Macau Business Daily, Sept 25, 2014

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 633 Thursday September 25, 2014 Year III

On course for record surplus W

e’re only three-quarters through the year. And the Macau Government has already raked in a large surplus. So far, 14 percent higher than expected for the whole of 2014. Macau’s fiscal surplus for the year stood at MOP72.4 billion in August. That’s the same amount accumulated for the whole of 2012. The fly in the ointment is that 90 percent of government revenues are generated by casino taxes

www.macaubusinessdaily.com

PAGE

The biggest loser

3

CCAC: Wynn land deal investigation still underway

MOP4.3 billion. That’s how much casinos here are expected to lose this month. Analysts continue revising down estimates for Macau’s gaming industry. If the numbers add up, September could see gaming operators lose more money than in the last three months combined

Page 2

Macau Property Opportunities boosts profits 156pct

Page 5

Page 2

Ironing out the difficulties

Link-up looming large

The metallurgy industry faces turbulent times.

Slower demand from China has taken prices to the bottom. But the government rejects rescue measures. Meanwhile, the biggest state-owned steel trader has big financial problems

The Hong Kong-Zhuhai-Macau Bridge. It’s loomed large in the media for years. Now reporters have been given a firsthand tour of the site and briefing on preparation works.

Authorities say the bridge is definitely on schedule. Once complete, the Macau side of the border can accommodate 250,000 daily crossings

Pages 8 & 10

Page 4

‘Banquet’ Week Next week marks the anniversary of the start of the Communist Party’s rule in 1949. Patriotic Golden Week, however, could turn into Banquet Week in Hong Kong. Thousands plan to march for democracy. Occupy Central tensions are rising in the neighbouring SAR. Travel agents report a 20 percent drop in Golden Week tours

Page 6

HSI - Movers September 24

Name

%Day

Tingyi Cayman Island

3.98

Want Want China Ho

2.58

China Petroleum & Ch

2.31

China Shenhua Energ

2.28

PetroChina Co Ltd

1.96

New World Developm

-0.61

Henderson Land Deve

-0.84

Lenovo Group Ltd

-1.34

Galaxy Entertainmen

-1.54

Sino Land Co Ltd

1.88

Source: Bloomberg

I SSN 2226-8294

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2

September 25, 2014

Macau

CCAC: Wynn land deal Betting the house investigation still underway opinion

José I. Duarte Economist

M

acau needs to diversify: this is a message that is repeated again and again. Sometimes, it comes across in the comments of some mainland official, and everybody assumes it is a reminder to the local government.

Other times, some local official reasserts it as a major commitment, and everybody presumes that there’s an active policy in the making to steer the region onto the right track. Now and then, one or the other of the various political agents with a stake in the matter states that Hengqin Island is the path for diversification, if not salvation.

And then…

What we seldom, if ever, hear is a reasoned account of the deeper trends shaping the evolution of the economy; or a sound appraisal of alternative ways to diversify, if they can be conceived; or a lucid identification of the consequences of this or that development route.

Diversification is becoming more a mantra than a mission, a kind of ritual that one substitutes for action.

Let’s assume – and it’s a long shot – that governments, in general, and this government, in particular, have the knowledge, the information and the ability to identify the activities that will drive the future development of the economy.

Then, let us admit that a coherent viable strategy has been crafted. Further, let us yet presume the human resources with the necessary skills to implement such strategy are available or can be mobilised. Well, all that would seem to be too good to be true – and probably would.

The ongoing and expected expansion in the gambling sector and its related activities in Cotai alone will require and absorb increasing quantities of imported labour.

That, combined with the rigidity in the supply of the local labour component, and compounded by the persistence of regimes of privilege in certain sensitive areas, will ensure a lively, but not necessarily stable, labour market. Casinos will be forced to compete for increasingly scarce talent, facing rising wage pressure and increased staff rotation. Many smaller companies will be pushed out of business, simply unable to find or hire the required staff.

Demographic pressures and financial flows will keep heating the economy. As real estate imbalances persist unaddressed, rents and labour costs together will make many smaller businesses simply unviable, and drive out additional segments of the local economy. On current trends, the combination of gambling growth policies, plus labour and real estate conditions will keep chanelling resources to the dominant sector. The region will be increasingly dependent upon its performance and its ability to satisfy the rising expectations of some, if not most, of its stakeholders.

The role of Hengqin in all this is the source of another set of misunderstandings. Will it provide opportunities for some local business people? Possibly, but that is not the same as contributing to boosting the resilience of the local economy, let alone safeguarding the survival of the local community as it has existed until now. As things stand, if the investment foreseen for the neighbouring city materialises in the coming years, Macau competitiveness will be further eroded in all sectors except gambling. On current trends, for all practical purposes, Macau will, in a few years, be no more than a special Zhuhai neighbourhood where one can bet legally, and a convenient location to place some assets that may become handy in the event of some cloudier, distant days. If that is desirable, or should even be counted as development, is a matter of contention. But that is another debate yet to be embarked upon.

M

acau government’s investigation into a land deal by Wynn Resorts Ltd. is continuing, according to its anti-graft agency, and hasn’t been concluded as company Chairman Steve Wynn has said.

“The relevant investigation is still underway,” the Commission Against Corruption of Macau said in an e-mail yesterday, while declining to provide further details, in response to questions from Bloomberg News. Wynn yesterday told reporters that the government agency was satisfied with its investigation and had ended it.

Katharine Liu, spokeswoman of Wynn Resorts’ Hong Kong- listed unit Wynn Macau, said in a text message

she was in a meeting and unable to take calls.

Wynn Resorts, based in Las Vegas, said in July it’s cooperating with the government agency on inquiries into the land purchase for the company’s new casino resort on Macau’s Cotai Strip. The Business Daily newspaper reported July 11 the agency is investigating why Wynn Resorts was made to pay MOP400 million (US$50 million) for the land rights.

The new Macau resort, called Wynn Palace, is on track to open in the spring of 2016, Wynn said yesterday.

“It’s totally mundane, irrelevant,” Wynn told reporters yesterday when asked about the investigation into the deal, after giving a speech to students

at a local university. “Everything about the transaction is crystal clear,” said the 72-year-old gaming billionaire.

Wynn Macau erased earlier gains to fall 1.2 percent to HK$25.50 as of 1:40 p.m. Tuesday in Hong Kong trading. Wynn Resorts’ Nasdaq-listed shares rose 0.9 percent to US$182.83 at the close of trading in New York, before the CCAC’s response.

Gross gaming revenue in Macau, the only place in China where casinos are legal, fell a third straight month in August as China’s anti-corruption campaign prompted high-rollers to avoid its gambling halls, hurting casinos’ earnings including at Wynn Macau Ltd., a unit of Wynn Resorts.

Bloomberg

Macau Property Opportunities boosts profits 156pct The Fund that develops and invests in property in Macau and Mainland China cashed in US$65 million during the first six months of the year. The company is confident that it will increase rental values in the near future João Santos Filipe

jsfilipe@macabusinessdaily.com

M

acau Property Opportunities Fund (MPO) increased its profits 156 percent yearon-year during the first half of the year. The company that develops and invests in property in Macau and mainland China increased its profits after taxes to US$65 million, from US$25.4 in the first six months of 2013.

During the first six months of this year, Macau Property Opportunities registered an income of US$131 million, which is an increase of 108 percent from US$63 million. The net gain from fair value adjustment on investment property jumped in the first six months of 2014 by 73 percent to US$84 million from US$48.4 million.

As for expenses, they increased as well but at a slower rate than income.

During the six months of the year, MPO increased its expenses by 96 percent from US$27.1 million to US$53 million.

At the same time the company portfolio value increased 38 percent year-on-year from US$452.9 million to US$535.8 million.

“The bulk of this increase can be attributed to the solid performance across the company’s portfolio. The portfolio value rose 37.7% year-onyear to US$535.8 million, boosted by your manager’s asset management initiatives and the shortage of housing supply in Macau”, the chairman of MPO, David Hinde, said.

The Chairman of the Board of

MPO also said that the company is focused on raising its rental values on the Waterside luxury residential property located in NAPE. “While occupancy has declined to about 80% on the back of a rogue junket operator’s disappearance and our drive for higher rental growth, we are not overly concerned. Our overriding focus remains on increasing rental values; some slippage is to be expected as the market adjusts to new, higher rental levels”, he explained.

As for the company’s low-density luxury residential development, The Fountainside, sales have been slower than expected. The company said that this is happening due to “prevailing property cooling measures” impacting transaction volumes across Macau.

3

September 25, 2014

Macau

Gov’t surplus already MOP10bln ahead of budget In eight months, the public coffers have amassed the same amount of money as in all of 2012: MOP72 billion Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

W

ith still four months to go, Macau’s government has already surpassed its goal for this year’s fiscal surplus by 14 percent and is running 6 percent above August 2013’s record performance. In eight months, the public coffers have amassed the same amount of money as the whole of 2012. The MOP100 billion mark is ready to be beaten. Macau’s authorities are sitting on a huge pile of cash that’s growing year by year.

According to the Financial Services Bureau, between January and August the fiscal surplus amounted to MOP72.4 billion. The sum is already 14 percent more than that projected by Chui Sai On’s cabinet for the whole year.

Fiscal surplus is the difference between the money that a government receives

– like revenues from taxes or sales – and the money it spends investing in roads, schools or running public offices and companies.

In other words, the government here has already ‘paid its bills’ for the year.

The 2014 budget is expected to amass MOP63.6 billion in fiscal surplus. With the August mark already above, every pataca that comes in from now on is pure ‘profit’.

In August, Macau was already sitting on a MOP10 billion extra budgeted surplus with four months to go to 2015.

August’s MOP72 billion surplus is not only 6 percent higher than last year’s. It’s also higher than all of 2012’s surplus (MOP72.7 billion) and almost four times the one recorded for the whole of 2009, only five years ago.

In that year, Macau was ‘making’ an average of MOP2 billion per month; now the

same figure exceeds MOP9 billion.

Even with the recent drop in casino revenues, 2014 is likely to be a record year and the first exercise in which Macau’s fiscal surplus surpasses the MOP100 billion mark.

