it remarkable how lean Asian family firms are at the top, with little expertise or spare talent to work on new things. When an unusual opportunity or crisis arises, or a major strategic change, everyone is pulled in to help, including an array of ad-hoc external advisers. Bringing experienced outsiders into the business would avoid this costly learning curve, yet family firms can often find it hard to integrate new talent. This is not because owners do not appreciate it, but because the family firm is rarely the right

environment for outsiders to succeed. A business that works well with a closely-knit, lean and agile owner-led team rarely features clear key performance indicators, detailed strategic plans, board charters or other procedures common in multinationals. Without clear expectations or resources to support top management, this means it is hard for outsiders to perform. Ultimately most external hires last no more than a year or two. There is no labour market for “loyal lieutenants” – one can only groom them over many years. So what is the solution? Sometimes family firms opt to create semi-separate units under loose guidance that are run by outsiders who may also hold some equity to tie them to the family. However this model can run into complex monitoring problems. Other firms may even resort to hijacking other people’s loyal insiders, but they can find they do not share the same values. Based on observations of some highly successful Asian family firms, here are some internal practices that can help expand a firm’s expertise: Broaden the top: Great family firm patriarchs will regularly send their top layer of management for outside training and exposure to other ways of working, despite them being stretched running a range of firms. Move the middle: Thanks to the ample opportunities provided by owners, motivated mid-career professionals in family firms often find their career path is faster than in global firms.

Middle management is a flexible and trusted resource that can be promoted to new challenges on their own, instead of under the tutelage of more senior loyal staffers. Strengthen the base: Building more slack at lower layers allows family firms to scale up faster at a lower cost. For this reason great family business leaders are constantly scouting for entry-level talent irrespective of job openings. New, young talent provides ad-hoc top management support and a testing ground for talented future loyal lieutenants. Change yourself: Any great ambition must come with a willingness to improve oneself. Similarly, to access a greater pool of good non-family management, owners must create better organisations. Leading change by example is an essential attitude for family owners who seek to move from successful to extraordinary. Family firms have important advantages such as strong values, high levels of trust, consistency and a long-term perspective. Relying on trusted insiders need not pose a limitation on growth as long as owners continually broaden their organisation beyond what they themselves can do. Ultimately, for any ambitious family business, successful transformation begins with a change in the owners themselves. ❚ The writer in an associate professor in the Department of Strategy & Policy at National University of Singapore (NUS) Business School. ❚ The opinions expressed are those of the author and do not represent the views and opinions of NUS.

COMMENTARY

Mrs May’s minority government may now not be resilient enough to survive the course of negotiations, and/or have the political capital to make the tough decisions necessary to see such an agreement brokered. PHOTO: REUTERS

Delhi: A quintessential example of India’s urban water mismanagement By Asit K Biswas, Udisha Saklani and Cecilia Tortajada NDER the auspices of Singapore International Water Week, some 200 water utility leaders are meeting in Singapore this week to discuss how best their performance can be optimised by sharing knowledge and experience. This is an important consideration, especially for rapidly growing Asian urban centres. Take Delhi. Water shortages have become an annual ritual every summer. As summer temperature soars above 40 deg C, acute water shortages become pervasive. Delhi’s current population is 14 million. It will have 11 million more residents by 2030. This additional population in little over one decade means adding a new megacity on top of an existing megacity. Unless the city’s water management policies improve dramatically, its water future is grim. Consider Delhi’s recent water policies, both under the current Aam Aadmi Party (AAP) and the earlier Congress Party. They have been unsustainable and unable to provide reliable sources of drinkable water to its residents. In 2015, AAP promised 20,000 litres of free water per month per household. Assuming a household of five members, it means each person should receive 130 litres per day. In 2016, the Delhi Jal Board (jal means water) responsible for the city’s water supply estimated total distribution losses of around 40 per cent due to leakages and theft. Consequently, Delhi must produce daily 182 litres per person so that individuals can receive their allotted 130 litres. There is not enough water to make this political promise feasible. Nor has the board the financial wherewithal to give all this water free. Even this 130 litres target is totally arbitrary. A person can live a perfectly healthy life with 75 litres per day. In many European cities, such as Malaga or Leipzig, per capita daily water consumption is now 92 litres or less. In contrast, in Delhi, people in high-income households use up to 600 litres. Anyone who has ever lived in or travelled to Delhi during monsoon months can testify to its water-clogged roads and overflowing drains. How can a city with so much rain suffer from serious water scarcity?

