Macau Business Daily, Oct 1st, 2014

MOP 6.00 Closing editor: Luis Gonçalves Publisher: Paulo A. Azevedo Number 637 Wednesday October 1, 2014

Retail fears for Golden Week M

Year III

acau retailers should be happy. But this Golden Week is different. Against the background of political discontent in HK another spectre has arisen. The slowing Chinese economy is affecting the spending patterns of the average visitor. Meanwhile, the cash-rich are being diverted to Singapore and Thailand, academics tell Business Daily. Away from the glare of the anti-corruption / lavish spending crackdown. Some retailers say that mainland tourists have discovered window shopping PAGE

www.macaubusinessdaily.com

Package tours take off Casinos had a great year in 2013. So did Macau travel agencies, with more locals travelling abroad. Last year, travel agencies here raked up MOP6.3 billion in revenues.

Some 6 percent more than in 2012. Thanks to the growing demand for package tours and ticket reservations.

Online business revenues skyrocketed 35 percent in 2013, official data reveals

2

HSI - Movers September 30

Name

%Day

Belle International

1.16

Sino Land Co Ltd

0.67

Bank of East Asia Lt

0.16

AIA Group Ltd

0.00

BOC Hong Kong Holdi

0.00

China Resources Lan

-2.56

Galaxy Entertainmen

-2.70

China Unicom Hong K

-2.85

China Mobile Ltd

-3.03

China Resources Pow

-4.34

Source: Bloomberg

I SSN 2226-8294

PAGE 3

Tam: Casino revenues to drop 13 pct in September PAGE 2

Mainland roaming 10 percent cheaper PAGE 6

Ferry tickets increase 6 percent on October 8 PAGE 6

Open sesame Alibaba has arrived in the markets. Fuelling the renewal of global investor interest in Chinese companies. Equity capital market deals clocked up US$678.1 billion in the first nine months of the year.

Page 11

Come rain or shine

Brought to you by

In Hong Kong it is known as the Umbrella Revolution. Tonight, some 1,000 Macau residents will express solidarity with the pro-democracy protesters. By assembling on the open ground in front of the Legislative Assembly building. New Macau Association president Sulu Sou Ka Hou says HK protests are affecting global markets

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October 1, 2014

Macau Macau promotes business tourism in Thailand Macau Government Tourist Office (MGTO) has invited a local trade delegation to participate in the 22nd edition of the Incentive Travel & Conventions, Meetings Asia (IT & CMA 2014) in Thailand in order to promote Macau as a business travel destination. The event is being held in Bangkok from 30 September to 2 October and is a leading business tourism tradeshow in the Asia Pacific Region. MGTO is running a booth themed ‘Touching Moments, Experience Macau’ this year and is partnering 40 delegates representing 30 local enterprises to spotlight Macau’s convention & exhibition industry in order to present the destination’s latest business tourism products and facilities to their Asian counterparts.

Golden Week loses lustre for local retailers Retail sector will not benefit as much as it used to during this year’s Golden Week as Taiwan and Singapore are diverting mainland tourists from the territory Joanne Kuai

joannekuai@macaubusinessdaily.com

T

he Golden Week holiday in the mainland no longer fills local retailers with cheer as many cash-rich tourists from across the border now prefer to spend their holidays in other destinations such as Taiwan, Singapore or even further afield on other continents.

Moreover, Macau may not benefit as much as it used to as the overall economy in Mainland China has slowed down, said Ho Wai Hong, Associate Professor at the Department of Economics

of the University of Macau.

The National Day Golden Week, beginning today, will last for seven days. Golden Week’s arrivals last year saw a 6 percent increase from the 2012 level, Macau Statistics and Census Bureau data show.

But Mr. Ho fears that visitor arrivals from the mainland are unlikely to match last year’s number.

However, while fears have arisen that Hong Kong protests may hurt the neighbouring SAR retail industry as political turmoil erupts at the beginning of the weeklong National

Day Holiday in China, Mr. Ho believes it could have a positive impact on Macau’s tourism as some visitors originally choosing Hong Kong may opt to stay in Macau for longer instead. But Mr. Ho remains pessimistic about the retail sector as many visitors to Macau have changed their shopping behaviour pattern.

The supervisor of a luxury brand store located in One Central said that the shop has been recording a plunge in sales since the end of June.

The supervisor said that on average a customer would

spend MOP7,000 in the shop.

But with the anti-corruption crackdown in China and less gift-giving traditions now the norm fewer visitors make the purchase. That’s why it is likely that the holiday period may make the shop look busier than usual but there will probably be less profits, said the supervisor.

Watches and jewellery sales may be better than normal but overall expectations remain reserved as almost 90 percent of retailers in the sector predict steady or worse sales for the second half of this

year in a survey conducted by the Statistics and Census Bureau. The recorded sales of the second quarter posted a 22 percent plunge compared to the first three months of 2014 and it’s also a 5 percent drop year-on-year.

In general, the retail sector has been shrinking since earlier this year. According to the Statistics and Census Bureau, Macau retail sector sales in the second quarter of this year posted MOP16.37 billion which is an 11 percent drop compared to the revised sales of the first quarter.

Electronic exports drop 47 percent in August Exports of electronic components decreased in August to MOP43.3 million Sara Farr

sarafarr@macaubusinessdaily.com

E

lectronic components exports dropped 47 percent during the month of August, with the total value reaching MOP43.3 million compared to August 2013. In the first eight months of the year, the value of exports of electronic components dropped 35 percent over that of the same period a year earlier.

Official figures released yesterday by the Statistics and Census Service (DSEC) show that the overall exports of non-textile merchandise increased 4 percent to MOP667.8 million patacas in August year-on-year.

Exports of non-textiles also increased 10 percent to MOP1.12 billion in the months between

Congratulations on the 65th Anniversary of the People's Republic of China

January and September over that of a year ago.

While exports of non-textiles increased year-on-year, the same cannot be said of textiles and garments. Overall, exported textiles and garments totalled MOP513.5 million in the first eight months of the year, representing a 12 percent drop compared to that of the first eight months of last year. However, when just looking at monthly figures, exports of textiles and garments increased by 8 percent to MOP83 million.

The total value of exported goods in the month of August amounted to MOP751 million, up 5 percent from that of August 2013, with the value of re-exports increasing 11 percent to MOP603 million. The value of domestic exports, however, dropped 15 percent to MOP148 million.

Hong Kong remains Macau’s biggest export destination, accounting for 59 percent of all goods leaving the territory, followed by mainland China at 15 percent, the United States at 3 percent and Japan at 2 percent.

In the first eight months of the year, exports to Hong Kong increased by 19 percent to MOP3.9 billion, while those to countries in the European Union increased by 8 percent to MOP206 million. Exports to mainland China, however, dropped 10 percent to MOP977 million, while those to the United States totalled MOP210 million, a 14 percent decrease year-on-year.

21pct drop in August mobile phone imports There was also a 21 percent fall in imports of mobile phones, with the total value reaching MOP311 million for the month of August. However, imports of such goods increased by 4 percent to MOP3.75 billion in the first eight months of the year.

Overall, imported merchandise was valued at MOP7.2 billion in the summer month, also up 5 percent compared to a year ago. According to official data, the merchandise trade deficit amounted to MOP6.45 billion.

The majority of imported goods into Macau are originally from mainland China at 32 percent, Hong Kong and Switzerland each at 10 percent, France at 9 percent, Italy at 8 percent, Japan at 6 percent and the United States at 5 percent.

Total trade reached MOP7.95 billion in August, up by 5 percent year-on-year, and MOP64.1 billion in the months between January and the end of August, up by 10 percent over the same period a year earlier.

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October 1, 2014

Macau Francis Tam estimates 13 pct drop in September casino profits Secretary for Economy and Finance Francis Tam Pak Yuen estimated yesterday that casino profits for September will decline by between 12 and 13 percent compared to the same period last year.

The secretary stressed that the decelerating profits of casinos and the record-breaking tourist numbers in August had proven that the government had successfully made use of the gaming industry to boost the development of the tourism industry, local media TDM radio reported.

Mr. Tam also perceives that the tourism market and the gaming industry are no longer correlated.

Meanwhile, he remains positive about the general economic health of the city.

Travel agencies racked up MOP6.3 bln Sales went up 6 pct last year compared to 2012 with a quarter being generated by package tours Sara Farr

sarafarr@macaubusinessdaily.com

T

here might still be more Macau residents choosing to travel outbound without resorting to the services of travel agencies. However, the number of package tours from Macau to other countries and regions is slowly but surely increasing. And it is these same package tours that contributed MOP1.56 billion to travel agency receipts generated for the whole of 2013.

A 2013 Travel Agencies Survey conducted by the Statistics and Census Service (DSEC) and released yesterday shows that travel agencies raked in a total of MOP6.33 billion in 2013, a 6 percent increase compared to a year earlier. Of this, MOP1.56 billion was generated by package tours, while MOP2.09 billion came from ticket reservations. The latter represents an 11 percent increase compared to a year ago, while the former is a 2 percent year-on-year increase.

Room reservations, while accounting for MOP1.31 billion of overall revenues, dropped 7 percent.

‘It’s noteworthy that receipts from online business rose substantially by 35 percent year-on-year,’ the survey reads. Online bookings reached MOP26.4 million.

Large travel agencies, however, reported less receipts after the shutting down of two offices, which led to an overall 9 percent drop in last year’s receipts over those of the previous year. These came primarily from vehicle rentals at 30 percent and package tours at 27 percent.

Expenditure increase As receipts increased, so did expenditure. Last year alone, those travel agencies surveyed reported expenditures totalling MOP6.08

billion, an increase of 7 percent compared to that of 2012.

The survey shows that travel agencies’ biggest expense was on ‘purchase of goods and services and commission paid’, which accounted for MOP4.88 billion of the total. But this was still 16 percent less than expenditure reported in 2012.

Breaking this figure down into different categories, ticket reservations accounted for MOP2 billion of overall expenses, followed by room reservations at MOP1.38 billion and package tours at MOP1.32 billion.

Combined, these accounted for 80 percent of all travel agencies’ overall expenditure. But the “corresponding share for small travel agencies stood at 90 percent,” the survey says, with the majority spent on ticket reservations at MOP590 million and room reservations at MOP334 million.