If the January-August period trend is maintained, the fiscal surplus this year could reach MOP120 billion. The gaming revenue slowdown here is not likely to stop 2014

posting a record performance but will probably be less spectacular than people expected in January or March.

The taxes charged to casinos here represent roughly 90 percent of government revenues and any decline in the first has a direct bearing on the latter.

In terms of gaming taxes, the government has already achieved roughly 75 percent of its goal for the year. Since January, it has

received MOP90 billion from operators and expects to get an extra MOP27 billion by the end of December. This year, the government is also profiting from a 24 percent increase in fees and fines and other taxes beyond gaming.

But despite the solid growth of taxes paid by casino operators, the ‘miracle’ of a record surplus is in expenditure. Or at least, in the low investment the government has made until now.

With eight months already gone (two thirds of the year), Macau has spent less than half of the expenditure budgeted for 2014. From the MOP77 billion announced, only MOP40 billion has been spent (45 percent). The investment budget has an execution rate of 8 percent: compared to the January to August period in 2013, the government has invested 30 percent less.

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4

September 25, 2014

Macau

Preparing for the Y-Bridge It has been reported that the Hong Kong-Zhuhai-Macau Bridge could face delays.

Nonetheless, authorities believe that all the construction work will be completed by the end of 2016, when the bridge is slated to open. The blueprint for the border on the Macau side is almost finished Kam Leong

kamleong@macaubusinessdaily.com

C

onstruction on the Macau border gate for the Hong Kong-Zhuhai-Macau Bridge (HZMB) will likely commence soon after drawings are finished by the end of this year, according to the chief officer of the Infrastructure Development Office, José Lam Wai Hou. In addition, it is believed that the difficult Island and tunnel project by the Chinese authorities will be completed in 2016 on schedule.

According to Mr. Lam, who is a civil engineer with the Office, the new border gate for the city will occupy 76.71 hectares and 34 percent of the artificial island on which the Zhuhai border gate will also be sited.

“The Macau Government is in charge of the construction of the Macau border and its link road [to the main bridge]. The link road will be to the west of the border and will also connect to Zone A of the new urban area by bridge,” Mr. Lam said, claiming that the two constructions

will be finished concurrently with the completion of the HZMB. Construction for the border will be divided into two stages, the engineer said. Passenger terminal buildings as well as two car parks, inside and outside the border, will be built in the first stage; other auxiliary facilities, such as immigration lanes and roads, will be built later next year.

Stating that the government is totally ready to start construction on the border as soon as the drawings are finished, Mr. Lam said they are currently working on the geological exploration of the artificial island to ensure its design and works meet standards.

The artificial island on which both the Macau and Zhuhai borders will be built is closer to the SAR Peninsula.

It was finished last November and, according to Mr. Lam, Macau will build two different passenger terminal buildings – Macau-Zhuhai and Macau-Hong Kong. Meanwhile,

Hong Kong has been assigned to build its own artificial island where its border will be.

The borders are designed to allow for a total of 250,000 crossings each day, of which the Macau-Zhuhai border will manage a maximum of 150,000 while the Macau-Hong Kong border will manage 100,000. Mr. Lam said the two separate buildings will be connected by a passageway.

Asked by reporters if he believes that construction can finish on schedule in 2016, he only said that the government is always targeting completion of construction at the same time as the HZMB.

The Island and Tunnel Project On the other hand, the Island and Tunnel Project, which will connect two other artificial islands and the underwater tunnel of the bridge, is also progressing according to schedule, the executive director of

the HZMB authority, Wei Dongqin, said.

The two artificial islands - namely, the East Artificial Island and the West Artificial Island - are located at the two ends of the main bridge, respectively, to connect both the tunnel and the offshore bridge.

The project is said by authorities to be one of the most difficult tasks of the HZMB constructions. The underwater tunnel will comprise 33 elements of immersed tunnels. Each element of the immersed tunnels is 180 metres long, weighing 69,000 tons each. The tunnel, with a total length of 5,940 metres, will accommodate six lanes.

It is believed it will be the world’s longest undersea tunnel.

Meanwhile, Mr. Wei, also the deputy secretary of the Party Committee of China, revealed that the bridge will apply electronic toll collection facilities for vehicles, although related details are still sketchy.

BESOR staff plan bank acquisition Local staff of Banco Espírito Santo do Oriente are interested in buying the Macau branch of Banco Novo. However, the parent company of BESOR has yet to devine the future of the subsidiary in Macau

L

ocal staff of Banco Espírito Santo do Oriente (BESOR) are uniting their efforts in order to acquire the bank that is a subsidiary of the Portuguese bank Novo Banco, Macau Daily Times reported yesterday.

According to the newspaper, the local subsidiary staff of Banco Novo have drafted an acquisition plan as they are aware that the parent company is willing

to sell its assets.

“The acquisition plan is flexible regarding strategic partnerships . . . while the plan is strict with regard to guaranteeing continuity of BESOR’s business, maintaining its core values”, an unidentified source is quoted as saying by the newspaper.

In August, Portugal’s central bank rescued Banco Espírito Santo, at the time the parent company of BESOR,

after regulators uncovered potential losses on loans to other companies tied to the Espírito Santo family.

As part of the rescue plan, the company was split into two companies: Banco Novo, which kept healthy housing assets, and another bank keep riskier housing assets.

BESOR was incorporated in the first.

However, no plans for the sale of BESOR have yet been formulated and it may

take some time until they are as the Novo Banco situation is anything but clear. Last week, Vítor Bento, who was appointed Chief Executive Officer of the company in July, decided to resign.

Eduardo Stock da Cunha assumed the role as new CEO. As for BESOR, it is going to hold an Annual General Meeting on 6 October, in which it will discuss the relocation of its headquarters.

The meeting will discuss the future of the company and the elections the board of directors will also take place.

Last year, the bank posted a profit of 39.4 million patacas, achieving a total income of 44.8 million patacas. The results were explained by the company due to the Corporate/Trade Finance activities related to commercial ties between Mainland China and Africa.

J.S.F.

5

September 25, 2014

Macau

Macau casinos set to lose MOP4.3bln in September With a week left, analysts already put at 15 percent the size of this month’s gaming revenue drop in Macau. In September alone, the industry here will likely lose more money than in the previous three months combined Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

15pct Year-on-year drop in revenues in September

G

aming revenues in Macau will decline this month by 15 percent and casino operators will lose more revenue in September alone than in the previous three months combined, according to Macau Business Daily (MBDaily) calculations.

The impact of the anti-corruption campaign launched by Beijing this year is not only disrupting VIP performance but mass market, too, a segment likely to grow less than 10 percent this month, a third of its normal average.

A poll of five banks and brokerages compiled by Business Daily reveals that the gaming revenues in September will decrease by 15 percent compared to a year ago. The drop makes this month the worst performer of the year so far. Revenues are declining almost three times faster than the average recorded between June and August, and well behind most recent market predictions. Last week, investors were predicting revenues would ‘only’ drop 10 percent in September. Now, they’re likely to fall 50 percent further.

Billions and billions If the gaming industry in Macau records a 15 percent decrease in revenues, it means that the sector will lose more money in one month than in the previous three combined or since the revenue cycle of diminishing revenues started in June.

According to MBDaily’s calculations (applying a 15 percent decrease estimation), gaming revenues in Macau will amount

to MOP24.6 billion in September.

That’s MOP4.3 billion short of a year ago (MOP28,9 billion) and only slightly above what was amassed by the industry in September 2012 (MOP23.9 billion), data from the Gaming Inspection and Coordination Bureau (DICJ) says.

Between June and August, the revenue growth in Macau headed into negative territory, decreasing 5 percent percent year-on-year. In these three months, operators in Macau made MOP4 billion less than in the same period last year. With the sector posting diminishing revenues for the fourth straight month in a row investors are getting nervous as no bottoming out signs have yet appeared.

The more than expected mass market slowdown this month is one of the main drivers of September’s underperformance. ‘We believe China President Xi’s anti-corruption campaign (and certain Mainland economic uncertainties) are not just impacting VIP but premium mass as well – which is a sizable controlling piece of the overall mass market (80/20 rule)’ wrote Sterne Agee yesterday in a note to clients.

The brokerage, which forecasts a revenue drop of 19 percent this month in a worst case scenario, expects a 7 percent growth in mass tables this month year-on-year, a less optimistic view than that of its peers.

Could always be worse But September was set to be even worse. Last week – from September

14 to 21 – Macau saw revenues from casinos rebound to an average daily revenue of MOP900 million, above the MOP800 million average recorded in the first two weeks of the month.

More bullish than Sterne Agee, Wells Fargo said also yesterday that it is expecting revenues here to decrease by 13 to 15 percent, with VIP gamblers spending 26 percent less than a year ago and mass segment gains to jump 10 percent.

The US bank assumed that this week the sector would see a fresh deceleration in revenues to around MOP835 million per day, as the market slows ahead of Golden Week.

‘The Chinese economy and Macau continue to remain soft, and weak growth trends into Golden Week and the smoking ban create uncertainty’, wrote Wells Fargo adding that there are some risks in the outlook, namely in the mass area. ‘While our VIP/ credit model gives us comfort on our negative VIP growth forecasts, the outlook for mass revenue is increasingly opaque’.

In the current weaker than expected month, Galaxy will likely retain leadership of the table-game market here with a share of 23.6 percent, followed by SJM with 22.4 percent, Las Vegas Sands with 22 percent and Melco Crown with 13 percent, Wells Fargo estimated.

One thing is certain. Macau’s gaming market slowdown is diverting billions of patacas from operators here. In only four months, more than MOP8 billion has already gone. And they’re likely not the last ones.

Gaming Revenues Estimations for Macau (September) Var.

(year-on-year)

Wells Fargo

-14%

Deutsche Bank

-15%

Sternee Agee

-16%

Nomura

-16%

Barclays

-14.5%

Average

-15%

Note: midpoint used in estimations

Total Gaming Revenues in September Year

Value

(MOP million)

2014*

24,618

2013

28,963

2012

23,866

*Estimation

Gaming Revenues Estimations for Macau (September) Month

Var.