POOR MANAGEMENT The answer is gross mismanagement of water for decades. Compare Delhi with Singapore. In 1965, Singapore and Delhi had similar water issues. Now Singapore has become one of the world's best cities for water management by expanding its water sources through water reuse, desalination and storm water storage, and significantly reducing water losses to less than 5 per cent. Meanwhile, Delhi has continued to suffer from policy impasse and poor management. It now stands well behind even other third world cities such as Phnom Penh, Windhoek or Manila. Delhi is facing a serious water crisis despite consistent big political promises, irrespective of whichever party is in charge. Yet, Delhi’s present and future water problems are manageable. It will require a new mindset from politicians, bureaucrats, public and the media. As a first step, the Delhi government should implement its promise of providing adequate wastewater treatment facilities so that treated wastewater can be consistently reused. This would benefit both industries and households.

Currently wastewater treatment facilities are highly inadequate and their management is abysmally poor. According to the Central Pollution Control Board almost 40 per cent of untreated sewage daily either seeps into the ground or is discharged into Yamuna River. Lack of knowledge, capacity, expertise, or even funds, are not the reasons for Delhi’s mounting water problems. What has been consistently missing is political will and a sense of urgency to solve the crisis. Delhi’s water sector has faced a myriad of institutional challenges. Its chief executive is always an IAS officer having a term of between 18 to 30 months unless the person is transferred earlier on flimsy political grounds. Within this short duration, the CEO must first invest time in developing sector-specific knowledge and skills, and conceive executable programmes to improve the existing water management practices and plan for the future. Water issues can only be solved over the long-term.

UK government in Mayhem over Brexit

GOOD CEO Water utilities in cities such as Delhi should be made autonomous institutions. They also must have strong political support, not political interference. The current CEO of Delhi Jal Board, Keshav Chandra, is an unusually competent individual, one of the best in the world. If DJB is made an autonomous corporation with limited political interference, and he is given six to eight years’ tenure, some 60 per cent of Delhi’s water problems will be resolved. With a good CEO, there is good news. The board has installed water ATM’s which dispense clean drinking water at significantly lower costs than bottled water. With aggressive social media advertising, these ATM’s are now popular. The concept of constructed wetlands has been introduced which features artificial wetlands of plants that absorbs pollutants. The plan is to clean an eight-km long wastewater drain that now dumps polluted waters into the Yamuna River. If proven successful, it can be replicated in other Indian cities. Delhi is a quintessential example of what is wrong with India’s urban water management. An expanding urban population, with an exploding middle class, implies more growth, more economic activities and more consumption. Demand for basic infrastructure has outstripped management and institutional capacities, budget available, and pace of urbanisation, industrialisation and commercialisation. Under such conditions, the city must have strong water institutions, innovative policies, public participation and a strong and objective media which can hold government to account whenever necessary. With proper water management, Delhi can have a 24x7 reliable supply of safe water. With strong political will and commitment and a proper policy framework this can be achieved within a decade. ❚ Asit K Biswas is Distinguished Visiting Professor, Lee Kuan Yew School of Public Policy, National University of Singapore; Udisha Saklani is an independent policy researcher; and Cecilia Tortajada is senior research fellow, Lee Kuan Yew School of Public Policy, National University of Singapore, and editor-in-chief, International Journal of Water Resources Development.

Brussels is pressuring Mrs May to expedite negotiations, whether her team is ready or not. BY ANDREW HAMMOND

HE United Kingdom and EU enter from Monday to Friday into their first full week of formal Brexit negotiations in Brussels. Following June’s UK general election, there are growing signs that the challenges of the exit process may prove too great for Theresa May’s fragile minority government to withstand. This has created a political paradox whereby there is growing domestic pressure, post-election, for a soft Brexit. Yet, the weakness of May’s administration means it may not now be resilient enough to survive the course of negotiations, raising the odds that the nation may leave the EU with the hardest and most disorderly of all exits. That is, without any deal over the UK’s future relationship with the continent, especially over trade.

BIG VICTORY Some five weeks after June’s election, it is already clear the result has transformed the context for the Brexit battles to come. Mrs May had previously hoped a big victory would allow her to deliver her vision of leaving all “bits” of the EU, including membership of the Single Market and Customs Union, while securing a comprehensive new trade deal. Yet today, her Brexit ambitions are being challenged with much greater vigour. Domestically, for instance, there is a changed power balance

between her, the ruling Conservatives, and other domestic politicians and parties in Westminster and beyond. Mrs May had previously appeared to dominate the political landscape. Yet, now it is highly uncertain that she will last as Prime Minister for the potentially full two-year duration of the Brexit talks set down by Article 50. Last week, for instance, the government introduced its so-called “Great Repeal Bill” which will end the supremacy of EU law in the UK, and transfer EU law on to the UK statute book. This will be a massive legislative undertaking and it is possible the government could lose key votes surrounding this bill which could potentially trigger another General Election in coming months. The government’s weakness stems in large part from the changed post-election distribution of power within the House of Commons. On Brexit, there is potentially now a majority in the 650-member chamber for a softer EU exit than Mrs May favours – with the overwhelming number of opposition MPs plus, perhaps, around a couple of dozen Tories favouring this outcome. Reflecting this, there is renewed post-election speculation about whether a deal might be possible that would see the nation remain a member of the Single Market, especially if new immigration restrictions can potentially be agreed with the EU. While that outcome still appears unlikely given the commitment

of Brussels to the four freedoms, even arch-Brexiteer Nigel Farage has said post-election that: “I think we are probably headed towards a Norway-type situation two-and-a-half years down the road”. What Mr Farage highlights is the possibility of the nation moving towards a European Economic Area (EEA)-type model which would see departure from the EU, but retention of full access to the Single Market. This possibility, at least, as a transitional measure for several