In addition, operating expenses totalled MOP625 million for the whole of 2013, up 12 percent from that of a year earlier, while employee compensation increased by 10 percent to MOP571 million.

At the end of 2013, there were 211 travel agencies in operation, 14 more than in 2012. In addition, there was a 6 percent increase in the number of people engaged in the travel agency business, totalling 3,801 at the end of last year. Of these, the great majority, at 42 percent, were working in 14 large travel agencies where 50 or more people are employed.

‘Since travel agencies provided significantly more coach hire with driver to hotels and casinos, [the] number of drivers employed increased by 4 percent year-on-year, at 1,176,’ the survey says.

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October 1, 2014

Macau

Local assembly supports Umbrella Revolution Watching their nearby neighbours fighting for democracy and dispersed by police with pepper spray and tear gas, some Macau residents are holding an assembly tonight to express solidarity with their Hong Kong compatriots Kam Leong

kamleong@macaubusinessdaily.com

A

n as s emb ly supporting pro-democracy protests in Hong Kong will be held on the open ground in front of the Legislative Assembly building tonight, according to the president of local pro-democracy group New Macau Association, Sulu Sou Ka Hou. Mr. Sou told Business Daily that the movement tonight was initiated by local high school pupils and university students to express their support of the Hong Kong protests; meanwhile, New Macau Association, Macau Conscience, and Macau Youth Dynamics will assist the assembly.

“Macau and Hong Kong are the two Special Administration Regions that share a similar target, which is important for the future. We think that especially after the violent suppression by Hong Kong police

of the protesters we have to stand up to support them as both of us [SARs] are chasing for a democratic system,” Mr. Sou remarked.

The pro-democrat believes that more than 1,000 Macau residents will participate in the movement tonight. The volunteers were promoting the assembly through social media such as Facebook in addition to distributing yellow ribbons on campus and in the streets.

Mr. Sou also stressed that his association and fellow groups are not the ones to stage the assembly but are helping by offering necessary equipment and guiding students on choice of venue and time.

Earlier on Sunday night, according to local Chinese news outlet ‘All About Macau’, more than 50 citizens had joined a spontaneous sit-in demonstration in front of Saint

Dominic’s Church after Hong Kong police had been reported using tear gas to disperse protesters. However, the demonstration lasted less than two hours as police arrived at the spot claiming that the participants were gathering illegally and requested them to leave immediately.

Umbrella revolution The current mass protests in Hong Kong are seen as the strongest challenge to the central government’s decision on the method employed for Hong Kong people to select their future leader. Currently, the protest is referred to as the ‘umbrella revolution’- after protesters used umbrellas to protect themselves from the pepper spray and tear gas used by police on Sunday night.

The protesters, mostly students, are demanding full democracy and

have called on the city’s leader, Leung Chun-ying, to step down after Beijing had limited 2017 elections for Hong Kong’s leader, known as the Chief Executive, to a handful of candidates loyal to Beijing.

Protesters massed in at least four of Hong Kong’s busiest areas; namely, Admiralty, where the Hong Kong Government is headquartered, Central business district, Causeway Bay, known for its shopping, and the densely populated Mong Kok district in Kowloon.

The protests, branded by authorities as illegal, blocked many main roads and caused schools in the related areas to be closed. In addition, the Hong Kong Government announced on Monday that the annual fireworks event celebrating China’s National Day would be cancelled.

With Reuters

Hong Kong experience to impact Macau Larry So says the experience that the youngsters of Macau are gaining in Hong Kong demonstrations is going to have an impact on the former Portuguese enclave.

He predicts that Chui Sai On will have to deal with such issues in his second term

T

he academic Larry So said that the participation of the young people of Macau in the demonstration for universal suffrage in Hong Kong is going to impact the former Portuguese enclave. He also said that the Macau Government is

closely following the pro-democracy movements in the neighbouring Special Administrative Region.

“Some youngsters, mainly those more involved in pro-democracy movements, are actively taking part in the demonstrations in Hong Kong.

They support such movements and many of them will bring this experience to Macau”, the professor at Macau Polytechnic Institute (IPM) told Portuguese news agency Lusa.

The demonstrations in the streets of Hong Kong were primarily instigated by students. Later, the Occupy Central movement, which had planned a campaign of civil disobedience for today [National Day of the People’s Republic of China], decided to anticipate it and joined the demonstration.

“They [the youngsters of Macau] are learning from this experience.

In the next term of Fernando Chui Sai On [re-elected as Macau Chief Executive in August] something of this kind is going to happen. But of course it will not have the same dimension as in Hong Kong,” said the academic, who was born in Hong Kong but lived in Macau for more than a decade.

Larry So stressed that last Sunday night 20 to 30 youngsters gathered in Senado Square in Macau to support the demonstrations in Hong Kong.

Senado Square is the place that has been used in recent years to pay homage to the victims of the Tiananmen Square protests of 1989.

“They were there around midnight and posted it on Facebook. Then, on the Monday of the previous week, during the first day of the boycott of classes by the university students of Hong Kong, some youngsters also gathered in another square [Lotus Square]”, he said, noting the role of the social networks, mainly in Hong Kong, in the mobilisation of demonstrators.

The academic believes that the Macau Government is also monitoring movements in the neighbouring city.

“That’s the reason why they do not like to let Hong Kong activists enter Macau when there are demonstration such as the 1st May and 1st October.

That’s the reason why the Hong Kong activists are blacklisted and are not allowed to cross the border”, he said.

Macau activist Jason Chao, who has been following the demonstrations as an observer, stressed that the fight for democracy in Hong Kong is very important for Macau because in a way it is leading the way for democracy and political reform in the territory.

“Macau shares the same political system and it’s going to follow, to a certain degree, in Hong Kong’s footsteps”, he surmised.

Yet, the President of the Macau Conscience Association considered that the population of Macau is divided in relation to the support for the demonstration in Hong Kong. “The citizens of Macau are well informed about the situation. However, while some massively support ‘Occupy Central’ and other democratic movements, others do not”, he said, stressing that finding a united voice in Macau is difficult.

The activist also stressed that the territory, where he promoted a civil referendum seeking universal suffrage, is not ready for civil disobedience as has happened in Hong Kong.

“We respect the law. If the law is not applied with proper justification we may consider civil disobedience.

However, we are far from reaching that point”, he concluded.

Lusa

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October 1, 2014

Macau Brought to you by

HOSPITALITY Changing mix Visitors from China represent the biggest share of the total number of visitors to Macau. Both their total numbers and their relative share of the total have been increasing. These are well established features of the visitor flows into the region. Using the cumulative figures for the last four years, we can rank the main sources of mainland visitors. The top five regions of origin are led by Guangdong Province. It, alone, represented in that period almost 47 percent of the total number of mainland visitors. That province was followed by the provinces of Fujian, Zhejiang and Hunan, and the city of Shanghai – but their numbers trail way behind the leader. All together, these four regions amounted in that period to 14.5 percent of visitors. The figure for the biggest of them, Fujian, is just about one-tenth of the figure for Guangdong. However, Fujian was the fastest growing province among these top sources.

Last August, it posted a 25.9 percent growth relative to the same month last year, setting a new monthly record for the province at 95,450 visitors. That was a growth well above the average for China, which stood at 13.3 percent.

Ferry Fares: 3 to 6 percent increase from October 8

M

acau - Hong Kong / Kowloon / Hong Kong International Airport ferry fares will be adjusted from 8 October 2014. Economy Class ferry fares will increase HK$5 to HK$8, representing a 2.6 to 6 percent rise.

Super class and VIP cabin fares will be adjusted, as well.

The Marine and Water Bureau says ferry operators TurboJet and Cotai Water Jet applied for the ticket price hike in March. They asked for a 7.5 to 8.3 percent rise based on increases in operating costs caused by higher fuel prices,

salary increases, inflation and greater spending on ferries using low sulfur diesel. The SAR Government managed to maintain the increase around inflation rate which hit 6.07 percent in August 2014.

The authorities say that the adjustment is based on a comprehensive consideration of changes in the Macau Consumer Price Index, the affordability of residents and the operations of the marine passenger transport industry.

Macau citizens will still be eligible to enjoy HK$15 discount per ticket for Economy and Super Class.

Mainland roaming charges cut 10 percent However, the shares of these five regions in the total number of visitors have been decreasing.

In 2010, these five regions together accounted for roughly two-thirds of all mainland visitors.

In the last twelve months, their combined share has hovered around 56 percent. In the same period, Guangzhou has seen its share drop by more than 10 percentage points.

These figures and their recent trends are signalling some internal re-balancing of flows of visitors arriving from inside China, with the Guangdong growth rate slowing down.

13.3%

increase in visitors from the mainland, Aug 2014, on previous year

F

rom today, local telecommunication users can enjoy a 10 percent decrease in roaming charges while making phone calls and texting messages (SMS) in Mainland China, according to a press release by the Bureau of Telecommunication Regulation on Monday. The Bureau announced that three local telecommunication companies - CTM (Companhia de Telecomunicações de Macau SARL), Hutchison Telephone (Macau) Co Ltd, and SmarTone Mobile Communications (Macau) - will reduce their charges from today. This is the third time in 20 months that the companies have lowered their prices, the Bureau said, claiming that the mainland roaming charges for calls had been accumulatively cut by 22 percent, while those of text messages had posted an accumulative drop of 61 percent.

Citic Bank profits increase almost 50 pct

C

hina Citic Bank International increased its profits by 46 percent in the first six months of the year to HK$1.5 billion from HK$1.1 billion a year ago, the company announced yesterday in its interim report. The main driver of the results was the wholesale and cross-border banking segment that generated HK$1.2 billion in profits.

‘Business momentum remained strong despite keen market competition. Cross-border business has achieved a satisfactory result by enhancing collaboration among marketing groups in Hong Kong, Singapore, Macau, the US and Citic Bank International Limited’, it was explained.

Operating income jumped 46.5 percent from HK$2.2 billion in the first half of 2013 to HK$3 billion in the first half of this year.

Wholesale and cross-border banking generated HK$1.2 billon, personal and business banking HK$0.3 billion, and treasury and markets HK$0.6 billion, while the remainder posted a loss of HK$0.6 billion.