(year-on-year)

June

-3.7%

July

-3.6%

August

-6.1%

September*

-15.0%

*Estimation

6

September 25, 2014

Macau Brands

Trends

Molecular Drinks Raquel Dias newsdesk@macaubusinessdaily.com

H

aving a drink is not like it used to be.

That old American tradition of the cocktail is not only taking Asia by storm, it’s being reinvented. Nobody knows exactly where cocktails got their name. Some say they were popular during the United State’s ‘dry law’ days to avoid detection, as the drinks looked pretty much like juices. Whether or not this is true we will never know but it’s surely indisputable that the cocktail has arrived in Asia, to stay.

The elegant yet cheeky ambience of the exclusive China Rouge goes really well with all the allure of the magical drinks they create. The club - inspired by naughty 1920’s Shanghai - is filled with that burlesque atmosphere that characterises the era. Don’t get fooled by the club’s vintage feel, though; China Rouge’s second name is innovation.

This holds true for their night-time entertainment, their choice of décor, and their exquisite molecular cocktails.

Yes, molecular cocktails. You can actually eat your drinks.

China Rouge’s new TEAser is the Green Tea Sake with ‘Sushi’ Cocktail and it promises to be as much of a success as its predecessor, a cocktail inspired by the long Tradition of Dim Sum. Available until November, the cocktail that includes everything from green tea to sake and banana liquor will set you back MOP328 ++ but it’s definitely a must-try.

Golden Week tours drop 20pct Macau and Hong Kong have been very politically active, vocally calling for democracy and demanding both SAR governments allow universal suffrage

W

ith fears that Hong Kong’s Occupy Central movement could erupt on China’s National Day – October 1 – travel agencies report a decrease in tours from mainland China to the Special Administrative Region.

According to Hong Kong Economic Journal, the number of tours from mainland China to Hong Kong have dropped between 20 and 30 percent “on worries over interference by the Occupy Central movement,” travel agents are quoted as saying. This would make it a first for Hong Kong, and certainly Macau, particularly when both regions traditionally welcome record numbers of visitors during the National Day Golden Week, which runs from October 1 to October 5.

A poll conducted by Hong Kong English-language newspaper South China Morning Post reveals that 75 percent of respondents believe that the Occupy Central movement will commence on October 1 to coincide with China’s National Day, which

marks the start of the Communist Party’s rule in 1949.

“While others celebrate the big day for the country, we will also serve a banquet in Central to push for Hong Kong’s democracy,” Benny Tai Yiuting, one of the movement’s organisers and a professor at the University of Hong Kong said.

Tai and other leaders of the movement have threatened sit-in protests in the city’s financial district after China said last month that candidates for the 2017 leadership election in Hong Kong must be vetted by a committee. Occupy Central applied to the police for an assembly of as many as 50,000 people at Chater Garden on October 1, Apple Daily reported yesterday, citing organisers.

The movement also applied for permits for rallies on Chater Road for October 1 and October 2, Apple Daily said.

Chater Garden and Chater Road are situated in the city’s business district, close to the Asian headquarters of HSBC Holdings Plc and the office

of Li Ka-shing, Hong Kong’s richest man.

Thousands of university students boycotted classes this week to express dissatisfaction with China’s ruling.

Opposition lawmakers, student groups and Occupy Central leaders say the vetting committee will be packed with legislators and business executives favouring Beijing.

Lawmakers are expected to vote on the electoral reforms next year. Opposition to the proposal is fuelling the risk of China cancelling the popular election, the city’s top official, Chief Executive Leung Chunying, said on September 14.

Tai said in a Bloomberg interview earlier this month that the number of people joining the movement may not be as big as earlier expected after its strategy of a threatened protest failed to win concessions from China.

He also said that the movement will choose a date for the occupation that will minimise possible economic damage to the city.

S.F. with Bloomberg

NetJets wins China backing to offer private planes Private jets have long been a symbol of wealth and power, and the business of private aviation has grown considerably in recent years. Currently, three companies offer travell by private jet. There could be a fourth if NetJets expands beyond mainland China

N

etJets Inc., the aviation arm of Warren Buffett’s Berkshire Hathaway Inc., said it will begin providing private aircraft in China after gaining regulatory approval from civil aviation authorities there.

NetJets Business Aviation Ltd., a venture with China’s Fung Investments and private equity firm Hony Capital, will initially charter two Hawker 800XPs in a move that expands the NetJets footprint beyond the U.S. and Europe. It will also provide maintenance, crewing, catering and storage services.

While NetJets pioneered fractional ownership, offering access to about 750 aircraft

including Bombardier Inc.’s Global 5000 and 6000 models, it will delay introducing similar plane shareholding deals to Chinese customers until the market is more mature, Chief Operating Officer Robert Molsbergen said.

“It’s a long-term play,” Molsbergen said in a telephone interview, explaining that Columbus, Ohio-based NetJets will target the business market before considering opportunities in the leisure sector and elsewhere. “We see a pick-up of Chinese businesses that are expanding globally.”

The Hawker 800XP, with a 3,200-mile range, is ideal for trips from southern China to Beijing, he

said. The first jets will be based in Zhuhai, near Hong Kong and Macau, with no decision taken on how quickly to expand, NetJets Business Aviation Vice Chairman Eric Wong said separately.

Air travel is projected to increase 5.7 percent in Asia through 2017, with China the largest driver, the International Air Transport Association said last year.

The level of demand for private charters is less clear as an anticorruption drive hurts sales of luxury products, though the crackdown won’t affect long-term demand as China’s economy continues to grow, Wong said on a conference call.

Bloomberg

7

September 25, 2014

Gaming

Deposit US$25, get US$10,000 back; your bank becomes a casino American banks may soon offer ‘saving promotion raffles’ to attract more people to open bank accounts with them. The proposed bill suggests that anyone depositing US$25 could win monthly prizes worth US$3,750. While the banking industry says the move will encourage people to save money, if the bill is passed, lottery sales could total US$70 billion annually

W

ith interest rates barely above zero, the typical U.S. savings account has all the excitement of, well, waiting in line at the bank. But what if instead of marketing yet another CD or credit card, banks held raffles and gave millions away each month to savers?

The local bank might feel less like the villain behind those big overdraft fees and more like a casino on the Vegas strip.

A bank in South Africa tried this in 2005. The First National Bank’s Million-a-Month Account promised savers a chance to win 113 prizes a month, including a grand prize of 1 million South African rand (about US$150,000, MOP1.2 million at the time). Within 18 months, the bank had more prize-eligible accounts than regular ones. These new customers, many of them poor, saved an extra 1 percent of their incomes, a recent study found, and boosted their overall saving 38 percent.

The only thing preventing a big bank from doing this in the U.S.: It’s completely illegal. A bill in Congress – which passed the U.S. House of Representatives on September 16 – would change the law. If it’s passed by the U.S. Senate in the next few months and signed by President Barack Obama, banks of all sizes could start tempting savers with “savings promotion raffles.”

Prize-linked savings accounts in South Africa are illegal now, too. In 2008, the South African Supreme Court shut the bank promotion down after three years. It ruled that under South African law only the government may run a lottery. Meanwhile, the accounts are thriving in the U.K., New Zealand and Sweden.

In the U.S., federal law already lets credit unions offer prizes to savers, as long as states are okay with it.

The Save-To-Win game, started in Michigan in 2009, is available at credit unions in four states. In Michigan,

every US$25 saved increases the chance that a customer could win dozens of monthly prizes worth up to US$3,750, or six US$10,000 grand prizes each year. So far, more than 50,000 people have saved more than US$94 million through the game.

The fun of competing for prizes does get more people saving, the studies of the South African and Save-ToWin experiments suggest. And lowincome people especially benefit from this extra cushion of cash. A quarter of Americans tell researcher they’re certain they’d have no way to come up with US$2,000 in the next month. If the American Savings Promotion Act becomes law, Bank of America or Citibank won’t roll out nationwide Million-a-Month Accounts right away. Any raffles would need to comply with state laws, and some states are stricter than others. Maine, for example, won’t let prizes of more than US$1,000 be offered more than twice a year.

The hope is that a federal law could spur more states to loosen rules, says Timothy Flacke, executive director of the Doorway to Dreams Fund, a nonprofit that’s been pushing

HK shares rebound, despite new drop from casinos

H

ong Kong shares ended higher for the first time this week yesterday lifted by a stronger China market, with investor sentiment recovering after better-than-expected Chinese manufacturing activity.

The Hang Seng Index ended up 0.4 percent at 23,921.61 points.

The China Enterprises Index of the leading offshore Chinese listings in Hong Kong climbed 1.4 percent, snapping a four-day losing streak.

Large state banks led index gains.

China Construction Bank Corp and Industrial and Commercial Bank

of China each added more than 1 percent. Chinese telcos rose after mainland media reported Apple Inc’s iPhone 6 is in the final stages of review for approval, with results due shortly, quoting a top Chinese government regulator. China Telecom spiked 5.2 percent. Galaxy Entertainment Group and Sands China were still major drags on the Hang Seng, down 1.5 and 1.6 percent, respectively. Macau gaming revenue for September could see a 15 percent drop, the market expects.

Reuters

prize-linked savings as a way to encourage Americans to save more.

Other supporters of the bill include three Senate co-sponsors: Democrats Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts, and

Republican Jerry Moran of Kansas.

Prizes at the bank could hurt the almost US$70 billion in annual lottery sales, much of that from low-income people. State lotteries haven’t organized against the bill, which passed the House without opposition. Still, passage isn’t a sure thing in a gridlocked Congress. While private banks in other countries have found prize-linked savings accounts profitable, banking lobbyists in the U.S. aren’t aggressively pushing for the bill. They’re mostly concerned with fending off tighter regulations related to the 2010 Dodd-Frank Act. A prize-linked savings account won’t help raise incomes, and it won’t lower the costs of health care or housing. But it may nudge Americans to pay just a little more attention to their savings, so that an unexpected expense doesn’t become a financial disaster. At the very least it could give some lucky savers the thrill of hitting the jackpot.