The government’s weakness stems in large part from the changed post-election distribution of power within the House of Commons. years, is being actively discussed by a group led by Labour’s Stephen Kinnock and at least 15 Tory MPs. Mr Kinnock’s belief is that EEA membership would deliver greater certainty in the short to medium term for UK business and workers, while potentially allowing more time to negotiate a final Brexit settlement. At the same time, he is hopeful a mini-deal might be possible that makes it possible to prevent EU nationals coming to the UK unless they already have jobs to go to, without violat-

ing EU rules on free movement. Another example of how Mrs May’s Brexit vision could get watered down is because of her pact with the Democratic Unionist Party (DUP), whose contingent of 10 MPs from Northern Ireland has agreed to support the government on key votes. While the Prime Minister has previously said she wants to cast aside full membership of the Customs Union, this could well be a red line for the DUP. The reason the DUP is concerned about leaving the Customs Union is that it would likely result in a harder border between the Republic of Ireland and Northern Ireland which will be, post-Brexit, the only land crossing between the United Kingdom and the EU.

DISRUPTION With cross-border trade between the two countries worth more than three billion euros a year, few want to see this disrupted. Yet, if the UK fails to stay in the Customs Union nor strike a new trade deal with the EU, UK exports will be hit by the common EU external tariff which would require customs checks on the Irish border. Yet, one of the big paradoxes of UK politics right now is that at the same time that there is growing momentum for a softer Brexit, there is also a growing possibility that the nation may be heading for the hardest and most disorderly of all exits. That is, leaving the EU without any deal over its future relationship with the continent. This is because Mrs May’s minority government could simply not now be resilient enough to survive the course of negotiations, and/or have the political capital to make the tough decisions necessary to see such an agreement brokered. Indeed, Brussels is concerned that it simply may not be possible for proper negotiations in coming months. As the EU-27 do not want to agree to an early extension of the two-year Brexit talks – since this would reduce its negotiating power vis a vis the United Kingdom – Brussels has therefore decided to ratchet up pressure on Mrs May and move negotiations on as fast as possible, whether her team is ready or not. Unless there is now stronger, constructive leadership from all sides, the odds are correspondingly growing that no deal will be reached and the UK will crash out of the EU with the hardest of hard Brexits, damaging the EU too. ❚ The writer is an associate at LSE IDEAS at the London School of Economics.

The Business Times | Tuesday, July 18, 2017

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VESSEL VOY SIN NSA KHI HKG KAN PUS Vessel VOY SIN TXG TAO SHA HY COURAGE 063W 23/07 31/07 06/08 – – – BALTIC BRIDGE 002E 20/07 – – 30/07 HY BRAVE 061E 25/07 – – 29/07 02/08 03/08 PL GERMANY 056E 22/07 30/07 01/08 – HY FORCE 057W 30/07 07/08 12/08 – – – ZANTE 102E 27/07 – – 06/08 HY GLOBAL 62E 01/08 – – 05/08 09/08 10/08 COSCO HAMBURG 0200E 29/07 06/08 08/08 – WE ALSO ACCEPT BKGS TO: 1) YANGON, CHITTAGONG, CALCUTTA, HO CHI MINH 2) PYONG TAEK VIA HONG KONG 3) VLADIVOSTOK / VOSTOCHNY VIA PUSAN 1) JAPAN INLANDS VIA PUSAN: AKITA, FUKUYAMA, HIBIKINADA, HAKATA, HOSOSHIMA, HIROSHIMA, IYOMISHIMA, IMABARI, IWAKUNI, KOCHI, KANAZAWA, MOJI, MATSUYAMA, MIZUSHIMA, MAIZURU, NAGASAKI, NAOETSU, NIIGATA, SAKAMINATO, SHIBUSHI, SHIMONOSEKI, SAKATA, TSURUGA, TOYAMASHINKO, TOKUYAMA, TOKUSHIMA, TOMAKOMAI, YATSUSHIRO, SENDAI, HACHINOHE.