‘Transaction banking is a key business focus for the year. The Group is dedicated to enhancing customer experience further by strengthening core infrastructure and promoting online banking as a preferred banking channel, particularly for fund remittances’, the report stressed.

At the same time, the total assets of the bank have increased 8.8 percent since the end of 2013 from HK$216 billion to HK$235 billion. The total amount of deposits increased as well, hitting HK$189 billion in June, up 10.7 percent (HK$18 billion) from HK$171 billion.

“Although the economic future is looking brighter, the Group will remain vigilant on potential uncertainties that might affect the global market”, Chief Executive Officer Zhang Xiaowei said of the future outlook.

The two events stressed that may affect the global market mentioned in the bank report are the armed conflicts between Russia and the Ukraine and the ongoing war between Israel and Hamas in Gaza.

Mr. Zhang Xiaowei also said that in relation to Hong Kong the drop in Mainland tourist consumption in combination with a lower per capita spending is going to undermine the local retail sector.

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October 1, 2014

Macau

MGM Resorts anticipates US$1.45bln debt drop

M

GM Resorts International may reduce its debt by the most in five years when a convertible bond issued in 2010 matures in April.

The 4.25 percent, US$1.45 billion bond will convert into MGM stock at a price of US$18.58 a share, Chief Financial Officer Dan D’Arrigo said in an interview. The conversion will reduce MGM Resorts’ total debt to about US$11 billion and eliminate US$60 million in annual interest expense, he said.

“That would be a dramatic improvement,” D’Arrigo said. “It positions the balance sheet for further de-leveraging.”

MGM Resorts, the largest casino operator on the Las Vegas Strip, has seen its share price double over the past two years as profit rose in Macau and in the company’s Nevada base.

Debt stood at US$12.6 billion at the end of June, down from US$13.8 billion two years ago.

The company took on debt to buy fellow casino operator Mandalay Bay Resort & Casino in 2005 and build the US$9 billion CityCenter project in Las Vegas. In 2010, the

company cut its debt by US$2 billion to US$12.1 billion, according to filings.

D’Arrigo said he was confident that a slowdown in spending by high rollers in Macau won’t have a major impact on the company’s business and it’s too early to tell if protests in the streets of nearby Hong Kong will hurt business. Most of the company’s customers come from the mainland, he said.

“Whenever there’s uncertainty people kind of take a step back,” he said. “We think over time, as people understand the new norm, people will come back.”

MGM Resorts is building a second property in Macau, a US$2.9 billion resort on the Cotai Strip that will include loft-like penthouses and a mansion with 29 private villas for high rollers. It is scheduled to open in 2016.

MGM Resorts fell 1.9 percent to US$22.16 at the close in New York.

The stock has declined 5.8 percent this year. MGM China Holdings Ltd. gained 0.7 percent to HK$23 in Hong Kong.

MGM Resorts International CEO James Murren

Bloomberg

Hong Kong banks, travel, business disrupted

H

ong Kong’s prodemocracy protests have shut down many schools, businesses and banks in the city.

As demonstrators refused to back down on their demands for China to grant the city universal suffrage, fears of a long stand-off saw investors sell major banks including HSBC and Standard Chartered.

In response, the stock exchange said trading would continue as normal while the de facto central bank sought to reassure investors by making liquidity available to support the banking system.

The city’s financial chief also said the government was tracking events on markets.

“We are likely to see (a) major sell-off and volatility for days to come” in the Hong Kong stock market,

said a report by New Yorkbased advisory firm JL Warren Capital.

It said those likely to be hurt most would be Hong Kong-listed retailers such as luxury businesses selling products purchased by mainland tourists, and local and Macau tourism businesses.

The protest will be felt especially in the retail sector as the Chinese Golden Week holiday begins today - usually a time when bigspending mainlanders visit Hong Kong’s numerous shopping outlets.

ANZ senior economist Raymond Yeung said the protests will “add salt to the wound” of the retail industry, already reeling from a slowdown in the China economy.

Sunday’s unrest was the

worst since the handover in 1997 and saw police fire volleys of teargas into crowds of thousands.

While the trouble had subsided by Monday morning, crowds of defiant demonstrators still controlled a number of major thoroughfares and intersections in the congested city.

An AFP reporter in Mongkok - one of the most densely populated districts and the site of a second protest across the harbour in Kowloon - saw angry confrontations between protesters and members of the public frustrated at the disruption.

Banks, jewellery shops and clothes stores in Mongkok remained closed.

The Transport Department said that more

than 200 bus routes were suspended or diverted while central sections of the tram network were also down.

The MTR was largely unaffected but multiple station exits in the busy districts of Causeway Bay and in Admiralty where many international businesses are located - were barricaded by protesters.

Some exits at Mongkok were also blocked.

The stock exchange insisted it would continue to operate as normal but the Hong Kong Monetary Authority (HKMA) said 17 banks were forced to close 29 branches across the city.

Standard Chartered, HSBC Holdings, Bank of East Asia, the Bank of China and CITIC were among those who said that their operations were affected.

The HKMA said the Hong Kong interbank markets would function normally on Monday. ‘The Currency Board mechanism will also function normally to maintain the stability of the Hong Kong dollar exchange rate,’ it said.

‘The HKMA will also inject liquidity into the banking system as and when necessary under the established mechanism.’

Later, it announced that there was still ample cash in the banking system. It also said that the exchange rate remained generally steady despite the Hong Kong dollar slipping to 7.7623 against the greenback, its lowest since March.

The dollar is pegged to the US unit but can move within a band of 7.75 to 7.85.

Financial Secretary John Tsang urged investors to keep tabs on possible risks, adding that the “government will closely monitor the market situation and strive to maintain normal operations”.

Fitch Ratings’ Andrew Colquhoun, head of Asia Pacific Sovereigns, reiterated the agency’s double-A-plus rating for the city, saying: “The events of the past 24 hours don’t significantly affect Hong Kong’s ratings.”

The Education Bureau said schools in the areas where protesters had gathered would remain closed.

The government also announced that all committee meetings at the city’s legislative building, which has become a major gathering point for protesters, would be cancelled.

AFP

8

October 1, 2014

Stocks

HK protests effect goes global U.S.-based casino shares fell with the S&P500, with Las Vegas Sands and Wynn Resorts most affected with a 3 percent loss in a single session

U

.S. stocks fell after the worst week in almost two months for the Standard & Poor’s 500 Index as Hong Kong protests added to geopolitical concern and a rebound in consumer spending fuelled speculation that the Federal Reserve may raise interest rates sooner than anticipated.

Ford Motor Co. slid 7.5 percent after saying pre-tax profit this year will miss its goal amid weaker results in South America and Europe. An S&P index of homebuilders retreated one percent as U.S. contracts to buy existing houses fell in August. Las Vegas Sands Corp. and Wynn Resorts Ltd. dropped more than 2.9 percent as casino companies slid. Semiconductor stocks in the S&P 500 climbed as Micron Technology Inc. and Intel Corp. gained at least 1.8 percent.

Casino companies with operations in Macau slid amid the protests in Hong Kong. Las Vegas Sands Corp. tumbled 2.9 percent to US$60.15, while Wynn Resorts Ltd. dropped 3 percent to US$178.99. Melco Crown Entertainment Ltd. fell 2.9 percent to US$25.73 and MGM Resorts

International slipped 1.9 percent to US$22.16.

The S&P 500 lost 0.3 percent yesterday in New York, trading near its 50-day moving average after paring an earlier drop of one percent. The Dow Jones Industrial Average slid 0.3 percent. The Nasdaq Composite Index retreated 0.1 percent. About 5.9 billion shares traded hands on U.S. exchanges, 4.2 percent above the three-month average.

“There’s this sense of foreboding in the stock markets that we’re almost deserving of at least a correction,” Drew Wilson, an investment analyst with Fenimore Asset Management in Cobleskill, New York, said in a phone interview. “Nobody wants to be in the way of that. We’ve had one tiger awaken in Russia and now we have a tiger awakening in China and that’s a little too much risk and uncertainty for U.S. stock market investors to have on their plates.”

The S&P 500 is down 1.3 percent for the month, paring a gain for the quarter to 0.9 percent. It has not had a four-day losing streak this year and

Congratulations on the 65th Anniversary of the People's Republic of China

has not fallen more than 10 percent in three years.

100 Points Swings in equities widened at the end of the quarter, with the Dow alternating between gains and losses of more than 100 points in the previous four days.

The Chicago Board Options Volatility Index, a gauge of investor trepidation derived from options, averaged 14.5 last week, 12 percent above its mean level during the third quarter. The VIX added 7.6 percent to 15.98 today.

The S&P 500 slid 1.4 percent last week, the biggest decline in almost two months, amid an escalation in the Middle East conflict and a selloff in small-capitalized stocks and technology shares. It jumped 0.9 percent on September 26 after a report showed that the U.S. economy had expanded in the second quarter at its fastest rate since 2011.

“We’re in a giant yo-yo the past six sessions but central banks are still accommodative, U.S. growth is decent, the grind higher is still intact,” Michael Block, chief equity strategist at New York-based Rhino Trading Partners LLC, said in a phone interview. “We’re just hitting some bumps with macro issues.”

Economic Data Data today showed consumer spending in the U.S. rebounded in August as further job gains encouraged households to loosen their purse strings.

Purchases increased 0.5 percent last month after little change in July.

Incomes increased 0.3 percent.

A report from the National Association of Realtors showed contracts to purchase previously owned homes declined in August as tighter credit and limited wage growth weighed on potential buyers.

The pending home sales index dropped one percent following a 3.2 percent increase in July.

KB Home dropped 2.4 percent to $15.19, while PulteGroup Inc. slid 0.8 percent to US$17.74.

Investors are analysing reports to assess whether economic growth is strong enough to withstand higher interest rates. The S&P 500 reached a record on September 18 as the Fed maintained a commitment to keep interest rates near zero for a considerable time after completing asset purchases. The central bank also said that the timing could move forward if data continues to exceed expectations.

The Fed mustn’t “fall behind the curve” as it weighs when to start raising interest rates, Dallas Fed President Richard Fisher said in a Fox News interview, citing strengthening U.S. growth and building wage-price pressures.