Bloomberg

8

September 25, 2014

Greater China Steel transporter chairman arrested Chinese steel transporter Anhui Wanjiang Logistics said 2 billion yuan (US$326 million) of its loans were overdue and its chairman had been detained by police, in the latest sign of strain in the country’s troubled steel sector. Shanghai-listed Anhui Wanjiang, which specialises in steel cargo logistics, said in a statement that it had about 16.7 billion yuan in debt, including 12.7 billion yuan owed to 19 banks, of which almost 1 billion yuan was overdue. It also had an additional 1.1 billion yuan in non-bank loans overdue.

IMF expects 2015 national growth to exceed 7 percent Many economists see the rapidly slowing property market as the biggest risk facing China’s economy

Fonterra not to sell formula in China New Zealand dairy exporter Fonterra has no plans to put its Anmum brand of milk formula on supermarket shelves in China’s largest cities, the company said yesterday. “I don’t want to pay massive amounts of listing fees in tier-1 cities get product on (supermarket) shelves,” Fonterra CEO Theo Spierings told Reuters in a telephone interview, referring to China’s largest cities including Beijing and Shanghai.

Support for inclusive finance

IMF headquarters

C

hina’s economy will likely grow faster than previously thought in 2015, the International Monetary Fund said yesterday, downplaying the risks of the cooling property market in the world’s second-largest economy.

Economic growth in China will likely be “well above” 7 percent next year, Changyong Rhee, director of the Asia and Pacific department at the IMF, told a briefing in Manila.

His remarks suggested the global lender’s will upgrade its growth

forecast for the country due next month from the current 7.1 percent estimate it made in July.

The IMF has a 7.4 percent growth forecast for China for 2014, slightly below the government’s official target of around 7.5 percent.

Supply drowns China appetite for iron ore Stockpiles of imported iron ore across China’s ports stood at 112.35 million tonnes last week China hopes for a universally beneficial financial system and backs the international efforts in fostering inclusive finance, Vice Premier Zhang Gaoli said. Zhang, who is here for the UN Climate Summit as Chinese President Xi Jinping’s special envoy, made the remarks in a meeting with Dutch Queen Maxima, who serves as the UN Secretary-General’s Special Advocate for Inclusive Finance for Development. Zhang said efforts should also be made to ensure that the people in developing countries have access to modern, safe and convenient financial services.

Live cattle demand cuts NZ trade deficit Exports of live cattle to China helped narrow New Zealand’s trade deficit last month, the government statistics agency announced yesterday. Exports rose by NZ$227 million (US$183.18 million) year on year to NZ$3.5 billion (US$2.82 billion), according to Statistics New Zealand. The August deficit at 13 percent of exports was the smallest August deficit since 2010, and compared with an average deficit of 24 percent of exports over the previous five August months. Live animals exports were up from 94 million NZ dollars (US$75.85 million) to 110 million NZ dollars (US$88.76 million) year on year.

M

iners betting on a heavy round of iron ore restocking

by Chinese steel producers late in 2014, after a 40 percent price slump this year, may be disappointed as a reform-driven government sacrifices growth, leaving the market drowning in supply.

A toxic combination of bountiful supply and slower demand growth in top importer China have hammered iron ore prices to five-year lows, the hardest hit among industrial commodities this

For the first time in over a decade, the need to eliminate iron ore supply, rather than incentivise it, is determining prices Ian Roper, CLSA analyst

year. Prices slid this week below US$80 a tonne for the first time since 2009.

In the last quarter of 2012 iron ore staged a 39 percent recovery from that year’s price rout when Chinese mills restocked heavily. But his time around, mills may not rescue prices.

“The tension in the market isn’t there to want to go and sit on 60 days worth of stockpiles because in 60 days it might be cheaper. There’s no real urgency to rush out and build a stockpile,” said James Wilson, analyst

at Morgans in Perth.

A restructuring in China’s economy has reduced business confidence and the country’s demand for steel and iron ore, Nev Power, chief executive of world No. 4 iron ore miner Fortescue Metals Group said at a conference in Melbourne on Tuesday.

Small Chinese steel producers have kept iron ore stocks at as short as a week to 10 days, said a trader in China’s eastern Shandong province who sells to the mills, as the increased volatility

9

September 25, 2014

Greater China

We have to be prepared, but the impact on Asian economies will be much more minimal compared with its possible impact on other regions. We cannot be complacent but I think Asian countries are well prepared Changyong Rhee, IMF’s APAC department, director

“We expect they have many tools to maintain the growth rate well above 7 percent next year,” Rhee said.

Many economists see the rapidly slowing property market as the biggest risk facing China’s economy. Home prices, sales and new construction are all falling, and increasingly dragging on related sectors from home appliances to glass, steel and cement.

Analysts believe Beijing will roll out further stimulus measures in coming months to avert a deeper

in prices has prompted mills to manage inventories.

Stockpiles of imported iron ore across China’s ports stood at 112.35 million tonnes last week, according to data tracker SteelHome. That is not far below a record high of 113.7 million tonnes reached in July.

The mountain of port inventory, up 30 percent this year, shows how well supplied China is with ore and how slow the rate of consumption has been despite imports surging this year.

China imported 77 million tonnes a month on average this year, nearly 10 million tonnes more than in 2013, based on the country’s customs data.

The import spike largely reflects the increase in shipments to China by top suppliers such as Australia and Brazil as some high-cost Chinese mines were shut out by the price plunge.

But while a large number of small Chinese mines have been forced to close, domestic output is increasing as the big state-backed producers expand or consolidate.

Reuters

economic slowdown, including more help for would-be home buyers.

However, Rhee said the IMF does not expect China’s cooling property market to become a serious problem, saying it sees “a gradual adjustment” rather than a hard landing.

“Evidence shows there will be a gradual adjustment in real estate market but we have to watch if that baseline scenario will hold,” Rhee said.

A slowing Chinese economy should not be looked at as a “pure risk” as it gives other countries in Asia a better chance at competing with Beijing and attracting foreign direct investments, Rhee added.

Growth in Asia will likely remain robust, Rhee said, putting countries in the region in a better position to withstand the impact of higher interest rates in the United States in terms of capital outflows and market volatility.

“We have to be prepared, but the impact on Asian economies will be much more minimal compared with its possible impact on other regions.

We cannot be complacent but I think Asian countries are well prepared,” Rhee said.

The Philippines is expected to sustain growth at above 6 percent for this year and next, Rhee said, but he encouraged the government to speed up structural reforms to address issues such as income inequality.

Rhee said the Philippines could afford to have a slightly higher budget deficit than its target of 2 percent of gross domestic product this year until 2016 so it can increase spending on critical infrastructure.

Manila has a 6.5-7.5 percent economic growth target this year and a 7-8 percent goal next year.

Reuters

Refined fuel stocks down Major oil companies have predicted that China’s diesel consumption is set to post its first decline in more than a decade

C

hina’s commercial crude oil inventories at the end of August gained for a second month, as refiners focused on drawing down refined fuel stocks which fell a steep 6.2 percent over the month, the official Xinhua news agency said yesterday.

Diesel led the fall with a 10.3 percent decline, as agricultural users started to boost purchases ahead of the harvest season, and as more boats sailed after a fishing ban in northern parts ended, China OGP, a Xinhua oil and gas newsletter reported.

Gasoline recorded a drop of 3.35 percent, as refiners cut wholesale prices to boost sales, the newsletter said.

Kerosene, used mostly as aviation fuel, edged up 0.56 percent last month, after a steep fall of nearly 7 percent the previous month due to the peak summer travel season.

Crude stocks, excluding the country’s strategic reserves, rose 2.1 percent from the month before.

Sources at the country’s major oil companies have predicted that China’s diesel consumption is set to post its first decline in more than a decade this year, as a sputtering economy takes its toll on key industrial sectors.

Demand for gasoline and kerosene, however, remained healthy due to strong sales growth in passenger

KEY POINTS Crude stocks, excluding strategic reserves, up 2.1 pct on month Diesel down 10.3 pct due to upcoming harvest, end of fishing ban Gasoline stocks down 3.35 pct, kerosene edges up

vehicles and an upturn in air traffic.

Last month, national refinery crude throughput was up 0.8 percent from July at 9.75 million barrels per day.

China’s government rarely publishes oil inventory data, commercial or strategic, making it hard to measure real demand in the world’s second-largest oil consumer.

China OGP’s figures only provide percentage changes without giving outright volumes.

Reuters

China puts ex-top economic planner on trial Prosecutors called for penalties that could see Liu jailed for life

A

former top Chinese economic planning official went on trial yesterday for taking bribes worth nearly US$6 million, a court said, the latest episode in China’s much-publicised anti-corruption campaign.

Liu Tienan, the former deputy director of the National Development and Reform Commission, was indicted for taking 35.58 million yuan (US$5.8 million) in bribes, said a statement posted by the Langfang Intermediate People’s Court in the northern province of Hebei.

Prosecutors called for penalties that could see Liu jailed for life, according to the statement on the court’s verified account on Sina Weibo, a Chinese equivalent of Twitter.

The account showed a photo of Liu, clad in a black jacket and standing stiffly in court yesterday flanked by two uniformed court police officers.

Taking advantage of his position, Liu took bribes from various business people in exchange for benefits such as project approvals and assistance in securing car dealership, the statement said.

The bribes were taken in the form of cash, gifts for his son, including a villa in Beijing and a Porsche, among others, according to the statement.

Allegations against Liu surfaced in 2012 when a journalist at investigative magazine Caijing accused him of fraud, graft and sending death threats.

He was placed under investigation last year and also expelled from the

Chinese President Xi Jinping in New Delhi last week. President has vowed to root out corrupt officials ranging from high-ranking “tigers” to low-level “flies”

ruling Communist Party.

President Xi Jinping has vowed to root out corrupt officials ranging from high-ranking “tigers” to lowlevel “flies”, and warned that graft could destroy the party.

Corruption has caused widespread public anger in China and the drive has been widely publicised.