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JAPAN/HONGKONG/STRAITS/BATAM/JAKARTA VESSEL LEGAZPI LIZSTAR SUCCESS TOKIHIME OCEAN GEM

VOY 12 10 4 8

SIN 21 JUL 28 JUL 02 AUG 17 AUG

P.GUDANG – – – 15 AUG

PKG 23 JUL 30 JUL 04 AUG 19 AUG

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ASTRO SHIPPING & FORWARDING SDN. BHD., P. KELANG, MALAYSIA TEL:3685309/3688985 FAX: 3686070 THONG LEE TRADING CO., PENANG, MALAYSIA TEL: 2627873/2620841 FAX: 2622499 GEWIRA SHIPPING AGENCY SDN. BHD., P.GUDANG, J.B., MALAYSIA TEL: 2525999 FAX: 2529999

On the current outlook for the Singapore maritime industry, veterans have this to say… Given the cyclical nature of its business, the maritime industry has seen through such tough times in the past and we have always emerged stronger after each cycle. Therefore we should not be fearful of the current economic outlook and stay resilient for Maritime Singapore, as this is an important industry to the world that is here to stay. The Singapore Maritime Foundation will continue to work closely with the Singapore Maritime Community in our joint efforts to further develop Singapore’s position as a global maritime hub.

This is an opportune time for the industry to take a look at which areas of shipping they could diversify into, which would help them to stay aﬂoat during such low periods. Companies should also plan ahead on strategies that will help them adapt to the new realities surfacing around them and prepare for the inevitable upturn. With some innovation and a focus on forward-thinking, I am sure that the industry will be able to pull through the current tough times and be ready for the future needs of Maritime Singapore.

Mr David Chin

Mr Punit Oza

Executive Director of the Singapore Maritime Foundation (with 54 years of service to Maritime Singapore)

Vice President, Head of Supramax Paciﬁc, Klaveness Asia Pte Ltd Chairman, Singapore Branch of Institute of Chartered Shipbrokers (with 23 years of experience in the maritime business scene)

JEBEL ALI 01 AUG

LIFE & CULTURE

The Business Times | Tuesday, July 18, 2017

| 25

Cardboard grannies a sad symbol of Hong Kong’s widening wealth gap They add up to almost 40% more than the registered Ferraris, Lamborghinis and Rolls Royces in the bustling Asian financial centre Hong Kong THEY start sometimes at dawn and work frequently into the night, an army of old workers manoeuvering carts around the streets of Hong Kong. Their spines bent with back trouble or simply the burdens of life-long toil, they’re collecting cardboard boxes to sell to recyclers for the equivalent of US$2.60 a day. In Hong Kong, they’re known as “cardboard grannies”. They’re estimated by non-government organisations to number 5,000 – a figure almost 40 per cent higher than the total of registered Ferraris, Lamborghinis and Rolls Royces seen frequently on the streets of the bustling Asian financial centre. Hong Kong has amassed enormous wealth since its handover to China in 1997, yet it’s also home to a widening wealth gap, going by the standard measure of income inequality. It has risen to a record in 2017, is the highest in Asia, and exceeds that of the US and Britain. “I do this work so I can afford to eat,” said Fok Mei-sung, 67, a former farmer who came from China’s Guangdong province almost 20 years ago. She migrated just as factory jobs were moving in the other direction into the mainland and a building boom was about to transform thousands of acres of farmland into residential estates for the growing middle class – and make the neighbours she left behind comparatively rich. She represents Hong Kong’s growing divide in economic opportunity, one that’s starting to get far more public awareness. In late June, a public protest broke out after a 75-year-old cardboard collector was arrested for unlicensed hawking, which comes with a HK$5,000 (S$880) fine, for selling a piece of cardboard for HK$1, the South China Morning Post reported. The Food and Environmental Hygiene Department, whose officers made the arrest, said that it dropped the charges after consulting with prosecutors and taking the woman’s background into account. “These old ladies and old men worked their whole lives to support building up this beautiful city,” said

Terry Lum, a University of Hong Kong professor and a director at the Sau Po Centre on Ageing. “What you see now are a group of forgotten workers. They can only use their residual capacity to collect cardboard to sell at a low price in order to supplement their living.” Many of these workers, particularly women with little education, migrated from China to Hong Kong in the late 1990s seeking to improve their families’ livelihoods and took up the low-wage work they could find. They’ve been cited by the Hong Kong government’s Centre for Public Policy as being particularly economically vulnerable and in need of support. Some 44 per cent of city-employed sanitation workers noted in the report, for example, had immigrated to Hong Kong between 1995 and 2002; 78 per cent of the sanitation workers were women. Madam Fok used to be one of them before she retired, earning low wages that weren’t nearly enough to buy a home, just as the city was beginning a property boom that has seen prices soar 400 per cent since the end of the last slump in 2003. She thinks frequently of her former neighbours back on the mainland, who she said received hundreds of thousands of yuan for their farmland from developers. Because she gave up her household registration when she moved to Hong Kong, she couldn’t benefit from the payouts. “Now they are so rich, they can’t even spend it all!” Madam Fok said. “Even after eating big feasts, they even use money to travel around – imagine! They’re people my age, strolling around at their leisure, sipping tea, playing mahjong. What a life they now lead.” The government’s provision of public housing and a living allowance for the elderly poor is insufficient to cover the needs of those who spent decades in poorly paid jobs, have no savings, suffer from ill health and can’t depend on their children for help, said University of Hong Kong’s Prof Lum. Waiting times for public housing are long, on average almost five years, despite government