U.S. data on employment and output from the manufacturing and services industries are due this week, and companies next month will begin to report earnings for the third quarter. Alcoa Inc. unofficially kicks off the earnings season when it reports quarterly results on October 8.

Stock markets overseas slumped today as tens of thousands of prodemocracy protesters poured back onto the streets of Hong Kong to press demands for free and open elections. Pro-democracy protesters in Hong Kong pledged to continue demonstrations until the city’s top official steps down.

Russia, Syria The turmoil added to the crises around the globe that have weighed on equities. Ukraine’s army endured its deadliest day since signing a ceasefire with pro-Russian militants 3 1/2 weeks ago, straining efforts to find a lasting settlement to the six-month conflict in the nation’s east. Investors are also watching the situation in Syria, where the U.S. and its allies are carrying out strikes against Islamic State positions.

Brazilian shares retreated 4.5 percent after a poll showed increased support for President Dilma Rousseff’s re-election bid. Traders are paring bets on the chances a new government will be elected next month and jump-start economic growth after the country fell into a recession in the first half of the year.

“Although we saw strong GDP numbers for the second quarter last week, there’s still a suspicion that unrest outside of our borders will impact economic growth here,” Jim Dunigan, chief investment officer at PNC Bank NA, which oversees $130 billion, said by phone from Philadelphia.

Ford Drops Nine of 10 main industries in the S&P 500 slumped today. Consumerdiscretionary shares had the biggest loss among the group, sliding 0.6 percent.

Ford Motor tumbled 7.5 percent, the most since 2011, to $15.11. The second-largest U.S. automaker said it will earn a pre-tax profit of $6 billion this year, missing its goal of $7 billion to $8 billion. Ford told investors it will lose $1 billion in South America as inflation and other currency problems hurt operations there. Ford also forecast a loss of $1.2 billion in Europe this year and a loss of $250 million there in 2015.

Bloomberg

11

October 1, 2014

Greater China

Alibaba leads global markets treasure hunt Equity market deals were also buoyed by the resumption of listings in China after a hiatus of nearly a year and half

G

lobal equity capital markets returned with a vengeance in 2014 as bankers, investors and companies led a charge that culminated spectacularly in Alibaba, the biggest share listing ever.

Worldwide equity capital market (ECM) deals, from flotation to rights issues, totalled US$678.1 billion in the first nine months of 2014, a quarter more than the same period of 2013 and the highest since 2007, according to Thomson Reuters data.

Companies around the world cashed in on strong investor demand and European deals jumped by more than half, hitting the highest level since records began in 1980.

Initial public offerings (IPOs) in particular stole the limelight, almost doubling from the same period in 2013 to hit US$176.1 billion worldwide.

The long-awaited Alibaba flotation finally landed in September, whipping up a frenzy as everyone from founder Jack Ma to kung fu star Jet Li descended on the New York Stock Exchange to watch the e-commerce giant’s stock rise 38 percent on its first day of trading.

The listing raised US$25 billion after underwriters sold extra shares, and helped stock market listings across the Asia Pacific region more than triple to US$69.5 billion so far this year.

Equity market deals were also buoyed by the resumption of listings in China after a hiatus of nearly a year and half, plus a surge in issuance in Hong Kong and Australia.

The ECM rebound has proved lucrative, with bankers netting a juicy US$300 million in fees for Alibaba alone. Goldman Sachs topped the

Alibaba executives celebrating IPO in New York

global ECM issuance league table by volume, with 300 deals totalling US$61.2 billion, followed by rival investment banks JP Morgan and Morgan Stanley.

“It’s been a fantastic year for some of the banks, but revenue is skewed towards the tech sector and one jumbo transaction,” said Mervyn Chow, head of the global markets solutions group in Asia Pacific at Credit Suisse, one of five book runners for Alibaba’s record sale.

“This is a landmark deal in every aspect globally and provides very positive momentum and a textbook roadmap for other Chinese entrepreneurs looking to float,” he said. “It will allow other up-and-

coming Internet companies to follow.”

Issuance in the region is expected to continue rising, with large offerings in Hong Kong, Thailand and Australia likely before the end of the year.

Key deals include an offer worth up to US$6 billion from China’s Wanda Commercial Properties, while Australian insurer Medibank Private’s flotation could fetch four billion Australian dollars (US$3.5 billion).

Rocket fuel Share offers from technology, media and telecommunications firms may ease, but deals from others sectors, including healthcare,

are expected from a wide range of issuers, Credit Suisse’s Chow and his European counterpart Nick Williams said.

“We would expect sponsors to account for a significant part of the pipeline, but we’re also expecting corporate spin-offs, spin-outs, and a wave of privatisations,” said Williams, head of European ECM at Credit Suisse.

European deals in 2014 have so far accounted for almost a third of global ECM issuance, rising 54 percent from 2013 to hit US$220.3 billion, the highest level for the first nine months of any year since records began in 1980.

Reuters

Spring Airlines sees Shanghai IPO by year end The funds from the share sale will be used for new aircraft and expansion of its international network

S

pring Airlines Co., China’s biggest low-cost carrier, plans to revive its initial public offering after a previous application failed to get past the nation’s regulator.

The carrier may sell shares as early as the year end, Chairman Wang Zhenghua said in an interview in Shanghai without providing details.

The airline has filed additional

documentation with the China Securities Regulatory Commission, Wang said. The regulator said on May 14 that it has cancelled the review of Spring Airlines’ IPO application.

Spring Airlines, started by Wang in 2005, had said in May it plans to spend about 2.5 billion yuan (US$411 million) to expand its fleet and network amid a surge in travel in the country. Routes within or connected to China will be the single largest driver of a projected 5.7 percent increase in air travel demand in Asia in the four years through 2017, according to an International Air Transport Association’s study last year.

Shenzhen Spring is aiming to raise the proportion of international passengers carried and revenue from the current 18 percent to about 25 percent by the end of 2015, Wang said.

He said the airline is in talks with Shenzhen Bao’an International Airport to start a second base in the mainland.

In the preliminary prospectus, the carrier had said it will buy a maximum of nine Airbus Group

Low cost carriers will see a faster pace of growth in China in the next few years Wang Zhenghua, Spring Airlines Chairman

NV’s A320 aircraft and three A320 simulators. Spring Airlines has 46 aircraft in its fleet and have bought two A320 simulators, said Wang.

China’s Civil Aviation Administration in February said it would loosen regulations and study tax breaks to encourage budget carriers after removing lower limits on air fares in November. China Eastern Airlines became the first of the three biggest state-owned carriers to start a low-cost carrier in July.

Bloomberg News

12

October 1, 2014

Greater China

HSBC PMI steady on firmer global demand Despite the strong surge in export orders, the overall output level fell to its lowest in four months, but managed to hold above the 50-point level

C

hina’s vast factory sector showed signs of steadying in September as export orders climbed, a private survey showed yesterday, easing fears of a hard landing but pointing to a still-sluggish economy facing considerable risks.

The final HSBC/Markit Manufacturing Purchasing Managers’ Index(PMI) hovered at 50.2 in September, unchanged from the August reading which was a three-month low, but lower than a preliminary reading of 50.5.

A sub-index measuring new export orders, a gauge of external demand, expanded to a 4-1/2-year-high of 54.5, though domestic demand appeared soft. The 50 mark separates expansion from contraction in activity on a monthly basis.

More worrisome, the survey showed further weakness in the job market, with the sub-index for manufacturing employment shrinking for the 11th consecutive month, which is bound to concern China’s Communist leaders.

HSBC main building in Hong Kong

KEY POINTS Sept factory activity 50.2, unchanged from Aug, down from flash New export orders at 4-1/2 year high but employment contracted Underlines fragility of economy despite export pick-up

The world’s second-largest economy has stumbled this year as a slowdown in the housing market further weighs on softening domestic demand.

With the property market expected to cool further, economists believe policymakers will have to roll out more stimulus measures in coming months to meet the government’s 2014 growth target of around 7.5 percent.

“Overall, the data in September suggests that manufacturing activity continues to expand at a slow pace,”

Congratulations on the 65th Anniversary of the People's Republic of China

said Qu Hongbin, chief economist for China at HSBC. “We think the risks to growth are still on the downside and warrant more accommodative monetary as well as fiscal policies.”

Weak domestic economy Despite a run of weak economic readings, Chinese leaders have said repeatedly that no dramatic change in policy is imminent.

Premier Li Keqiang said earlier this month that China cannot rely on loose credit to lift its economy and would continue to make only “targeted adjustments” to boost activity.

The latest worrying data came at the weekend, with news that profits at China’s industrial companies fell in August from a year earlier. Many of the country’s biggest firms are already receiving heavy subsidies from the state.

A flash PMI by HSBC/Markit that was released last week had showed factory employment skidding to a six-year-low in September. Tuesday’s survey showed the sub-index was revised up markedly in the final version, though it showed the labour market was shrinking nonetheless.

A soft labour market is a worry for Chinese policymakers, who fear that rising unemployment could fuel social unrest and threaten the government’s grip on power.

“The domestic economy is very weak and is being brought down by the property market,” said Tao Wang, an economist at UBS in Hong Kong.

“But until there is clear evidence of weakness in the labour market, the authorities won’t be responding,” she said in reference to the soft employment data in the PMI. China will release its official factory PMI on Wednesday. It is also expected to show growth steadied.

The official PMI is focused on larger factories that belong to the government, as opposed to the HSBC/ Markit PMI survey which is biased towards smaller manufacturers in the private sector.

Smaller firms are facing greater financial stresses as some cashstrapped customers are taking longer to pay their bills. Smaller companies are also having more trouble getting credit as banks grow more cautious in the face of mounting bad loans and fears of defaults.

The Industrial and Commercial Bank of China, the country’s biggest bank, said 80 percent of new nonperforming loans in the second quarter came from the manufacturing and wholesale sectors.

China’s banking regulator said on Sunday it had issued revised internal control guidelines for banks to ensure that appropriate risk management controls are adopted, while increasing penalties for any violations.

Issuance of the guidelines came days after China’s central bank began a targeted program to make available 500 billion yuan (US$81.6 billion) in short-term funds to China’s five biggest banks to help the economy by keeping borrowing costs affordable.