But critics say no systemic reforms have been introduced to combat it,

while citizen activists calling for such measures have been jailed on public order offences.

In addition to Liu, other current and former top figures who have been ensnared in the anti-corruption campaign include Jiang Jiemin, who oversaw state-owned firms, and Zhou Yongkang, China’s powerful onetime internal security czar.

AFP

10

September 25, 2014

Greater China

Rise and fall of the yuan, and PBOC plans The liquidity injection has many traders predicting a weakening of the currency

C

hina’s sudden deployment of its Standing Liquidity Facility (SLF) last week to inject targeted stimulus funds into its biggest banks to boost the slowing economy could also signal an impending period of currency weakness.

While People’s Bank of China (PBOC) officials have said that slower growth is the “new normal”, Premier Li Keqiang’s latest comments that China will employ targeted easing measures shows the extent to which growth concerns are dominating policymaking at the highest levels.

Use of the SLF - a policy tool created in 2013 to manage liquidity, akin to the U.S. Federal Reserve’s discount window - to inject 500 billion yuan (US$81.4 billion) of threemonth loans to the country’s five biggest banks, shows policymakers believe the time for decisive action has arrived.

The liquidity injection has many traders predicting a weakening of the currency - the time-honoured way for Chinese policymakers to boost growth.

A weaker currency would boost exports and make Chinese companies battling strong internal wage growth and a rising exchange rate more competitive.

Chinese average yearly wages in manufacturing have risen three-fold in dollar terms since the U.S. business cycle’s December 2007 peak, versus growth of 12 percent in hourly earnings for U.S. manufacturing workers, according to Russell Napier, a consultant with investment bank CLSA. Previously, manufacturers could usually pass higher wage costs on to consumers in the West. But now, a stuttering global economy, the rise of other cheap manufacturing bases such as Bangladesh and Indonesia, and a 30 percent-plus rise in the renminbi against the U.S. dollar over the last decade could spell trouble ahead for China’s manufacturing sector.

The impact of the strong yuan has been a slump in export growth with exports expanding just 9.4 percent in August year on year, versus average annual rates of nearly 20 percent since 2000.

But there are questions over just how effective a weaker currency might be.

Interbank market rates barely blipped after the latest liquidity injection and there is little sign that the cash being pumped into banks is making its way to the real economy, with China’s home prices falling for a fourth straight month in August.

500 billion yuan to be injected in three-month loans to China’s five biggest banks

Bank of China building in Hong Kong. The bank will be one receiving the liquidity injection

A gauge of China’s currency against its trading partners adjusted for inflation is flirting near a record high, according to Thomson Reuters data, and the PBOC may revisit its

last bout of currency depreciation in January-April when it set about dissuading hot money inflows by forcefully demonstrating the yuan was not a one-way upward bet.

Broad economic conditions are also greatly changed since the PBOC last depreciated the currency that some think weakening it too aggressively now risks stoking capital outflows and threatening various projects aimed at promoting the yuan’s use in global trade, such as a landmark Shanghai-Hong Kong stock-connect scheme set to start in October.

Instead, policymakers are likely to let the currency weaken in line with broader emerging markets, stepping in when required to ensure the currency remains weak against major trading partners.

Reuters

No debt crisis, claims Sinosteel A number of Chinese news websites said Beijing was planning to fork out 20 billion yuan to rescue Sinosteel

C

hinese state metals trader Sinosteel Corp is not about to undergo a restructuring as a result of mounting debt, a company official said yesterday, denying domestic media reports.

China’s biggest stateowned steel trader earlier told financial magazine Caixin that it was facing financial problems as a result of unpaid bills from customers, but it denied rumours that it is struggling under the weight of overdue loans amounting to 10 billion yuan (US$1.63 billion).

A number of Chinese news websites said Beijing was planning to fork out 20 billion yuan to rescue Sinosteel, in what would have been one of

the largest bailouts ever of a government conglomerate.

A Sinosteel official, who declined to be named because he wasn’t authorised to speak to the media, told Reuters he “didn’t know why this was being stirred up again now”.

Pressure has mounted on Chinese trading firms this year as a result of an economic slowdown and a supply glut that has driven steel product prices down to eight-year lows and iron ore to its weakest since 2009.

The media reports claimed Sinosteel - China’s secondbiggest importer of iron ore and the trading agent for many of the country’s steel mills - was unable to meet billions of dollars in loan principal and interest

repayments to a number of banks, including the Industrial and Commercial Bank of China Ltd (ICBC) .

An ICBC spokesman told Reuters yesterday that Sinosteel hadn’t defaulted on any loans, and that the bank’s exposure represented less than 1.3 percent of the conglomerate’s total borrowing from financial institutions.

Loss-making traders have tried to survive by borrowing and hoping that prices will recover, but a crackdown on cheap credit, tightened in the wake of an investigation into financing fraud at Qingdao port beginning in June, has left many of them unable to continue operating.

Steel industry in China is facing rough times

Reuters

11

September 25, 2014

Asia

Japan PMI shows manufacturing picked up Confidence of Japanese manufacturers fell the most in nearly two years in September Stanley White

Japan’s, Prime minister, Shinzo Abe speaks during the Climate Summit 2014 at United Nations headquarters in New York. A report raised fresh doubts about the effectiveness of Abe’s plan to reflate the economy

J

apan’s manufacturing activity picked up in the third quarter, a survey showed, but economists say they need more information on wages and consumer spending to determine whether the government should raise the sales tax again next year.

An improving corporate sector is certainly welcome news for Japanese Prime Minister Shinzo Abe after the economy contracted sharply in the second quarter following the first of two increases in the sales tax.

But the government, which is monitoring third-quarter economic data to decide whether to raise the sales tax again, is likely to remain

cautious for fear that consumer spending may not fully recover. Abe is to make a final decision by the end of the year.

“Conditions for Japan’s manufacturers are improving, and this is in line with an improvement overseas,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

“However, Abe’s policies rely more on households and the services sector.”

The Markit/JMMA flash Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 51.7 in September from a final reading of 52.2 in August, but

remained above the 50 threshold that separates expansion from contraction for a fourth straight month.

From July to September, the manufacturing PMI averaged 51.5, which is higher than the AprilJune average of 50.3 and shows that manufacturing is recovering, Miyazaki said.

The quarterly figures could ease fears that manufacturers would scale back production as stocks of unsold goods piled up after the tax hike.

In another encouraging sign, the output component of the flash PMI index rose to 53.4 from a final 52.9 in August to reach the highest level in six months.

Signs of rising factory output could help the economy recover from the shock of the April sales tax hike to 8 percent from 5 percent.

The increase dampened consumer spending more than many economists expected, triggering a 7.1 percent annualised contraction in the second quarter, and has taken some steam out of an expected third quarter rebound.

The government will analyse data for July-September to decide whether to proceed with a second sales tax hike to 10 percent scheduled for late next year.

The tax increases are needed to pay for rising welfare spending, but some politicians worry they will do too much damage to the economy.

Consumer spending has disappointed since the first sales tax hike, and data next week on household spending and retail sales will show whether or not things improved in August.

KEY POINTS Factory activity in Q3 higher than previous quarter-PMI Early signs manufacturing is improving Economists still in doubt on wages, consumer spending Q3 data to determine if second sales tax hike goes ahead Japan’s exports have also struggled to rise despite a weaker yen. Many companies have shifted production overseas, which robs the economy of an important growth engine that many policymakers were hoping would offset the blow from the tax hikes.

The Bank of Japan’s Tankan survey is expected to show manufacturers were less optimistic in July-September and sentiment will improve only slightly in the following quarter.

Confidence at Japanese manufacturers fell the most in nearly two years in September, the monthly Reuters Tankan business confidence survey showed last week.

The report raised fresh doubts about the effectiveness of Abe’s plan to reflate the economy, which hinges on a strong pick-up in both corporate and consumer spending.

Reuters

Myanmar calls for sustainable agricultural development Country’s president urged ASEAN member states to double efforts to conserve natural resources including water and forest resources

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yanmar President U Thein Sein has called on ASEAN member states to take sustainable agricultural development, food security and nutrition as the main national duties in implementing tasks for meeting the objectives of ASEAN Community, official report said yesterday.

“ASEAN member states must work hand in hand to meet the objectives of the UN Millennium Development Goals (MDG) with the aim of zero hunger by 2025,” U Thein Sein told the 36th Meeting of ASEAN Ministers on Agriculture and Forestry (AMAF) in Nay Pyi Taw. He cited figures as saying that global population is increasing annually and current population of 7 billion is projected to increase over 9 billion to 10 billion in 2050.

Warning that at present a total of 850 million people are facing food security and mal-nutrition, he called for doubling the food production.

As the year 2014 is the International Year of Farming, designated by the Food and Agriculture Organization (FAO), he called for putting entire efforts on developing small-holder farmers and family farming system

Myanmar President U Thein Sein

ASEAN member states must work hand in hand to meet the objectives of the UN Millennium Development Goals (MDG) with the aim of zero hunger by 2025 U Thein Sein, Myanmar President

since they contribute to more than 80 percent of the global agricultural production.

He also warned that ASEAN countries and global community are also facing the challenges imposed by global warming in couple with environmental deterioration and climate change.

He urged ASEAN member states to double efforts to conserve natural resources including water and forest resources and protect ecological system.

The 36th Meeting of AMAF, which began on Tuesday, discussed the proposals on government-private cooperation for establishing proper food stuff value chains between ASEAN and Japan, that on challenge of poverty, that on stability of

paddy production and market and that on sector wise cooperation for food sufficiency and agricultural development for emergence of developed Asian region submitted by the World Business Forum.

Myanmar is the rotating chair of ASEAN this year with a theme chosen as “Moving Forward in Unity to a Peaceful and Prosperous Community.”

Xinhua

12

September 25, 2014

Asia Temasek-owned company signs LNG deal Singapore state investor Temasek-owned Pavilion Energy has signed a second long-term contract to buy liquefied natural gas (LNG) for trading and supply to Asia, taking another step towards its goal of becoming a global company in the fuel.

