Macau Business Daily, Oct 10, 2014

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 642 Friday October 10, 2014 Year III

Bearer shares under seige

B

earer shares are under fire. Because they present money laundering opportunities. The Law Reform and International Law Bureau wants to eliminate them. For this, Macau’s commercial code will have to be amended. But not before public and commercial consultation, concluding November 8. At stake is Macau’s perceived financial transparency and international standing, says the Financial Services Bureau PAGE

Not lovin’ it

Golden Week jewellery sales sparkle in Macau Page 4

There’s been a lot of fallout from the tainted meat scandal.

A heavyweight report discovers that McDonald’s has taken the brunt of consumer ire. Profits in mainland China have dropped 38 percent, while other fast food chains have escaped relatively unscathed. Now the company is being forced to revise down its 2014 outlook. Major fast food chains in Macau, Hong Kong and the mainland were affected

Sa Sa’s sales lose shine during National Holiday Page 4

Pachinko operator Niraku said to plan US$100mln in HK IPO Page 7

Page 5

Borrowing bedlam The Basel III-compliant Reg S securities sale by the Bank of China could destabilise borrowing costs in Asia.

Because investors are trying to broaden their capacity in order to join the offer

Page 10

www.macaubusinessdaily.com

3

Plaza Premium taking off There’s more to flying than flying.

Macau International Airport agrees.

And sanctioned the installation of Hong Kong-based Plaza Premium Lounge in August. The service is all about relaxation, convenience and conviviality. The group’s product manager speaks to Business Daily about the concept, services, target group and rationale for Macau

Page 6

Brought to you by

MOP300 million in illegal transactions

HSI - Movers October 9

Name

MOP300 million patacas. That’s how much authorities estimate have been illegally transacted using UnionPay mobile card swipe devices. A police investigation has resulted in 51 arrests, with 12 suspects from Macau

Page 2

%Day

Belle International

4.33

Hong Kong & China Ga

3.42

China Mobile Ltd

3.26

China Resources Land

3.06

AIA Group Ltd

2.92

MTR Corp Ltd

-0.32

Lenovo Group Ltd

-0.34

Tencent Holdings Ltd

-0.51

Kunlun Energy Co Ltd

-0.54

Tingyi Cayman Island

-0.72

Source: Bloomberg

I SSN 2226-8294

Brought to you by

2014-10-10

2014-10-11

2014-10-12

24˚ 30˚

25˚ 30˚

25˚ 30˚

2

October 10, 2014

Macau

Shilla, King Power operational at MIA next month South Korean travel retailer Shilla Duty Free joins hands with Hong Kong enterprise King Power to target shoppers at Macau International Airport Stephanie Lai

sw.lai@macaubusinessdaily.com

S

outh Korean travel retailer Shilla Duty Free is to run the duty free retail service in Macau International Airport in tandem with the existing operator, King Power Group, in November. Both will operate under a duty free service concession term for five years.

According to media outlet DFNIonline.com, Shilla Duty Free will run the duty free service at the Macau airport under a joint venture with Hong Kong-based Sky Connection Ltd. Sky Connection Ltd, a subsidiary of Hong Kong-listed conglomerate NWS Holdings Ltd, operates liquor and tobacco duty free shops in Hong

Kong International Airport.

Incumbent duty free retail operator in Macau airport, King Power Group, whose concession expires in November, was also successful in its bid to continue its duty free service for another five years.

Macau International Airport Co Ltd (CAM) launched a 54-day public tender in April to seek two companies for the airport’s duty free service, requiring the winning bidder to invest at least MOP4.48 million (US$560,000). In late July, CAM announced that it had finished assessing the bids.

But when contacted by Business Daily, a spokeswoman from CAM

refused to comment further on the public tender result, stressing that further information could only be disclosed at a later date.

CAM told us that it had yet to sign a contract with both Shilla Duty Free and King Power Group finalising their running of the duty free service at the airport.

Senior executive vice-president of Shilla Duty Free, Jason Cha. is quoted by media outlet DFNI as saying that Macau is one of its “strategic regions” for targeting mainly Chinese customers.

“The duty free shops in Macau are estimated to generate a yearly revenue of around US$160 million,” Mr. Cha confided to the media outlet.

Property management companies advised to release accounts

D

eputy vice director of the Housing Bureau Cheng Sek Lam said yesterday that the new proposed bill on the city’s property management will recommend management companies announce the accounts of buildings to owners so that there is greater transparency for both parties when adjusting management fees.

Mr. Cheng said during the TDM radio show Macau Forum that owners should be clear about the relationships between them - the management company as well as the management committee - while the recommendation in the new bill may provide a clearer picture for building owners, indicating that the management companies are hired and delegated by owners to provide services.

Meanwhile, the head of the Department of Buildings Administration of the Bureau, Vu Chon Va, who also participated in the radio show, said that if residents discover misbehaviour by the management companies or doubt their expenditure on the buildings they can turn to the Housing Bureau, which will follow up on such issues.

The new bill, announced by the government at the beginning of September, involves a licensing scheme for the industry and requires related companies to have minimum amounts of capital. The consultation text of the law indicates that the founding members of the property management companies and the companies themselves will have to obtain licences otherwise their businesses will be deemed illegal.

The public consulting session of the bill will end on November 9.

K.L.

Illegal UnionPay transactions total MOP300 million

T

he volume of illegal transactions employing UnionPay devices in Macau total more than MOP300 million, the Judiciary Police (PJ) have revealed to Portuguese news agency Lusa.

Since the beginning of the year until the end of August more than 40 enquiries were received by the PJ. Of these, 34 were handed to the Public Prosecutor’s Office. The enquiries also resulted in the detention of 51 persons (39 from mainland China and 12 from Macau).