Reuters

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13

October 1, 2014

Greater China

Chinese companies plan Vanuatu nickel partnership Chinese steel mills scour the Asia-Pacific region for alternative supplies of nickel after top supplier Indonesia imposed a ban on such exports in January James Regan and Cecile Lefort

T

he South Pacific islands of New Caledonia and Vanuatu are studying a plan to jointly mine and process nickel ores into refined metal to help produce stainless steel in China.

The acting prime minister of Vanuatu, Ham Lini, has expressed interest in the proposal and has asked the partners to lodge a formal application to construct the smelter in his country.

The move comes as Chinese steel mills scour the Asia-Pacific region for alternative supplies of nickel after top supplier Indonesia imposed a ban on such exports in January.

KEY POINTS Plan is to mine ore in New Caledonia and refine it in Vanuatu Vanuatu asks partners to seek approval to build a refinery South Pacific seeking to lift role in world nickel supply

Under the proposed partnership, New Caledonian company MKM Group and China’s Jin Pei Century Investment (Group) Co Ltd plan to mine lowpurity nickel ore in the French Pacific territory and ship it to Santo in northern Vanuatu for smelting.

Media reports in New Caledonia said the project would be owned 51 percent by MKM and 49 percent by Jin Pei. The head of MKM, Wilfried Mai, told New Caledonian television he had advised the Chinese investors to build the plant in Vanuatu.

The acting prime minister of Vanuatu, Ham Lini

“All the advantages” “It’s a country in Melanesia, there is no tax, labour is not expensive and it’s not far away from our country - all the advantages,” Mai said.

Vanuatu has no history of mining or refining.

In contrast, New Caledonia is awash with nickel ore, holding as much as a quarter of the world’s known reserves.

Nickel dominates the economy, with than 6,000 people employed in processing of the ore.

But building a new plant there would prove difficult, given mounting local opposition to such industries following half a dozen environmental incidents at Goro nickel plant, owned

CIC selling part of Noble Group stake CIC is its second-biggest shareholder after Noble Holdings Ltd which has a 20.8 percent stake

C

hina Investment Corp will sell part of its stake in Noble Group Ltd at a 5 percent discount, sending shares in the commodity trader tumbling and sparking fears that CIC would eventually move to offload most of its holding.

The Chinese sovereign wealth fund, Noble’s second biggest shareholder, is selling shares equivalent to 4.5 percent of the commodity trader, a term sheet showed.

The sale will be priced at S$1.32, the bottom of an indicative price range up to S$1.35, and would be worth about US$310 million, according to a source with knowledge of the matter.

It was not immediately clear why CIC was selling the stake, but Nathan Gee, an analyst at Bank of America Merrill Lynch, said he did not expect any damage to Noble’s strategic relationships in China.

The deal coincides with the completion of Noble’s US$1.5 billion sale of a 51 percent stake in its agricultural products venture to COFCO, China’s largest grain trader, and that is the more important relationship, he wrote in a report.

KEY POINTS CIC selling about a third of its stake in Noble Deal priced at S$1.32 a share vs range of S$1.32/S$1.35 -source CIC became a substantial shareholder in 2009 But he noted that investors would be concerned about whether CIC would move to dispose of the rest of its stake, which is around 9.4 percent according to Reuters calculations.

Noble’s shares were trading down 6.8 percent at S$1.30 in afternoon trade.

The source, declining to be identified as there had been no official announcement, said CIC would continue to be a substantial holder of Noble’s shares.

Reuters

by Vale of Brazil, the latest involving the discharge of 100,000 litres of acidtainted effluent in May. Another smelter in the capital, Noumea, operated by Societe Le Nickel and part owned by France’s Eramet, has long been criticised for filling the sky with smoke and marring the natural beauty of the area.

Vanuatu’s government is sensitive to such concerns.

“The government wishes to stress the importance of ensuring that landowners receive maximum benefits from the refinery if it is established, and that the plant does not adversely impact their environment or compromise the lives of their future generations,” Lini said in a statement emailed to Reuters.

The Indonesian ban removed a third of global nickel mine supply, driving nickel prices up by as much as 50 percent this year.

South Pacific countries are vying to play a bigger role in supplying nickel, which is required to make stainless steel.

This month, a court in the Solomon Islands finally unlocked a large nickel deposit that geologists have known about for half a century but have been unable to exploit because of ownership changes and legal wrangling.

A nickel mine in Papua New Guinea developed by Ramu NiCo and majority-owned by Metallurgical Corp of China is already operating.

Reuters

15

October 1, 2014

Asia

Jobless rate fuels Japan’s hopes While factory output is still falling against all predictions and Government measures

A

nnual household spending in Japan fell for a fifth straight month in August and factory output unexpectedly declined, highlighting the challenges policymakers face to revive an economy reeling under the strain of a sales tax hike.

The one bright spot came in data showing the jobless rate fell in August, while the availability of jobs stayed at a 22-year high, suggesting that improvements in the job market will ease some of the pain on households.

Still, it’s unlikely to be sufficient on its own to underwrite a solid rebound in the economy, especially as exports also continue to underperform.

Internal affairs ministry data showed household spending fell 4.7 percent in August from a year earlier, weaker than a 3.8 percent drop forecast in a Reuters poll, as an April 1 sales tax hike to 8 percent from 5 percent continued to take its toll.

Although the Bank of Japan is in no mood to deploy additional easing anytime soon, a run of soft data is raising doubts about the central bank’s conviction that inflation will reach its 2 percent goal by around mid-2015.

To that extent, the BOJ’s key tankan corporate survey, due today, will be closely scrutinised by central bankers at the rate-setting meeting next week.

The headline index for large manufacturers in the BOJ tankan is viewed as a leading gauge of economic growth, while capital spending plans offer clues on the strength of business activity.

“Contrary to the BOJ’s view that output is rising as a trend, production is pretty sluggish. The economy won’t see a clear pick-up for the rest of this year,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“The government must compile quite a big fiscal stimulus package to revive the economy if it were to

KEY POINTS Aug factory output -1.5 pct vs f’cast +0.2 pct Household spending -4.7 pct vs f’cast -3.8 pct Job market continues to improve, Aug jobless rate falls BOJ to review tankan, other data Oct 6-7, no action seen

Japanese Prime Minister Shinzo Abe arrives at National Diet before delivering his policy speech at the opening of the Extraordinary Diet session in Tokyo Japan, 29 September 2014. Abe presented his program aiming to boost local economies

proceed with the second stage of the sales tax hike,” he said.

The April tax hike, which drove the economy into its biggest slump since the global financial crisis in the second quarter, is keeping up pressure on the BOJ to ease again eventually.

The government may also be forced to compile a stimulus package if weakness persists, as Prime Minister Shinzo Abe must decide by year-end whether to proceed with a second sales tax hike planned for next year.

Factory output also reflected the struggles faced by companies, which have been saddled with a pile of inventories due to weak demand

both at home and abroad.

Trade ministry data showed industrial output fell 1.5 percent in August, as hopes for solid bounce remained elusive after the post-tax hike slump.

The fall compared with economists’ median estimate for a 0.2 percent increase in a Reuters poll. It followed a 0.4 percent rise in July and a 3.4 percent drop in June, which was the biggest decline since the March 2011 earthquake.

Manufacturers surveyed by the ministry expect output to rise 6.0 percent in September but decrease 0.2 percent in October.

Despite a flagging economy, the BOJ remains confident that a tighter labour market and improving income conditions will spur private consumption that accounts for about 60 percent of the economy, keeping it on track to meet the 2 percent price goal.

Separate data showed the jobless rate stood at 3.5 percent in August, down from 3.8 percent in July, with the jobs-to-applicants ratio unchanged at a 22-year high of 1.10.

Japan’s economy shrank at an annualised 7.1 percent in the second quarter, the deepest slump since the 2009 global financial crisis as April’s tax hike took a heavy toll on domestic demand.

Analysts and policymakers expect the economy will rebound in the current quarter, though some warn that the recovery may lack strength and wane later this year if the tax pain drags on.

Reuters

Japan real wages fall at faster pace The Bank of Japan will also take note because it considers wage growth as crucial to achieve its 2 percent inflation goal sometime in the next fiscal year starting in April

J

apan’s real wages fell at a faster annual rate in August, government data showed, in a discouraging sign that consumer spending could suffer as salary gains fail to keep up with inflation.

Real wages, which are adjusted to reflect changes in consumer prices, fell 2.6 percent in August from a year earlier, following a revised 1.7 percent annual decline in July, data from the labour ministry showed yesterday.

The wage report is likely to be a cause of concern for Prime Minister Shinzo Abe after recent weak economic data suggested that soft exports and a sales tax increase in April could drag on the economy longer than expected.

Falling real wages could make politicians reluctant to go ahead with another

sales tax hike scheduled for next year.

Overtime pay, a barometer of strength in corporate activity, rose 1.8 percent in August from a year earlier, the data showed.

That was slower than a revised 3.6 percent annual gain in July.

Total cash earnings rose 1.4 percent in the year to August, also slower than a revised 2.4 percent annual increase in the previous month.

Japan’s economy shrank an annualised 7.1 percent in April-June, the fastest since the global financial crisis in 2009, as consumer spending and capital expenditure weakened after the sales tax increase.

The ministry defines “workers” as 1) those who are employed for more

Payments (yen)

August

August yr/yr change

July (pct)

Total cash earnings

274,744

+1.4

+2.4*

Monthly wage

260,988

+0.7

+0.5*

Regular pay

241,875

+0.6

+0.3*

Overtime pay

19,113

+1.8

+3.6*

Special payments

13,756

+14.4

+7.3*

Overall

47.020

+1.6

+1.7*

General employees

33.237

+1.9

+1.1*

Part-time employess

13.783

+0.6

+3.0*

Number of workers (million)

*denotes a revision from preliminary data

than one month at a firm that employs more than five people, or 2) those who are employed on a daily basis or

have less than a one-month contract but had worked more than 18 days during the two months before the

survey was conducted at a firm that employs more than five people.