CRYPTIC CROSSWORD

Madam Fok says that she gets up at 4am in order to get a head start on the other elderly residents competing fiercely for scrap in her neighbourhood, Sham Shui Po, the poorest in Hong Kong. PHOTO: BLOOMBERG pledges to build more supply. For most of her working life, Madam Fok spent about two-thirds of her HK$3,000-a-month salary to pay rent on an apartment sub-divided with wooden planks, which cost HK$2,000. Even as her salary rose to HK$6,000 a month at the peak, rent doubled to HK$4,000. After she retired from her government sanitation job, the fund of HK$50,000 she had saved over two decades ran out

within two years. After a five-year wait, she received a government-subsidised apartment last September. “I am so much happier now and feel so much less pressure from my life, but I know many older people who aren’t as lucky as me,” she said. “We get the basics covered in Hong Kong – HK$2,490 a month allowance – but we still need to struggle for our livelihood at our age. It’s just not enough, even if we buy vegetables

that are a few days old.” More than 14 years of crouching and bending over garbage caused a back injury that left her unable to work full time, she said. Madam Fok long ago separated from her husband and can’t ask for financial help from her two sons who both work in construction and do odd jobs. They barely make enough to support their own families, and she doesn’t want to be a burden, she said. When she can

work, she said, she gets up at 4am in order to get a head start on the other elderly residents competing fiercely for scrap in her neighbourhood, Sham Shui Po, the poorest in Hong Kong. “There are days it hurts so much I need to hang onto railings to even take one step. There’s no time for pleasure, or for any normalcy in my life. I hope that my life here has given my children and grandchildren a better future.” BLOOMBERG

Keeping golf alive in its birthplace As a membership crisis looms, golf clubs in Scotland are trying to make the sport more accessible for juniors Edinburgh

Across 1 Fairly good judge, following fashion (8) 5 April’s turned out to be springlike (6) 9 Pile of hay’s put with wild fruit in carriage (8) 10 Channel without water mentioned (6) 11 Fast eating that is initially not sparing (7) 12 City in great shambles (7) 13 Clear coach’s avoiding one father? (11) 16 Summons to action from US president, and French come round (7,4) 21 Leaving South Carolina, motorcyclist or walker (7) 22 Humiliate degree-holder briefly seen in river (7) 23 Killer struck worker (6) 24 First couple of questions priest composed to be comic (8) 25 After exercises, Swiss hero rolled over in small ball (6) 26 Inconsistent bishop avoids scepticism following fashionable article (2,3,3) Down 1 Man accepts alternative spirits (6) 2 Pour out of brigade canteen (6) 3 Admiration as Peter’s turned about 100 (7) 4 One responsible for somebody’s health after a meal (11)

6 Favourite college will get over a bloomer (7) 7 Caught on concerning a sled I damaged (8) 8 Intelligentsia must be switched on, period – it’s uplifting (8) 12 Have a fling then go? It’s what some do after retiring! (4,3,4) 14 Features cool spacecraft (8) 15 Grey knight in fix – and others (8) 17 Attendant coming over poorly gets sack (7) 18 Not a pleasing, deviating type of bowling (3,4) 19 Junk excessively personal artwork (6) 20 Covert cult embracing religious class (6) YESTERDAY’S SOLUTION Across: 1 Antimony, 5 Paunch, 9 Relation, 10 Hammer, 12 See the, 13 Buntings, 15 Foundry, 16 Stye, 20 Rook, 21 Jetties, 25 Turnover, 26 Kuwait, 28 Really, 29 Disraeli, 30 Dotted, 31 Mandrake. Down: 1 Across, 2 Tilted, 3 Matchbox, 4 Nook, 6 Adapts, 7 Nominate, 8 Harasses, 11 Quorate, 14 Sneezer, 17 Cratered, 18 Potroast, 19 Required, 22 Goalie, 23 Camera, 24 Strife, 27 Riga. G Telegraph Group Limited, London