Pavilion Energy said in a statement yesterday its wholly owned subsidiary Pavilion Gas Pte Ltd has struck a deal with BP under which the UK company will supply it with 0.4 million tonnes per year of LNG for 20 years from 2019. It did not say how much Pavilion would pay for the LNG.

Solar energy conversions soar in NZ Rising electricity prices are powering a move to solar energy in New Zealand, according to a study. The number of grid-connected small-scale photovoltaic (PV) systems grew by 330 percent over the last two years, Victoria University researcher Dr. Rebecca Ford said in a statement. The study found 70 percent of New Zealanders were unhappy with buying electricity from their power company, and 60 percent would be willing to purchase PV in the future to generate their own electricity. The numbers were still relatively low compared with other countries.

FDI increases in Vietnam’s southern hub Foreign direct investment (FDI) registered in Vietnam’s southern economic hub Ho Chi Minh (HCM) City have increased by 6.9 percent to more than US$1.18 billion as of mid-September this year, according to the city’s statistics office yesterday. Local authorities have granted licenses to 277 new foreign-invested projects worth over US$1.1 billion, of which seven projects were in real estate worth US$450.4 million, and 100 projects in industry and trade areas worth US$452 million. The British Virgin Islands was the largest foreign investor among 40 countries and territories.

National Australian Bank weighing unit sale National Australia Bank, the country’s fourth-biggest lender by market value, is weighing the sale of its insurance unit, which has been a drag on its earnings and capital, people familiar with the matter told Reuters.

Melbourne-based NAB, with a near US$70 billion market value, is likely to test potential buyers’ interest in the unit before deciding to launch any formal sale, the people added. The sources said they estimate the value of the unit at about US$800 million.

NAB will likely negotiate a long-term marketing deal with the buyer.

Reserve Bank of India seen A survey showed that the RBI is also unlikely to alter either the Deepti Govind

T

he Reserve Bank of India will probably wait until the second quarter of next year to loosen policy as it wants to cool inflation before trying to spur growth, a Reuters poll found ahead of a policy review meeting next week.

All but three of 46 economists surveyed over the past week said the bank would leave its key repo rate unchanged at 8.0 percent when it meets on September 30.

The survey showed that the RBI is also unlikely to alter either the statutory liquidity ratio (SLR), setting banks’ minimum bond holding requirements, or the cash reserve ratio (CRR) that sets the percentage of depositors’ balances that banks must keep with the central bank.

And 16 of 21 economists polled said it will not cut the ceiling on debt that must be held-to-maturity (HTM).

Analysts also pushed back expectations for when the first interest rate cut is likely to happen.

The poll shows they now think the first 25 basis point cut in the repo rate will come between April and June next year, three months later than they had predicted in a July poll.

Reserve Bank of India Governor Raghuram Rajan recently reaffirmed his commitment to bringing down inflation

That would coincide with expectations of the first rate hike by the U.S. Federal Reserve, in a move that would start pulling the curtain down on almost five years of nearly zero percent interest rates and trillions of dollars spent on stimulus.

From there on, the RBI is expected

to gradually cut the repo rate to 7.00 percent by mid-2016.

“From the commentary of Governor Raghuram Rajan it was very clear that inflation remains the focus,” said Bhupesh Bameta, economist at Quant Capital. “That gives us more confidence that instead

Dairy pay-out cut to hurt NZ farmers While Fonterra sees dairy prices recovering later this year, market participants are less hopeful

N

ew Zealand’s Fonterra is about to reach a six-year low at milk purchase, reviving margins while dealing a blow to farmers and the economy of the world’s largest dairy exporting nation.

Pent-up milk powder inventories in China, where demand has soared, and a rise in global supply have knocked world prices from last year’s record highs, and there’s little upside on the horizon with producers in Europe and the United States ramping up supply.

Economists expect Fonterra to cut its farm gate price forecast to the low NZ$5.00 (US$4.05) region per kg of milk solids at its annual result announcement.

Fonterra has also flagged a 50 percent slide in earnings for the year ended July, when it paid its farmer shareholders record-high prices for milk and struggled to churn out higher-margin products during a bumper production season.

A downgraded price forecast from NZ$6.00 currently would reflect a 44 percent tumble in global dairy prices so far this year and represent

Fonterra dairy plant in Cobden, Australia

a sharp fall from a record-high payout of about NZ$8.40 for the year ended July.

It would take the pay-out price to its lowest since 2008/09, while dipping below the 10-year average of about NZ$6.40.

“At NZ$5.00 there will be a few farmers who will be on the borderline of breaking even,” said ASB rural economist Nathan Penny, who is expecting the price to be cut to NZ$5.30.

Such a fall would represent a NZ$5.4 billion blow to farmers’ incomes from the previous season and roughly a 2 percent impact on nominal growth in the US$180 billion economy.

Penny said a lower pay-out would force farmers to reduce capital expenditure while highly indebted operators might struggle to repay debts as interest rates rose. Some farmers are already curbing spending on large equipment such as tractors, he added.

Reuters

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13

September 25, 2014

Asia Australia cuts 2015 iron ore price forecast

holding rates statutory liquidity ratio (SLR)

While steel production has increased in 2014, it has failed to absorb the surge in supply

KEY POINTS RBI Sept 30 meeting expected to keep repo rate at 8.00 pct Seen keeping SLR, CRR and held-to-maturity ceiling unchanged Poll sees RBI cutting repo rate by 25 bps to 7.75 pct in Q2 2015

of the first quarter the first rate cut will be shifted to the second quarter.”

At an RBI meeting in early August, Rajan reaffirmed his commitment to bringing down inflation and said it was “appropriate to continue maintaining a vigilant monetary policy stance”.

Consumer price inflation cooled to 7.80 percent in August from 7.96 percent in July.

But, it is still far higher than the 6 percent level the RBI wants it at

by January 2016, and as risks of a temporary spike from escalating food prices still exist three economists expect a hike in the repo rate in the next six months.

Sluggish investments, stalled projects, government policy paralysis and high interest rates meant India’s economic growth has been running at a shadow of the near double-digit levels seen in 2010.

In the quarter ended in June, the lumbering economy notched its fastest growth in two-and-a-half years, accelerating to 5.7 percent to raise hopes that the worst was over.

Stock markets have rallied since Prime Minister Narendra Modi took charge in May on hopes his government will rapidly usher in reforms and attract foreign investment.

But New Delhi’s failure to introduce any big-ticket reforms has dented much of that optimism, putting a spotlight back on the RBI to help boost growth through credit and interest rates.

Reuters

A

ustralia trimmed its forecast iron ore price for 2015 due to rising supplies, but still expects a rebound from current five-year lows as higher cost producers are forced out of the market.

Australia’s official forecaster lowered its 2015 average price to US$92.40 a tonne from US$94.60 a tonne previously, well above this week’s sub-US$80 a tonne levels.

“Over the next five years, iron ore prices are projected to average between US$90 and US$95 a tonne,” the Bureau of Resource and Energy Economics (BREE) said in its latest quarterly update.

“Further increases in supply indicate increasing price competition will be needed to push more high-cost supply out of the market over the next two years,” BREE said.

The forecast is well below the US$100-US$120 a tonne forecast some iron ore miners used in forward price assumptions to support massive expansion work completed or in progress to inject tens of millions more tonnes into the sea-traded market.

Mega miners such as Rio Tinto, Brazil’s Vale and BHP Billiton have been ramping up output despite concerns of

an oversupply as steel output growth moderates in China, the world’s biggest buyer of imported ore.

Benchmark 62 percent iron ore for immediate delivery into China fell below US$80 per tonne for the first time in five years this week to US$79.40, according to The Steel Index.

The China Iron and Steel Association said on Monday it expected iron ore prices to hover around US$80 a tonne in the long term amid limited growth in China’s steel output.

Credit market conditions in China have affected end-user demand for steel, leading to lower sales growth and higher inventory levels.

BREE also lifted its forecast for Australia’s iron ore exports in fiscal 2014/15 to 735.3 million tonnes from 720.7 million tonnes forecast in June.

Reuters

RBA wants to cool ‘unbalanced’ housing market Policy makers have stepped up warnings on a hot housing market in Sydney and Melbourne

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ustralia’s central bank said investors are starting to distort the nation’s housing market and is discussing possible measures with other regulators to strengthen lending practices.

“The composition of housing and mortgage markets is becoming unbalanced, with new lending to investors being out of proportion to rental housing’s share of the housing stock,” the Reserve Bank of Australia said in its semiannual financial stability review in Sydney. It is in talks with regulators including Treasury on “additional steps that might be taken to reinforce sound lending practices, particularly for lending to investors,” the release showed. No measures were specified.

Policy makers have stepped up warnings on a hot housing market in Sydney and Melbourne, saying accelerating price gains in Australia’s two biggest cities may threaten an economy where interest rates have been cut to a record low to aid an economic transition.

Treasurer Joe Hockey has called on regulators to closely monitor the housing market and said any measures to stem home-loan growth

This is an issue of growing concern for the Reserve Bank and reinforces the notion that rate cuts are off the table. It’s a step towards the macroprudential side which we haven’t really seen before

Sidney is one of the most affected cities in the country

should be targeted and temporary.

Investor surge Investor housing loan approvals are almost 90 percent higher in New South Wales than two years ago and 50 percent higher over the same period in Victoria, the RBA said yesterday.

Sydney and Melbourne are the respective capitals of the states.

“Strong investor demand can be a sign of speculative excess,” it said.

The RBA reiterated last week’s warning about potential macroeconomic fallout from a booming property market, saying speculative demand could “amplify the property price cycle and increase the potential for prices to fall later,” which would hurt household wealth and spending. “Furthermore, the direct risks to financial institutions would increase if these high rates of lending growth persist, or increase further,” it said.

Governor Glenn Stevens lowered borrowing costs by

2.25 percentage points in an almost two-year easing cycle to 2.5 percent in August last year as he seeks to boost industries like construction as mining investment ebbs.

In response, prices jumped 16 percent in August from a year earlier in Sydney and 12 percent in Melbourne.