Reuters

16

October 1, 2014

Asia Newmont Indonesia restarts copper exports Newmont Mining Corp sent out its first copper concentrate shipment from Indonesia this week that ended a nine-month hiatus, highlighting a ramp up in copper mine supply that is expected to tip the market into surplus this year. U.S.-based miners Newmont and Freeport-McMoRan Inc. halted exports in January after Indonesia imposed a hefty export tax that the miners said violated their mining contracts. The export tax was part of moves to force all miners to develop local mineral processing facilities, which would bring bigger returns for the government from Indonesia’s mineral resources.

Alaskan crude bound for S.Korea The first U.S. export of Alaskan crude to South Korea in more than a decade set sail at the weekend, according to a company source and shipping data, marking another milestone as booming shale oil output forces domestic drillers to seek new customers. The Suezmax Polar Discovery loaded at the Valdez terminal in Alaska late last week and was due to arrive next week in Yeosu, South Korea, according to shipping data available on Thomson Reuters Eikon.

A source at South Korea’s second-biggest refiner GS Caltex Corp said the firm would receive 800,000 barrels.

Vietnam, Japan to cooperate in key industries Vietnam has unveiled a plan that maps out strategies to develop key industries to improve the country’s production and service supply with assistance from Japan, according to local VietnamNet daily yesterday. Under the framework of Vietnam-Japan cooperation from 2020 to 2030, the four industries - electronics, agricultural machinery, agro-fishery processing, and environmental industry and energy conservation - are viewed as playing a leading role in attracting foreign investments and popularizing technologies and skills in the economy. Vietnam aims to raise the annual value of these industries by 20 percent.

S.Korea factory output falls South Korea will publish export and import performance estimates

S

outh Korea’s August factory output marked its worst fall since the 2008 global financial crisis, as strikes at automakers disrupted output, although markets showed little reaction as investors look ahead to trade and inflation data due on Wednesday.

The industrial output index dropped by a seasonally adjusted 3.8 percent in August from July, Statistics Korea data showed yesterday, the biggest fall since December 2008 and far below the most pessimistic forecast in a Reuters survey.

July’s reading was revised to a 1.5 percent gain from a 1.1 percent rise reported earlier.

A finance ministry official attributed the fall mainly to strikes by unionised workers at auto makers including Hyundai Motor Co over pay negotiations and said the country remained on track for a modest economic recovery.

South Korea’s economy has been hobbled since a ferry sinking disaster in mid-April dented consumer sentiment, spurring the government to launch a range of new policy measures to boost demand.

“This weakness doesn’t seem like it will continue and is likely to be temporary as the auto sector was mainly to blame,” said Kim Yu-kyum, an economist at LIG Investment & Securities in Seoul.

Strikes at the nation’s leading automaker are fairly frequent and

Bank of Korea

output as well as exports have rebounded following previous labour disruptions as factories made up lost production.

The estimates are something of a barometer for global commerce because South Korea is the first of the world’s trade powerhouses to report its monthly numbers.

A R eu ter s s u r v e y s h o w e d September exports are expected to show a rise of 8.2 percent on an annual basis and imports are seen

gaining 6.0 percent. Should exports reach the expected level, it will be the best performance for shipments from South Korea in 20 months.

Shipments in September are expected to have rebounded from an annual 0.2 percent fall in August on an additional working day from a year earlier and improving demand from advanced economies such as the United States.

Industrial output tends to mirror trade data as South Korea largely

Thai August factory keeps way down Auto sales are still tumbling and retail sales growth is weak, curbed by high household debt levels

S.Korea c.bank pending on FED Central bank is ready to intervene should upward pressure on interest rates become too great or the won exchange rate become too volatile after the U.S. Federal Reserve starts raising interest rates next year, an senior official said. “Once the U.S. begins to raise interest rates that will affect global rates and South Korea cannot remain uninfluenced,” Kim Jun-il, a deputy governor and chief economist at the Bank of Korea, told a news conference, adding that the Fed was expected to increase rates next year.

Myanmar seeks oil support services Myanmar is seeking the entry of international support services into the local oil and gas sector and will host an oil and gas-related exhibition in Yangon in mid- October, exhibition sources said yesterday. Some 130 exhibitors from 22 countries and regions will participate in the first Oil and Gas Myanmar exhibition. Myanmar will see an influx of foreign companies following the release of its oil and gas resources to the international market with many international firms looking for local agents and partners and setting up operation in Myanmar, said a Singaporean exhibitor.

Thai Prime Minister and head of the Thai military junta General Prayuth Chan-ocha (C-L) stands next to new Army chief General Udomdej Sitabutr (C-R) during a handover ceremony at the Thai army headquarters in Bangkok

T

hai factory output dropped less than forecast in August, but the 17th straight month of decline from a year earlier is the latest sign that the country’s economy is still sputtering.

Factory output in August was down 2.66 percent from a year earlier, compared with July’s revised fall of 5.3 percent the Industry Ministry said yesterday. Initially, it put July’s drop at 5.18 percent.

A Reuters poll had forecast a decline of 4.5 percent for August, during which exports fell a larger-

than-expected 7.4 percent from a year earlier.

Southeast Asia’s second-largest economy avoided a recession in AprilJune weak recent indicators show key pillars of the economy - exports and consumption - remain weak, so there are doubts real economic recovery has started in the wake of a military coup in May. In August, imports plunged 14.2 percent from a year earlier.

The army said it had to take power to end protracted political turmoil and to get the battered economy going again.

The central bank expect 2014 economic growth of around 1.5 percent, and expansion of close to 5 percent next year.

Thammarat Kittisiripat, economist with TMB Bank said August’s slightly improved output data “might come from a base effect or better economic activity.

It’s rather a fragile recovery from a bad situation, which does not necessarily mean things are really getting better. We think factory output data will still be negative this year.”

17

October 1, 2014

Asia

most since 2008

India keeps rates on hold

today Wednesday

The Reserve Bank of India (RBI) also kept both the statutory liquidity ratio (SLR) and the cash reserve ratio (CRR) unchanged

I

KEY POINTS Aug factory output worst since Dec 2008, -3.8 pct s/adj m/m Analysts focused on Wednesday trade, inflation data Views split on Oct. 15 rate meeting between hold and cut

ships manufactured goods such as cars and computers, leading analysts to expect an improved picture in next month’s data.

Next rate move?

Analysts have forecast inflation will reach an annual 1.5 percent in September, slightly up from 1.4 percent in August and far below the central bank’s target band of 2.5 percent to 3.5 percent.

They said yesterday’s data dashed hopes for a quick rebound and may put pressure on the Bank of Korea to ease monetary policy, but a majority in a Reuters poll last month forecast the next policy move will be a hike.

“The economy stands a chance of moving into the 1-percent growth range in the third quarter as the second quarter was weak. Construction is still good and consumption numbers are also getting better,” said Kim Jong-su, an economist at Taurus Investment & Securities.

“The central bank will want to keep an accommodative stance while observing government policy effects.

We see a hold for October, with ‘cut’ views in the market lingering.”

Reuters

ndia’s central bank kept its key policy repo rate unchanged at 8.0 percent yesterday, as widely expected, while warning of risks to its target to bring consumer inflation down to 6 percent by January 2016.

“This continues to warrant policy preparedness to contain pressures if the risks materialise,” the Reserve Bank of India said in a statement following the policy review.

“Therefore, the future policy stance will be influenced by the Reserve Bank’s projections of inflation relative to the medium term objective (6 per cent by January 2016), while being contingent on incoming data.”

In a separate report on inflation, the RBI spelled out its concerns, noting elevated inflation expectations among households and an enduring risk of higher food prices.

A Reuters poll last week showed most analysts expect the RBI will not cut interest rates until the AprilJune quarter, as it will want to see consumer price inflation down at 8 percent by January 2015 and on course to slow to 6 percent a year later.

The RBI expressed comfort about meeting that first inflation target, but warned of “upside” risks to the second target.

Consumer price inflation slowed to 7.8 percent in August, and core inflation, which strips out food and fuel prices, eased to 6.9 percent.

If CPI inflation moves towards 7 percent then we expect a gradual pace of rate cuts R. Sivakumar, Axis Mutual Fund

Only three of the 46 economists polled had expected a rate cut at this review. The repo rate has been unchanged since January, when the RBI increased it by a quarter percentage point.

SLR is the minimum bond holding requirement that lenders must set aside, while CRR determines the percentage of bank deposits that must be kept at the central bank.

However, it said it would cut the ceiling on bonds that must be held-tomaturity from the current 24 percent to 22 percent in stages starting in the bi-weekly cycle beginning in January 10, 2015. It expects to complete the process by September 2015.

Reuters

Australia’s RBA to front housing inquiry

KEY POINTS Industrial output -2.66 pct in Aug y/y vs -4.5 pct in Reuters poll Annual output drops for a 17th straight month Weakness led by cars, jewellery, sugar, petroleum, clothes As exports are weak, “the government needs to rush to introduce measures to spur growth, otherwise an economic recovery will be delayed,” he said.

Factory output is a significant gauge of Thai activity, as exports equal more than 60 percent of the economy. Thailand is a regional hub and export base for global automakers and a major producer of hard disk drives.

The Industry Ministry blamed the August output decline - the smallest percentage-wise since the string of annual falls began in April 2013 - on weaker production of cars, jewellery, sugar, petroleum and clothing.

August’s capacity utilisation rate was 60.29 percent, little changed from 60.06 percent in July. Industrial goods account for about 65 percent of total exports.

The military government is seeking to fast-track long-dormant spending plans such as infrastructure projects.

Economic ministers have said the junta is planning measures, which are expected to be announced this week, to help growth at a time of weak economic pillars.

Reuters

The central bank last week warned that record low rates and intense competition among banks have fuelled growth in lending

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op officials from Australia’s central bank will appear before lawmakers on Thursday to answer questions on the housing market, just as data shows lending for investment growing at its fastest pace in over six years.

The Reserve Bank of Australia (RBA) last week surprised many by saying it was considering tougher rules on lending for housing investment given rapid loan growth and rising home prices.

That led Senators to invite the central bank to a hastily-arranged committee meeting to discuss the new measures with an eye to making sure they would not harm housing affordability or the supply of new homes.

Attending will be RBA Assistant Governor Malcolm Edey, who looks after the financial system as a whole, and Luci Ellis the head of its financial stability unit.

The central bank last week warned that record low rates and intense competition among banks have fuelled growth in lending for investor housing that was making the market “unbalanced”.