FOR decades, Calum McPherson’s father made golf clubs. Mr McPherson played golf for Scotland as a teenager and eventually joined the family business. But when he was ready to introduce his young children to golf, their response shocked him. “They hadn’t hit a golf ball, but they weren’t interested – they had no pals there, it was a difficult game and the clubs were too heavy,” said Mr McPherson, 50. That is not an unusual reaction for children, even in Scotland, the birthplace of golf. As a membership crisis looms, golf clubs across Scotland are feeling the financial strain and trying to make the sport more accessible for a new generation of golfers. “Boys are down 35 per cent in the last five years and girls by almost a half,” said Cameron Ross, who organises junior programmes at West Kilbride, a club on the Ayrshire coast a few kilometres north of Royal Troon, Prestwick and Turnberry. “Lots of clubs are really struggling to get juniors in. The minority of clubs in Ayrshire now have junior sections. It’s a national problem.” Last year, the Scottish Boys’ Championship failed to attract a full field of 256 for the first time in its 80-year history. To increase participation this year, the tournament was moved to midsummer from its season-opening slot in April, and the boys’ and girls’ championships were played at the same time, with 225 participants. Video games, smartphones, dress codes, antiquated traditions and the weather all play their part in the waning interest, but some also point to something more basic: golf is not as fun as it used to be in Scotland. “I know fun and golf don’t seem right together,” said Linzi Allan, the assistant pro and junior coach at West Kilbride. “Sometimes it’s not; it can be the worst game in the world.”

At West Kilbride primary school in North Ayrshire, Scotland, youngsters are taught golf as part of their physical education. But some critics say children should start golfing earlier, before other sports beckon. PHOTO: NYTIMES With a donation of £1 million (S$1.8 million) generated from the 2014 Ryder Cup at Gleneagles, Alex Salmond, Scotland’s first minister at the time, pledged to give every nine-year-old in Scotland the chance to play through the ClubGolf government initiative. More than 400,000 children have been introduced to golf through that programme since 2003, but critics say that nine is too late to start, and that children from four or five years of age were playing other sports. Faced with his children’s indifference to golf, Mr McPherson said, “I thought: ‘I am not accepting this. Let’s have a think of root cause to find a solution to overcome this.’” He went to the hardware store, bought a lump of resin and started carving clubs in the garden shed. “We cast some prototypes and gave it to the kids,” he said. “Immediately they started whacking the ball and loved it.” His tinkering evolved into a line of clubs called Golphin. They are designed for children rather than being cutdown adult clubs. They are

lighter and have a bigger sweet spot, with the head and shaft weighted for juniors. The clubs have won innovation awards, and Open winners Dustin Johnson and Henrik Stenson have bought sets for their children. More accessible equipment is only half the battle, though, Mr McPherson said. He sees programming as more important, saying that for decades Scottish clubs have not created the proper environment for training children younger than nine. At West Kilbride primary school, a local amateur took 26 seven- and eight-year-old students outside for a lesson using Golphin equipment. After some simple instruction, they played golf in soccer nets with their friends. When asked if they had fun, almost all stuck up a hand. “Generally all the clubs have found their junior members declining,” said Brian Craig, a volunteer instructor who has played for 44 years and helps with the schoolwork. “Clubs are all realising that it’s their future membership, so for their

survival they need to hold on to them.” There is no formal golf education in Scottish schools, either. “There aren’t enough golf pros around with the skill set to go into primary schools,” Mr McPherson said. Mr McPherson has designed a programme that requires starting children in golf at a younger age, finding trainers and then connecting them to clubs willing to change to include younger members. “In the past, members could ignore the juniors, but they need them now,” Mr McPherson said. “Teaching an adult is easier, one-to-one, and you’re making more money as opposed to getting a bunch of 30 kids together and they are running about like maniacs, being kids and enjoying themselves.” Assuming all this might work, another hurdle lies beyond. “There are so many distractions now and golf is hard,” Ms Allan said. “I notice with some of my juniors if they don’t get it the first time around, they don’t want to try because they are used to getting everything instantly now.” NYTIMES

| SME

The Business Times | Tuesday, July 18, 2017

Business lessons – the hard way As a rookie boss, Terence Neo made all kinds of beginner’s mistakes and nearly went bust. BY WONG SHIYING

F anyone has experienced the struggles of starting up, it is Mr Terence Neo. The 33-year-old is the design director of eightytwo, a local interior design boutique. While he now has a sizeable portfolio under his belt, his journey to this point has been far from smooth. After working in various architectural and contractor companies, Mr Neo took to a colleague’s idea to start a practice together. A newcomer in a viciously competitive industry, the company laboured to differentiate itself from other interior design firms. But from prior job experience, Mr Neo saw a gap in the market he sought to bridge. He said: “Most homeowners either went to places which gave them halfpast-six work for a low price or they went to overly expensive places. I wanted to balance that out so my clients could enjoy the best of both worlds.” That meant quality, customised service at a reasonable price. “Every project is individualised painstakingly with careful attention to detail. It is unlike the ‘rubber stamp’ business model where projects are cloned, which gives them a much faster turnaround time.” However, the partners struggled to find clients who would give their newly formed company a chance. Mr Neo recounted: “Back then, clients would walk in and request to see our portfolio... And I would respond: ‘Would you be my first portfolio...?’ Nobody was willing to give us that first project.” Having spent too much money on renovating the new office from the get-go, the company struggled to stay afloat. Things took a turn for the worse when the company’s second shareholder made an exit six months into the venture. “That was the toughest period. It was hard for me to accept his departure because he was part of the reason we started in the first place.