Balmain bonanza Stevens is grappling with a market where in the inner Sydney suburb of Balmain a derelict house sold for A$2.7 million at a September 20

Michael Blythe, chief economist, Commonwealth Bank of Australia

auction, or A$830,000 above the reserve price. Georgia Glover, an agent at Belle Property Balmain, which marketed the home, said the 450-square-meter block with views of Sydney harbour was sold to a local family who plan to rebuild and live there.

Bloomberg News

14

September 25, 2014

International Portuguese PM wants to clarify fiscal fraud Prime Minister Pedro Passos Coelho said he would call for the Attorney General to launch an investigation based on allegations he committed fiscal and legal fraud during his term as a member of parliament. Promising to “bear all consequences,” Passos Coelho said he deemed clarification from the Attorney General “important” following a lodged complaint that the current prime minister received 5,000 euros (about US$6,450) a month for two years from company Tecnoforma, for consultancy work he provided, during his term as parliament member between 1995 and 1999.

No more cash for Zimbabwe The International Monetary Fund has scotched suggestions that cash-strapped Zimbabwe could get fresh financial aid, saying it must first service old debts. Domenico Fanizza, a senior official from the IMF’s Africa department, said the Washington-based lender “by its law” could not give more support until Robert Mugabe’s government makes up missed repayments. “That’s the real problem, we need to solve that problem,” he said in Harare on Tuesday.

The country is saddled with debts of over US$10 billion (7.8 billion euros), according to an AFP tally of finance ministry figures, and has stuttered in making repayments.

Confusion over Air France low-cost plans Confusion reigned yesterday over Air France’s plan for its low-cost subsidiary that has been at the heart of a bitter and costly strike, as the government and management contradicted each other.

As the strike at Europe’s second-biggest flag carrier stretched into its 10th day, Transport Minister Alain Vidalies told French radio the airline had scrapped plans to expand its Transavia budget subsidiary. “The Transavia Europe project has been abandoned by management,” Vidalies told RMC radio. But within minutes an Air France spokesman told AFP it was “premature” to say the airline had buried the plans.

Albania’s economy accelerating Albania’s economy is showing signs of acceleration this year, an official said on Tuesday. In the first quarter, the country’s economic growth recorded an increase of 1.7 percent, while the figure is much higher in the second quarter, said Albanian Finance Minister Shkelqim Cani when he unveiled the government’s bill to amend the 2014 budget in parliament. Albania’s economic development is progressing steadily, the Albanian Telegraphic Agency reported, quoting the minister. As for the amendment, approved with the votes of majority lawmakers.

Pfizer approaches Actavis Pfizer Inc has approached Dublin-based generic drugmaker Actavis Plc to express its interest in an acquisition, Bloomberg reported, citing people with knowledge of the matter. The companies are not currently in formal talks and Pfizer has not made an offer, the Bloomberg report said. Pfizer in May abandoned its attempt to buy British drugmaker AstraZeneca Plc for nearly 70 billion pounds (US$118 billion). Actavis, which has a market capitalization of about US$63 billion, obtained an Irish tax domicile by acquiring Warner Chilcott Plc last year.

German business confidence keeps sinking A gauge of German manufacturing activity expanded at the slowest pace in 15 months in September as new orders fell Alessandro Speciale

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erman business confidence fell for a fifth month even after the European Central Bank stepped up plans to revive the faltering euroarea recovery.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, dropped to 104.7 in September from 106.3 in August.

Economists predicted a decline to 105.8, according to the median of 36 estimates in a Bloomberg survey.

Europe’s largest economy contracted in the second quarter and euroarea growth stalled as international political tension and stubbornly high unemployment sapped sentiment. The

Drivers of the moderation are the Ukraine conflict and lower growth momentum in the neighbouring euro-area countries Alexander Koch, economist at Raiffeisen Schweiz

risks prompted the ECB this month to say it’ll be more active in adding stimulus to the euro area by starting asset purchases.

“Ifo has dropped substantially since spring,” said Alexander Koch, an economist at Raiffeisen Schweiz in Zurich. “Drivers of the moderation are the Ukraine conflict and lower growth momentum in the neighbouring euro-area countries. Dynamics should stabilize in autumn and provide the way for somewhat better growth prospects again at the end of the year.”

The European Union and the U.S. have ramped up sanctions against Russia, citing its support for separatists in Eastern Ukraine. German Chancellor Angela Merkel said that industry backing of the restrictions has been crucial and a solution to the conflict is “far off.” Germany is Russia’s biggest EU trading partner.

Production cutbacks Munich-based MAN SE, Europe’s third-biggest truck maker, is scaling back production by cutting hours for as many 4,000 workers, partly because of a drop in demand in Russia.

Other data has pointed to weaker growth. A gauge of German manufacturing activity expanded at the slowest pace in 15 months in September as new orders fell, and the ZEW index of investor confidence dropped for a ninth month. While factory orders and industrial production gained in July, the Bundesbank warned that they were boosted by factors such as the dates of school holidays.

Since June, ECB President Mario Draghi has cut interest rates to record lows, offered cheap long-term cash to banks, and pledged to buy asset-backed securities and covered bonds in a bid to revive the euro-area economy.

Consumer prices rose 0.4 percent in August from a year earlier, the weakest pace in almost five years, and unemployment is near a record at 11.5 percent.

Acquisition spree Speaking at the European Parliament in Brussels on September 22, Draghi said the ECB is moving to a more “active and controlled management of our balance sheet” as “unacceptably high unemployment and continued weak credit growth” pose downside risks to the economy.

To avoid crisis-ridden Europe, German companies are embarking on their biggest-ever acquisition spree in the U.S., chasing deals that promise innovation and growth.

Merck KGaA this week agreed to acquire medical-equipment manufacturer Sigma-Aldrich Corp. for more than US$16 billion, in what would be the biggest acquisition in its 346-year history. Siemens AG said it would buy Dresser-Rand Group Inc., a provider of energy equipment based in Houston, for US$7.5 billion. In two deals last week, SAP AG agreed to buy Concur Technologies Inc. for US$7.4 billion, and ZF Friedrichshafen AG bid US$11.7 billion for TRW Automotive Holdings Corp.

Bloomberg News

WTO cuts 2014 trade growth forecast to 3.1% The Geneva-based body also downgraded its forecast for trade growth in 2015 to 4.0 percent from 5.3 percent

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lobal commerce is set to expand by 3.1 percent this year, the World Trade Organization said, cutting its previous forecast of 4.6 percent due to weak growth and demand.

“International institutions have significantly revised their GDP forecasts after disappointing economic growth in the first half of the year,” said WTO chief Roberto Azevedo in a statement.

“In light of this, the WTO’s forecasts for trade growth have also been revised downwards for 2014 and 2015. Uneven growth and continuing geopolitical tensions will remain a risk for both trade and output in the second half of the year,” he added.

Among the problems, the WTO said, are tensions over the Ukraine crisis pitting the European Union and the United States against Russia.

The resultant tit-for-tat trade measures have notably affected agricultural commodities.

Conflict in the Middle East is also stoking uncertainty, and could lead to

This is a moment to remind ourselves that trade can play a positive role here. Cutting trade costs and broadening trade opportunities can be a key ingredient to reversing this trend Roberto Azevedo, WTO chief

a spike in oil prices if the security of supplies is threatened, said the WTO. And the Ebola outbreak raging in west Africa has also sown panic over its economic impact in the region and potentially beyond, it added.

The WTO noted that growth and import demand was particularly muted in natural resource exporting regions such as South and Central America.

It also pointed to sluggish economic performances in the United States and Germany, which have sapped global import demand.

The 160 economies which make up the WTO set trade rules among themselves in an attempt to ensure a level playing field and spur growth by opening markets and removing trade barriers, including subsidies, excessive taxes and regulations.

But they have failed repeatedly to conclude the Doha Round of trade liberalisation talks launched in 2001 with the stated aim of underpinning development in poorer nations.

AFP

15

September 25, 2014

Opinion Business

wires

Rebooting globalization

Leading reports from Asia’s best business newspapers Martina Larkin

Head of the World Economic Forum’s Network of Global Agenda Councils

THE JAPAN NEWS Japan’s direct investment in China from January to June dropped 48.8 percent from the same period last year to US$2.4 billion (about ¥260 billion). This indicates Japanese companies’ efforts to make inroads into China have lost steam. “This is a staggering decline,” said Eizo Kobayashi, chairman of Japan Foreign Trade Council, Inc. and chairman of Itochu Corp. Japan’s direct investment in China is expected to continue to fall at least until the end of this year.

Another decline is in tourism, with fewer Japanese tourists visiting China.

PHILSTAR As of March 2014, government debt stood at P4.49 trillion or 38.1 percent of gross domestic product (GDP). The current ratio is lower than the 38.5 percent recorded in the first quarter last year due to government’s proactive liability management and slower debt accumulation from April to December 2013. The debt to GDP ratio is a measure used by many debt watchers to assess the creditworthiness of governments. Under the consolidated general government debt, the obligations of the Philippine government, the Central Bank Board of Liquidators, social security institutions (SSIs) and local government units are taken into account.

BANGKOK POST Thai rice is in danger of losing further export competitiveness over the next 10 years after having been hurt by rising production costs over the past decade. A survey by the University of the Thai Chamber of Commerce’s Centre for International Trade Studies revealed the proportion of Thai rice in the global market has shrunk continuously during that period, from 13% in 2004 to 8% yesterday. The decline is blamed on higher prices — Thai 5% white rice averaged US$285 a tonne in 2004, rising to US$518 a tonne last year.

THE TIMES OF INDIA The Indian airline industry is firmly divided between new and old players on the issue of relaxing the rule that a carrier must be five-year-old and have at least 20 aircraft in its fleet before being allowed to fly abroad. Yesterday, aviation minister Ashok Gajapathi Raju Pusapathi met CEOs of all Indian airlines, where the four airlines — Air India, Jet, IndiGo and SpiceJet — sought retention of the 5/20 rule. The new airlines of Tatas, one with Malaysian low-cost carrier AirAsia and other with Singapore Airlines, sought removal of this rule.