The bank is worried that rapid lending growth would push up prices ever faster and lead to a speculative bust sometime down the track.

Home prices in Sydney were up over 16 percent in the year to August, according to figures from property consultant RP Data, while Melbourne boasted gains of almost 12 percent.

Home prices in Sydney (pictured) were up over 16 percent in the year to August

Figures out yesterday showed lending to buy investment properties accelerated yet further in August, to be up 9.2 percent on the same month last year. That was the fastest pace of growth since April 2008, though still well below the lofty peaks seen in the early 2000s.

The RBA even softened its long standing opposition to using macroprudential measures that aim to limit the build up of leverage and risktaking in the banking system as a whole rather than just at individual banks.

As a result, the RBA said it was discussing with the Australian Prudential Regulation Authority (APRA) “additional steps that might be taken to reinforce sound lending practices, particularly for lending to investors.”

Reuters

KEY POINTS RBA officials to appear before Senate committee on Oct 2 Focus on measures to cool lending for housing investment Borrowing for investment growing at fastest pace in over 6 years

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October 1, 2014

International Holcim and Lafarge plan to divest Cement makers Holcim and Lafarge are stepping up plans to shed assets in order to win clearance from competition regulators for their planned mega-merger, including possibly spinning them off into a new company. Holcim said yesterday the two firms were seconding one senior manager each to a committee responsible for divesting assets that would look at options including setting up a new business as well as outright sales. Analysts have mostly assumed until now that the two companies would sell the assets. However, Holcim said yesterday the firms did not have a preferred option at this stage.

Luxembourg agreement is state aid The European Commission has told Luxembourg its preliminary view is that its tax arrangement with a subsidiary of Fiat constitutes state aid, the Commission said yesterday. In a document published on its website outlining its probe into Fiat Finance and Trade Ltd.’s tax arrangements in Luxembourg, the Commission said it had doubts about the compatibility of the agreement with the EU’s internal market.

Fiat, the Italian carmaker, declined comment.

German unemployment rises German joblessness increased unexpectedly in September but the jobless rate remained low and a surge in August retail sales offered hope that private consumption can help prop up Europe’s largest economy in the third quarter. The number of people out of work rose by 13,000 to 2.918 million - its highest level since January - seasonally-adjusted data showed from the Labour Office showed yesterday. That confounded forecasts for a drop of 2,000 and overshot the highest estimate in a Reuters poll for a rise of 10,000.

EU questions Ireland’s tax deal with Apple European Union antitrust regulators have asked Ireland to provide details of its tax arrangements with Apple in 1990 and 2007, warning that they could amount to illegal state aid which may be recovered from the U.S. company. In a letter published yesterday, European Commissioner Joaquin Almunia told Ireland it must provide the details of the tax arrangements, which in his preliminary view could constitute illegal state aid and therefore be recoverable from Apple. “The tax ruling of 1990 (effectively agreed in 1991) and of 2007 in favour of the Apple group constitute state aid,” Almunia wrote.

eBay aims to drive consolidation in Russia Internet auction site eBay intends to drive a wave of consolidation in Russia’s e-commerce market over the next couple of years, persuading smaller companies to get on board as the economy weakens. Launching a marketplace for Russian merchants, eBay Vice President Wendy Jones said growth in e-commerce would probably only reach half of earlier predictions for around 20 percent after a “softening” in consumer spending. She declined to comment directly on Russia’s economy, which has been brought to a standstill

by Western sanctions over Moscow’s role in Ukraine.

Global regulators agree reforms of currency benchmarks Several banks are being investigated by authorities in Britain, the United States and elsewhere for allegedly manipulating the US$5 trillion a day currency market

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he one minute window for setting a widely used currency market benchmark should be extended to 5 minutes to make it harder to manipulate prices, the Group of Twenty’s (G20) regulatory task force said yesterday.

Several banks are being investigated by authorities in Britain, the United States and elsewhere for allegedly manipulating the US$5 trillion a day currency market, prompting regulators to map out reforms of market operations.

“Extending the width of the window to 5 minutes strikes a balance between reducing incentives for manipulation while at the same time still ensuring the fix is fit for purpose by generating a replicable market price,” the Financial Stability Board (FSB) said in its final report on forex benchmarks.

The recommendations confirm a Reuters report on September 23 outlining the FSB’s main conclusions.

Activity around the WM/Reuters currency fix in London is at the heart of a global investigation into allegations that traders colluded and used client information improperly to influence pricing.

“Market-makers should not share

Market-makers should not share information with each other about their trading positions beyond that necessary for a transaction Financial Stability Board

information with each other about their trading positions beyond that necessary for a transaction,” the FSB said. “This covers both individual trades and their aggregate positions.”

The WM/Reuters fix relates to several exchange rates and is compiled using data from Thomson Reuters and other providers. They are calculated

by WM, a unit of State Street Corp.

Thomson Reuters is the parent company of Reuters News, which is not involved in the fixing process.

The FSB also recommended that WM should draw on a wider range of price feeds and transaction data during the fixing window.

The FSB said it backed industryled initiatives to create independent netting and execution facilities for transacting fix orders.

If those initiatives fail to bring about improvements then an initial idea - which the FSB has put aside for now - of setting up a new global trading platform or utility would be revisited, the global body added.

Separately the International Organisation of Securities Commissions (IOSCO), a body of global markets regulators, reviewed how WM, which administers the WM/ Reuters forex benchmark, complies with IOSCO’s general principles on running benchmarks.

IOSCO said as of May 2014 WM had implemented some of its guidelines, “but still needs to do substantial work to implement many of them”. IOSCO recommended a subsequent review in mid-2015.

Reuters

Euro-Region inflation slows Euro-area economic confidence slipped this month to the lowest level since November Ian Wishart

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uro-area inflation slowed in September, challenging European Central Bank officials gathering this week to decide if more measures are needed to avert deflation.

Consumer prices rose an annual 0.3 percent, the European Union’s statistics office in Luxembourg said today. That’s in line with the median estimate in a Bloomberg News survey and follows a reading of 0.4 percent in August. Unemployment held at 11.5 percent in August, Eurostat said in a separate report.

ECB President Mario Draghi told lawmakers in Brussels on September 22 that policy makers remain “fully determined” to shore up inflation, which has undershot the central bank’s goal since early 2013. Policy makers have agreed on unprecedented stimulus in the past four months, and are set to unveil details of an assetpurchase plan that will help add as much as 1 trillion euros (US$1.3 trillion) to the ECB’s balance sheet.

Euro-area economic confidence slipped this month to the lowest level since November, while manufacturing and services growth unexpectedly slowed to the weakest pace this year, according to preliminary data by Markit Economics.

Energy prices dropped 2.4 percent in September from a year earlier after falling 2 percent the previous month, yesterday’s preliminary report shows.

Prices of alcohol, food and tobacco increased 0.2 percent, while the cost of services was up 1.1 percent.

Core inflation The core inflation rate, which strips out volatile items such as energy, food, tobacco and alcohol, slowed to 0.7 percent this month from 0.9 percent in August, according to Eurostat, which will release updated data on October 16.

In addition to cutting interest rates to record lows and offering long-term loans to banks, the ECB has committed to buy asset-backed securities and covered bonds to steer price gains back toward its goal of just under 2 percent. Details of the plan are set to be revealed after the 24-member Governing Council meets in Naples, Italy, on October 2.

Policy makers will leave the benchmark rate unchanged at 0.05 percent and the deposit rate at minus 0.2 percent, according to all economists in a separate Bloomberg News survey.

The euro-area jobless rate in August

[Inflation] is a sign of incredible weakness of economic activity in the euro zone. It’s looking bleak right now, and I don’t see any short-term relief Christopher Matthies, economist, Sparkasse Suedholstein

was in line with the 11.5 percent median forecast of 29 economists in a Bloomberg News survey and down from last September’s peak of 12 percent.

Spain had the highest unemployment rate across the bloc, at 24.4 percent, and Austria the lowest, at 4.7 percent.

Bloomberg News

19

October 1, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Two views of finance Simon Johnson

Former chief economist of the IMF, is a professor at MIT Sloan, a senior fellow at the Peterson Institute for International Economics

THE STAR Asean bond markets are growing as an important source of long-term funding to pay for the development of infrastructure projects in fast-expanding economies across the region. As it is, experts say infrastructure development projects in Asean are too dependent on bank loans. It has been estimated that infrastructure spending in Asia will reach US$8 trillion (RM26.24 trillion) over the next decade, with a large portion being in Asean. Asian Development Bank head of office of regional economic integration Iwan J. Azis said there is still a huge deficit in infrastructure within Asean.

JAKARTA GLOBE The House of Representatives passed on Monday the 2015 Indonesian state budget, which caps the budget deficit at 2.21 percent of the gross domestic product from 2.5 percent of GDP this year in order to reduce government debt issuance. Finance Minister M. Chatib Basri said the government was anticipating a rise in interest rates next year due to the US Federal Reserve’s plan to hike its benchmark rate, which could increase Indonesia’s cost of borrowing. “The smaller deficit sends a signal to all stakeholders and businesses that the 2015 state budget is more sustainable,” Chatib said.

THE STRAITS TIMES Banks in Singapore gave out more loans in August, to both businesses and consumers.

Overall loans last month stood at US$604.6 billion, up 1.19 per cent compared with the US$597.4 billion disbursed in July, preliminary data by the Monetary Authority of Singapore released yesterday showed. The figure was an improvement from July, when total loans dropped for the first time in five years due to slower business activity.

Business loans in August reached US$372.2 billion, up 1.61 per cent from July.

VIETNAM NEWS Viet Nam welcomed more than 6 million international arrivals during the first nine months of 2014, up by 10.42 per cent compared to the same period last year. The number of domestic tourists hit 32.4 million during the same period, an increase of 7.6 per cent, according to the Viet Nam National Administration of Tourism (VNAT). Tourism has generated VND179 trillion (US$8.44 billion) so far this year, a year-on-year rise of 19.24 per cent. The launch of a brand new hydro-plane service is expected to attract more tourists to the country.

First Bank of United States

The International Monetary Fund’s annual meetings will be held on October 10-12 in Washington DC, and the world’s financial sector is a central item on the agenda. That will make for an interesting meeting, because two diametrically opposed views of the global financial system will face off against each other.