Mr Neo said one early mistake he made was spending too much money on renovating the office when he started. He also used to turn down clients with smaller budgets. The company struggled to stay afloat. PHOTO: KELVIN CHNG He just walked out when he realised that it was not going to be easy.” The company continued in financial hardship for the next two years. With clients turning them away and employees leaving, they were “bleeding money every day”, he said. On hindsight, Mr Neo admitted it was a predicament that could have been avoided.

“New business startups tend to get overly excited about their concept and about being bosses. I went into a ditch because I wasn’t mindful about my finances. Looking back, I could have tuned it down by two or three notches and started a lot smaller.” Gesturing to his rustic two-storey office unit, he said: “We had this office six years ago when we first started, and we are still in the same office, with 18 employees, triple the original number.” He also had to eat humble pie. In the past, he used to turn down clients with a smaller budget, such as newlyweds who wanted work done for their flats or do minor renovations for their rented apartments. Mr Neo said: “I used to think that I was curating (my portfolio) and had wanted to market ourselves as a boutique agency. But because of how small we are, we need to take on such projects to keep overheads low.” Plagued with financial woes, the company reached a tipping point when bankruptcy loomed. “My accountants told me that I had to pitch in another S$50,000 or wind up the business for good,” he said. For a man who had just gotten married and had the weight of his young family resting on his shoulders, it was a difficult decision to make. “I did not know whether to contrib-

ute another S$50,000 to a company on the edge of bankruptcy or save it for my daughter’s education.” His wife firmly believed the company needed more time for people to believe in their work and encouraged him to take the plunge. She offered to pitch in S$20,000 to keep the company going. With her support, he took a leap of faith and was more determined than ever to make it work. With a renewed perspective, he opened the company to a broader range of clients and was more mindful of his finances. Slowly but surely, business began to pick up. On eightytwo’s concept for design, Mr Neo said: “We build homes, not houses.” He explained: “Homes are where people live in, so we have to care about the day-to-day aspects. It’s very easy to get carried away in creative design, but we don’t want to push boundaries just because we like something. “It’s so much tougher to be considerate and think of something that will be timeless in the next five to 10 years.” So, eightytwo has adopted a muted, airy and minimalistic design strategy as its main attraction. He also cautioned home owners against designing their houses like cafes. “Trends come and go, but houses have to stay timeless. We’ve been trying to educate our clients to keep things sustainable as functionality is so much more important.”

On the commercial front, one of the company’s most prominent projects is the design of Starker Bistro at Katong Square. The 200-seat restaurant has a provincial rustic interior adorned with real trees and hanging flowers. There is also an al fresco dining area. The satisfaction of running his own interior design practice extends beyond being his own boss. Mr Neo also plays the role of a mentor to his employees, through harnessing their creative ideas into feasible designs. Mr Neo said: “When people leave the company, it’s almost never a relationship gone sour. These people have grown to start their own companies and that, to me, is an accomplishment as an employer.” Unlike most firms in the interior design industry where it is not uncommon for employees to work past 10pm and on weekends, his team works five days a week and he “chases” people home at 7pm. Mr Neo said: “While we want the business, we are not going to be desperate. Seven o’ clock is the cut-off and it doesn’t matter if someone is going to present a S$100k cheque or has a 50k square feet house to design.” He added: “We do compromise, but our clients have to respect us too. If not, how are we going to work together in the coming months? We don’t sell short, but we also don’t sell too hard.” sywong@sph.com.sg

SME | 27

The Business Times | Tuesday, July 18, 2017

How to ensure success in new markets The head office must exercise effective corporate oversight of its business units By Sovann Giang, Ng Shi Qian and Claire Nie WHAT does it take for business units to operate effectively and succeed in new markets? What do failed business expansions have in common? In a volatile and diverse economy, how should top business executives redefine the relationship between the head office and business units to drive future growth? The answer lies in building robust, well-coordinated and integrated corporate oversight to supervise, support, control and monitor business operations on an enterprise-wide level. Effective enterprise-wide oversight allows detection and rectification of early signs of strategic errors, incompetent management, operational weaknesses, as well as poor governance and risk management practices. With a unifying and shared corporate culture, effective corporate oversight could instil good governance and supercharge business performance and strategy formulation.