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lobalization, as many have recently noted, is in retreat. Despite all of its undeniable benefits, it has spawned problems of governance and management that have exposed the inadequacy of national governments and international institutions.

This has left people everywhere, rich and poor alike, struggling to cope with problems – from failed states to failed banks, from over-fishing to under-employment, from climate change to economic stagnation – to which globalization has contributed but cannot address effectively. Fragile institutions have given rise to a political backlash and the danger of disaster on many fronts.

Mark Leonard, Director of the European Council on Foreign Relations and Vice Chair of the World Economic Forum’s new Global Agenda Council on Geo-economics, has noted that interdependence, formerly an economic boon, has now become a threat as well. “No one is willing to lose out on the benefits of a global economy,” he wrote recently, “but all great powers are thinking about how to protect themselves from its risks, military and otherwise.”

Indeed, “After 25 years of being bound together ever more tightly, the world seems intent on re-segregating itself.”

Added to this “new isolationism” is the fact that governments, multi-national corporations, and international bodies

can often find themselves too distracted to maintain the perspective that they need to build a comprehensive problem-solving agenda. For political leaders, facing electoral calendars or other short-term pressures, “long-term planning” can mean just four years, or even less.

Likewise, private-sector managers and company directors have to meet annual or quarterly profit targets, sometimes at the expense of their firms’ longer-term best interests – to say nothing of the well-being of society as a whole. Academics can be adept at identifying problems, but they often struggle to win the full attention of decision-makers and may be subject to legal, financial, or political constraints. And, though regional and global international organizations have had some notable successes, they are too often paralyzed by national rivalries and a shortage of money.

Yet interdependence is undeniable. From carbon dioxide and Internet governance to depleted ocean fisheries and corporate tax avoidance, many of the world’s problems today are innately transnational. The current Ebola outbreak that is ravaging much of West Africa and threatens to spread elsewhere is yet another stark example of this.

Clearly, the world’s 7.2 billion people need not only new ideas, but also new ways to build consensus that involve all stakeholders in moving the best ideas

Though regional and global international organizations have had some notable successes, they are too often paralyzed by national rivalries and a shortage of money

from theory to practice. None of the many issues identified, both within and among states and societies, can be addressed effectively without thorough and continuing consultation across the spectrum of stakeholders.

Here, thankfully, there is some good news: The world is not short of intelligent people. Governments, corporations, civil-society groups, academia, and international organizations are full of experts who can, when brought together, achieve a critical mass of insight.

Moreover, modern communication tools mean that ideas and good practices can be disseminated worldwide at unprecedented speed. Multinational corporations and villagers alike can share the fruits of progress.

For example, the mobile-phonebased microfinance and banking system known as M-Pesa has spread in various forms across and beyond East Africa, where it originated.

Meanwhile private and public laboratories worldwide are incubating technologies and materials with which the future will be built. From messenger RNA therapeutics to the mining of metals from desalination brine, new research and development promises new opportunities for progress.

The world is full of ideas – many of them excellent – in technology, sustainability, and governance; unfortunately, the capacity to build consensus and to roll out effective programs is much rarer. No one doubts that ideas are the fuel of human progress and development. With fragmentation threatening to replace globalization, the urgent need now is to share concepts, insights, and good practices that can bring people together and head off dangers.

The 2014-2016 Global Agenda Councils, 86 groups of experts, each focused on a pressing global issue, an industry, or a region, began work this month.

Project Syndicate

16

September 25, 2014

Closing Vietnam to export rice at higher prices

Health mogul scopes NZ resort for stem cell centre

Vietnam plans to export rice with an average price of US$600 per ton for white rice, and US$800 per ton for fragrant rice by 2020, higher than the current US$452.5 per ton, the Ministry of Agriculture and Rural Development (MARD) said yesterday.

It is part of the ministry’s plan to restructure the cultivation sector, which defines rice production as one of the country’s most advantageous strategic spearheads. The ministry will apply a variety of means to achieve the goal, including using high-yield, high quality, insect-resistant rice strains that meet the market demand and bring in high prices, said the report.

AChinesehealthindustrybillionaireisconsidering building a major stem cell treatment and research centre in the New Zealand ski resort town of Queenstown, according to reports yesterday.

Medical entrepreneur Xia Jie, whose company Health 100 owned a large chain of health clinics in China, planned to open overseas facilities to cater for wealthy clients, the Dunedinbased Otago Daily Times newspaper reported.

“We’re now negotiating with the local medical teams,” Xia told the newspaper through an interpreter while on a four-day fact- finding mission to Queenstown.

Alibaba arm plans to create loan marketplace In June 2013 Alibaba created Yu’E Bao and attracted 574 billion yuan of funds by the end of June this year Lulu Yilun Chen

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libaba Group Holding Ltd.’s finance arm aims to create a marketplace for 1 trillion yuan (US$163 billion) of loans in as soon as two years as the e- commerce group encourages more Chinese to borrow and lend.

Alibaba in April started Zhao Cai Bao, a platform that lets small businesses and individuals borrow from investors directly, and has created a 14 billion yuan marketplace, Yuan Leiming, a general manager at Alibaba’s financial arm, said yesterday.

The platform allows a borrower to tap a maximum of 200 investors after a financial institution has guaranteed the loan and made sure the money will be paid back. Zhejiang Ant Small & Micro Financial Services Group Co.’s push comes as Alibaba completed a record US$25 billion initial public offering in New York this month.

of funds by the end of June this year.

The stock of Alibaba jumped 38 percent to US$93.89 on its first day of trading on September 19.

Investment returns

Jack Ma, Alibaba’s founder is thinking in keeping the engine working

“There was a strong demand for investment products that provide higher returns,” Yuan, who is also the chief executive officer of Zhao Cai Bao, said at the Hong Kong Institute of Bankers conference. “Think of us as an exchange for loans.”

The finance arm, which

is controlled by billionaire Jack Ma, already owns a small-business lending unit, a money-market fund known as Yu’E Bao, a Paypal-like service Alipay, and is close to submitting an application for a banking license.

Alibaba in June 2013 created Yu’E Bao and attracted 574 billion yuan

Zhao Cai Bao has listed about 11,000 products.

The annualized return on a loan for a period of six to 12 months is at least 5.5 percent, according to the company’s website.

The online platform is working with more than 40 financial institutions to help guarantee the credit, including Ping An Bank Co. and Zhongan Online Property and Casualty Insurance Co., in which Alibaba’s finance arm owns a stake, said Yuan.

“I don’t think individual investors have the ability to evaluate the risks in the financial products, so it’s up to the financial institutions to screen the risks,” said Yuan.

The average loan size has been about 70,000 yuan, said Yuan. There is no cap on how much an individual can invest. The minimum threshold usually depends on the loan size divided by the maximum 200 investor quota.

Zhao Cai Bao plans to attract 1 million people and small businesses to issue loans on the platform by the end of this year, said Yuan.

Alibaba has indicated that the financial arm could conduct its own public offering in the future, and the implied equity value would be at least US$25 billion, according to a filing with the U.S. Securities and Exchange Commission.

The e-commerce operator’s relationship with its financial business has been a point of contention since Ma transferred Alipay to a company controlled by the billionaire.

Bloomberg News

GM expects to sell over 3 mln cars in China

Central China city lifts house purchase limits

ASEAN energy ministers demand power integration

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eneral Motors Co expects to sell over three million vehicles in China for the second straight year in 2014, with its premium brand forecast to grow 40 percent, the U.S. carmaker’s China President Matthew Tsien said yesterday.

Tsien identified luxury, SUV and compact cars as GM’s three focus areas of growth in China, reiterating plans to launch 60 new and upgraded models through 2018 in the world’s biggest market.

“Cadillac certainly has momentum here in this country. We believe the luxury market here will become the largest in the world in 2016,” Tsien told a media event in Shanghai, forecasting Cadillac sales will exceed 70,000 vehicles this year, up from last year’s 50,000.

The compact car market is also an important battleground for GM because it’s the biggest segment of China’s passenger car market, Tsien said as he announced the company’s cumulative sales in China had reached 20 million units.

GM, which sells cars under brands including Chevrolet, Buick and Cadillac, lost the top spot last year in China to German rival Volkswagen AG. Reuters

uhan, capital of Hubei province, yesterday became the latest Chinese city to scrap all housing purchase restrictions.

Wuhan housing security and management bureau lifted restrictions put in place three years ago on homes smaller than 140 square meters.

In mid July, it lifted limits on homes above 140 square meters. Non-locals will still need one-year record of social insurance contributions if they wish to buy homes in the suburbs.

On September 15, the provincial housing department announced the lifting of the restrictions and also give home buyers tax breaks and mortgage rate discounts.

On Tuesday, Fuzhou, capital of southeast China’s Fujian Province, also announced a similar move. Only a few cities, including Beijing, Shanghai and Guangzhou, are yet to lift the limits.

China’s property market has performed poorly this year, becoming a drag on the economy and prompting dozens of cities to remove housing restrictions to revive sales and boost the economy.

Out of 70 major Chinese cities, new homes in 68 saw month-on-month price declines in August.

Xinhua

he 32nd ASEAN Ministers of Energy Meeting (AMEM) concluded yesterday in Lao capital Vientiane with ministers agreeing on the need to achieve inter- connected regional power systems. In a joint ministerial statement, delegates applauded the initiative of a pilot project to explore cross-border power trade from Laos to Singapore.

The energy ministers expressed their wish that the pilot project would act as a path finding project towards further multilateral electricity trade.

The 32nd AMEM joint statement also commended the heads of ASEAN Power Utilities/Authorities (HAPUA) for its on-going efforts to establish the ASEAN Power Grid (APG). The ministers welcomed the initiative to conduct sub-regional multilateral electricity trading by 2018. In the 11th ASEAN+3 Ministers on Energy Meeting, delegates concluded that improving linkages in energy connection would bring the region closer to its goal of achieving greater energy security.

ASEAN+3 ministers emphasized that capacity building, and information sharing and exchange are key to the promotion of sustainably developed low-carbon growth economies.

Xinhua