The first view is that “we have done a lot” since the global financial crisis erupted in 2008.

According to this view, which is put forward on a regular basis by some US Treasury officials and their European counterparts, there may be a bit more to do in terms of implementing reforms, but our banks and other financial firms have already become much safer.

The crisis of 2008 cannot soon be repeated.

The second view is that we are a long way from completing the far-reaching changes that we need. Even worse, on at least one key point, the very language used among policymakers and leading journalists to describe finance is badly broken.

The issues are complex and nuances abound, but much of what divides the two sides in this debate comes down to this: Is it acceptable to say that banks “hold” capital?

This is an expression used with great regularity among top finance reporters (though not, for example, by Bloomberg/BusinessWeek, which has long been much more careful on this point). “Banks will need to hold more capital” is a common refrain, describing efforts by regulators – and, in the United States, some legislators – to require that financial institutions

fund themselves with relatively more equity and less debt.

Using “hold” in this way is both completely conventional and deeply misleading. In any other common English language usage, “hold” is an active verb or a noun with a similar connotation. You hold a baby in your arms. Please hold on tight to this rope. He had a strong hold over his colleagues.

This matters, because “holding” capital has become a disguised or implicit metaphor. The implication is that banks are being asked to sequester part of the asset side of their balance sheets – and this naturally leads to the perception that somehow “less is available” to lend, for example, to the real (non-financial) economy. I encounter this view frequently, even in sophisticated circles – for example, on Capitol Hill.

But this interpretation is a complete – and sometimes deliberate – misunderstanding of bank capital and the policies being pursued. (Anat Admati and Martin Hellwig have pointed out that there are many misperceptions in this area; but, of these, misconstruing capital is surely the most fundamental.)

Capital, in this context, is simply a synonym for equity, which is on the liability side of a bank’s (or anyone’s) balance sheet. It refers to how a bank (or other firm) finances its activities, not to how it uses the funds that it has available.

Higher capital requirements mean, in essence, more equity funding and – by implication, under any sensible definition – relatively less debt for a given balance-sheet size. This is an attractive and sensible policy,

The issues are complex and nuances abound, but much of what divides the two sides in this debate comes down to this: Is it acceptable to say that banks “hold” capital?

because today’s global banks have relatively small slivers of equity underpinning their operations.

The best comparable measures of bank capital are those found in the Global Capital Index produced by Thomas Hoenig, Vice Chairman of the Federal Deposit Insurance Corporation.

Hoenig looks at how much equity banks have in the simplest and most transparent measure (also known as leverage). Six years after the world’s largest financial crisis, our megabanks have equity amounting to no

more than 5% of their balance sheets. (In fact, some banks have not much more than 3% equity.) That means that 95% of their operations are financed by debt – and thus that only a small negative shock would be needed to push them toward insolvency.

Many measures are still needed to address this vulnerability, including the formalization of international cooperation to handle failing financial firms.

We need these firms to be able to fail without causing a global panic. They should prepare meaningful “living wills,” to show how this will be possible; in fact, such plans are a requirement – still unimplemented – of the 2010 Dodd-Frank financial reforms in the US. But there is a much simpler step that would make a big difference: A senior policymaker, such as a member of the Federal Reserve’s Board of Governors or the president of the New York Fed, should make a speech that explains clearly what bank capital is (and what it is not).

Journalists who ignore the guidance on terminology in this speech should be called – in private – by the Fed. The Fed devotes considerable effort to ensuring that the public understands its monetary policy; officials should devote similar effort to communicating regulatory policy precisely.

And Hoenig’s index should be picked up and publicized by a major organization, such as the IMF. We need not only more precise use of language, but also timely and accurate measurement of banks’ capital levels.

Project Syndicate

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October 1, 2014

Closing Hong Kong main index ends worst month in 28

Thailand to give tourists ‘safety’ wristbands

Hong Kong’s benchmark index fell to a threemonth low yesterday, finishing on its biggest monthly fall since May 2012 as investors dumped shares amid the city’s worst civil unrest in decades.

Investor apprehension at how Beijing might respond next has deepened as tens of thousands of pro-democracy protesters blocked streets in Hong Kong’s busiest areas, in one of the biggest political challenges to Beijing since the Tiananmen Square crackdown 25 years ago. The Hang Seng Index lost 1.3 percent at 22,932.98 points. Having had only five winning sessions out of 21 trading days in September.

Thailand yesterday announced plans to give tourists wristbands carrying their personal details, as the kingdom falls under intense scrutiny over visitor safety following the murder of two British holidaymakers. Under the scheme hotels will distribute the wristbands to new arrivals.

“If anything happens to them we will then know their names, nationality and hotel,” said Arnuparp Gaesornsuwan, director general of the Department of Tourism told AFP. “We have discussed it with hotel operators and they are willing to do it,” he said. Tourist police said the safety measure would be voluntary.

Measures to boost imports and restructure The announcement came as China’s imports posted year-on-year declines for two consecutive months in July and August

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he latest measures aimed at boosting imports of advanced technology and retail goods have come at the right time and should help China as it restructures its economy, analysts say.

On Monday, the State Council, or China’s cabinet, announced a spate of measures target balancing China’s foreign trade, meeting domestic demand, promoting innovation and upgrading the economic structure.

The announcement came as China’s imports posted year-on-year declines for two consecutive months in July and August, heightening concerns over subdued growth momentum in the world’s second largest economy.

Due to contracting imports, the monthly trade surplus in August reached an all-time high of US$49.8 billion, up 77.8 percent from a year earlier, customs data showed.

“The trend of foreign trade in recent months, which features an expanding trade surplus, is unbalanced and unsustainable,” said Liu Xuezhi, a financial analyst with the Bank of Communications. He said the measures required to change this came just as they were needed.

The trend of foreign trade in recent months, which features an expanding trade surplus, is unbalanced and unsustainable Liu Xuezhi, financial analyst, Bank of Communications

Liu said that a declining import volume causes pressure on China’s trade balance as well as the balance of international payments, putting upward pressure on the yuan.

At a press conference earlier this month, the Ministry of Commerce spokesman Shen Danyang clarified China is not pursuing a trade surplus.

Instead, the country aims at balanced development of

Chinese Premier Li Keqiang (R) walks to his place beside President Xi Jinping (L) during a flower laying ceremony one day before the National Day holiday at the Monument to the People’s Heroes at Tiananmen Square. Premier Li chaired the State Council that approved the economic-boosting measures

trade, giving the same weight to export expansion as import expansion.

In May, the cabinet already drew up a guideline to stabilize foreign trade growth. Monday’s measures offered more details, vowing to encourage imports

of high-tech equipment and parts, as well as services on research, design, energy saving and environmental protection.

Wang Jun, analyst with the China Centre for International Economic Exchanges, said this round of policy is more targeted

and compliments the need to upgrade domestic industries, as China shifts away from over-reliance on investment and external demand to an innovation-driven economy.

At the time of the announcement, the cabinet said imports of resources will stay stable and imports of general consumer goods like beef, mutton and aquatic products will be increased reasonably.

Analysts believe these measures will tap the country’s vast consumer goods market, as retail goods only accounted for 5 percent of China’s total imports, far below the world’s average of about 20 percent.

China will continue to facilitate imports by simplifying administrative procedures and establishing trade platforms, including e-commerce, according to Monday’s statement.

Liu Xuezhi points out the fundamental way to improve imports will depend on the recovery of demand.

Given the weak commodities prices on the international market, it will be difficult to see an obvious rally of imports in the near future, Liu said, stressing the urgency to deepen reform and seek internal growth.

ABN Amro unmoved

by Qingdao probe

HK domestic helpers to have pay rise

China eases second home mortgage rules

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BN Amro Group NV’s confidence in China is unshaken by the probe into loan fraud at the port of Qingdao and the Dutch lender plans to expand its commodity financing, according to its global commodities head.

The Amsterdam-based bank found nothing irregular after reviewing its lending procedures amid the investigation by the Public Security Bureau into the use of metals by a Chinese trading company as collateral, Jan-Maarten Mulder said in an interview in Singapore. China is the world’s biggest consumer of metals and energy. “Our confidence isn’t shaken at all,” said Mulder, who headed Trafigura Beheer BV’s corporate finance and treasury. “Probably in the long run, this will take out some of the banks that are less specialized.”

ABN Amro is expanding commodity lending in China amid speculation the Qingdao probe will accelerate the exit of banks from the business. The State Administration of Foreign Exchange said last week it uncovered almost US$10 billion in fraudulent trade nationwide including irregularities at the port.

Bloomberg News

he Hong Kong government announced yesterday that the Minimum Allowable Wage (MAW) for foreign domestic helpers (FDHs) in Hong Kong is to be increased by HK$100 (about US$12.89) to HK$4,110 per month, up by 2.5 percent.

Under the Standard Employment Contract for hiring FDHs, employers are required to provide FDHs with food free of charge or pay them a food allowance in lieu. If employers choose to pay a food allowance to FDHs, the allowance will be increased by HK$44, up 4.8 percent, to not less than HK$964 per month. The new levels of MAW and food allowance will apply to all FDH contracts signed on or after October 1.

A government spokesman said the government reviewed the MAW for FDHs regularly.

“In accordance with the established practice, we have carefully considered Hong Kong’s general economic and labor market situations, as reflected through a basket of economic indicators, including the relevant income movement and price change in this year’s review.”

Xinhua

Xinhua

hina relaxed mortgage rules for second-home buyers yesterday by cutting their interest rates and down payment levels, taking a major step toward rejuvenating flagging growth in the world’s second biggest economy.

Second-home buyers can now get a 30 percent discount on their mortgage rates, a privilege previously limited only to first-home buyers. Down payment levels were also cut to 30 percent from 60 percent to 70 percent China’s property market is suffering its worst downturn in two years, and has become a increasing drag on the economy at a time when it is being buffeted by unsteady foreign and domestic demand.

A cut in mortgage rates is seen by many analysts to be the most potent way to revive a housing sector that saw prices fall for the fourth consecutive month in August.

To support the housing market 40 of 46 regional Chinese governments have already abolished housing investment limits that were originally in place to calm frothy home prices.

Reuters