A case study on weak corporate oversight: Hanjin Shipping South Korea’s Hanjin Group was founded in 1945. The Hanjin empire was divided into four business units after the patriarch’s passing and handed over to four brothers. The perceived unfairness and favouritism towards the eldest son soured family ties. However, the underlying root cause for the tragic collapse of South Korea’s largest shipping company stems from more than just a long-standing Korean family feud. When the patriarch of Hanjin Group divided his empire, he did not foresee the risks of letting his four

sons run their own shows and relinquishing group-level control. Debt-laden Hanjin Shipping’s collapse was due to a multitude of factors such as lack of head office support for strategic direction, management capability, financial resources and risk management. In retrospect, the demise of Hanjin Shipping might have been prevented if strong corporate oversight was established to provide adequate supervision, support, control and monitoring from the head office.

The four pillars of effective corporate oversight

Debt-laden Hanjin Shipping’s collapse was due to a multitude of factors such as lack of head office support for strategic direction, management capability, financial resources and risk management.

To assist the board at the group level in exercising good governance over its business units, we have synthesised the multiple roles of an effective head office into the Four Pillars (4Ps) of effective corporate oversight – Supervise, Support, Control and Monitor – to ensure business sustainability and good corporate governance. ■ Supervise: Supervision is a process of managing and overseeing business unit performance in executing strategic, operational as well as financial plans and targets. Supervision from the head office is operationalised through line management. The head office assigns line managers with direct control and accountability for results of business units to drive performance and delivery. ■ Support: With a whole spectrum of business challenges and market diversity, a newly formed overseas unit is often too thinly resourced to handle them alone. It therefore requires a period of hand-holding from the parent to tap its financial, human capital, operational, technical and innovation resources. The collapse of Hanjin Shipping

General Electric has created a parallel system that takes advantage of its sheer scale of operations to drive strategic growth and performance. PHOTO: REUTERS

highlights the critical role of leadership support and succession planning by the head office. With the head office hollowed out from the group’s management structure following the split of family assets among the four brothers, Choi Eun-young was forced to switch overnight from her role as housewife to that of CEO of Hanjin Shipping upon the passing of her husband. To better cope with external shocks, the head office needs to identify and groom a pipeline of qualified leaders who are able to take over the helm and ensure sustainability of the subsidiary.

A strong group culture cements the foundation critical to supporting the four pillars and binding them together. When a company ventures overseas, its culture – the collective values and mindset instilled in its employees – should also cascade down to all business units. Culture influences subconscious behaviours and permeates every aspect of the business. No amount of strategic planning or policy setting will work if the doers lack the discipline, accountability and integrity to follow through and do the right thing.

■ Control: A new business unit is bound to struggle with risks such as operational lapses, regulatory breaches, IT failure and possible financial fraud, which could make or break the new establishment in its infancy stage. Good corporate controllership ensures that business units stay compliant with internal company rules as well as external regulations. A clear reporting structure and accountability matrix with proper segregation of duties should be implemented to prevent miscommunication and avoid over-reliance on any single individual. Controllership guided by formal policies will ensure consistency in areas such as risk management practices, internal controls, ethics, technical standards, operational quality and IT processes.

General Electric (GE) – a conglomerate whose operational and financial impact reaches almost every corner of the world – has created a parallel system that turns its sheer scale of operations into an advantage to drive strategic growth and performance. Through GE’s Operating System, regional C-suite executives set annual strategic plans and financial targets that guide and reprioritise resource allocation to support business segments. This system forms the Supervise and Support Pillars of effective corporate oversight. Running in parallel with the Operating System is the Controllership Initiative, which taps the knowledge of staff functional teams to track, analyse and synthesise key performance indicators. The GE Controllership Initiative forms the Control and Monitor Pillars of effective corporate oversight. Embedded in the two systems is GE’s culture of commitment and integrity, which is consistently cultivated and practised across all business units worldwide.

■ Monitor: Ongoing monitoring enables the head office to assess business, financial, technical and compliance performance of the respective business units. Continuous monitoring introduces greater clarity, visibility and predictability of business performance, and enables top management to steer the company towards the right strategic direction. In an age of digital disruption, information gathered from market trends could be aggregated and synthesised by business information analysts, generating a unique data repository for the company. Such a data analytics process serves the head office function beyond monitoring of performance; it allows proactive management of company strategies and offers predictive insights for the management.

A case study on good corporate oversight: General Electric

Despite geopolitical changes and digital disruptions, Singapore companies remain sanguine about economic conditions and strive towards internationalising operations to tap bigger markets. To drive future success, it is now time to redefine the role of the head office as a long-term partner of business units and how corporate oversight could become a source of growth and value. ❚ This article is written by senior director Sovann Giang and consultants Ng Shi Qian and Claire Nie from the Risk Advisory division of RSM in Singapore.

The Business Times | Tuesday, July 18, 2017

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