These transactions are considered illegal because they are executed in Macau – outside Mainland China through UnionPay card-swipe devices, resulting in UnionPay International not receiving its commissions.

“The total amount of the transactions of the 34 cases was over MOP300 million.

The money lost by UnionPay International totalled 600,000 patacas”, which accounts for the 0.2 percent, value of the commissions, that the company should have been paid, had

the transactions been legally reported, the PJ explained.

The people detained are suspected of crimes of ‘high value’ and ‘considerable high value’ losses to UnionPay International.

According to the Penal Code, the definition of ‘high value’ involves an amount exceeding MOP30,000, while ‘considerable high value’ refers to more than MOP150,000.

The scheme – which took

place not only in casinos but restaurants and other places close to the gaming areas – was used to breach the legal established limit of 20,000 yuan per day that visitors from China are allowed to bring to the Special Administrative Region. This quantity is considered small in comparison to the bets placed in Macau, the only place in China where gambling is legal.

“With the goal of reaching

a better understanding of such transactions and proceeding with the proper intervention according to the law, the PJ has maintained close contact with UnionPay International and the banks in Macau. For that purpose, the PJ has also communicated frequently with the security departments of casinos. In relation to this matter, the PJ has been especially focused on raising the awareness to

these transactions with the staff of these departments”, the PJ said.

However, the PJ also stressed that “this kind of crime is considered to be semi-public and so it cannot be investigated until there is a denouncement.”

Once these schemes were discovered, a letter from the Monetary Authority of Macau, accessed by Lusa, confirmed that the regulator ordered all UnionPay swipe devices in casino jewellers to be retired from 1 July on. AMCM also restricted money withdrawals inside these shops.

The restriction on UnionPay swipe-devices has been cited by gaming experts to be one of the reasons for the first fall in five years of gross gaming revenue (GGR) registered since June.

GGR has been shrinking for four months in a row now, with September registering the largest fall (11.7 percent) following falls of 3.7 percent, 3.6 percent and 6.1 percent in June, July and August, respectively.

Lusa

3

October 10, 2014

Macau

Macau seeks to eliminate bearer shares The Law Reform and International Law Bureau fears it’ll be unable to meet the requirements of the Organization for Economic Cooperation and Development Joanne Kuai

joannekuai@macaubusinessdaily.com

A

new bill for the complete abolishment of bearer shares will undergo a round of consultation in the coming month, say the Law Reform and International Law Bureau (DSRJDI) and the Financial Services Bureau (DSF).

At a press conference announcing the public consultation on the bill which requires amendment of the existing Commercial Code, the vice director of the Bureau, Chou Kam Chon, also pointed out that there would be a clearer definition of ‘long-term operation’ of companies so that the companies would be subject to registry law, hence the registrar would be able to better monitor the activities of their businesses in Macau.

These acts are a part of the preparation for the third phase review by the Organization for Economic Cooperation and Development (OECD) Forum on Transparency and Exchange of Information for Tax Purposes, of which Macau is a member.

Chou Kam Chon said Macau had passed the first phase review in October 2011. And between March and September 2013, the territory underwent a second phase of review, the result of which showed it “mostly complied

with the standard but still needs to be improved.”

“The SAR will have to make the revision of the legislation as soon as possible. Otherwise, in the third phase review in 2016, Macau is very like to fail the test based on the current situation,” said Mr. Chou. “Successfully passing the review is very important to the SAR. If we fail, it would hurt Macau’s image as a city that is always in compliance with international standards. It would also create a really negative impact on Macau’s economy. Foreign investment would stop coming to Macau or transfer to elsewhere.”

Under the current Commercial Code, it is open to public companies to issue bearer shares.

Bearer shares are a type of freely transferable securities that enjoy the advantages of simplicity and rapid transmission, cost saving and high level of privacy, whereas for registered or conventional shares, the name of the owner is included and will also be entered in the shareholder’s company register.

As at last August, some 113 companies were able under their incorporation documents to issue bearer shares and registered shares at the same time; 12 companies are known to the commercial

registrar as having issued bearer shares only.

The vice director of the Financial Service Bureau, Iong Kong Leong, said that these companies comprise sectors such as transport, logistics, finance and real estate.

The OECD’ s concerns lie in the fact that while the SAR Government said that only a limited number of such shares are known to be in circulation for the time being, there are insufficient mechanisms in place to ensure the availability of ownership information in all circumstances.

‘Macau should ensure that robust mechanisms are in place to identify the owners of bearer shares or should abolish bearer shares,’ it was said in the peer reviews of the Global Forum on Transparency and Exchange of Information for Tax Purposes - Phase Two: Implementation of the Standard in Practice.

Although in the consultation paper the SAR Government has listed the other two approaches using the book entry system or identify the owners of bearer shares through self-regulation, the authorities intend to go all the way to completely abolish bearer shares.

“Bearer shares are not a common

form of ownership in Macau. We expect the abolishment of bearer shares won’t have a negative impact on Macau’s general economy,” remarked Iong Kong Leong.

However, professor Shui Bing at the Faculty of Law at the University of Macau remained skeptical of the effectiveness of the measure on tackling money laundering.

“Nowadays, exchanging shares is not a common practice in money laundering any more. Macau’s market size is limited.

There’s also a rare chance where you do business with strangers. Abolishing bearer shares will cost in shares transfer.

The bill may have its meaning but it awaits to be tested,” said Mr. Shui.

The consultation period ends on November 8. The Law Reform and International Law Bureau as well as the Financial Services Bureau will collect opinions from the pubic and the industry, including the 125 companies that are known to be able to issue bearer shares.

Chou Kam Chon said that they would finish the report on this issue within 180 days once the consultation is concluded. The legislative process will depend on the studies and conclusions of the consultation.

4

October 10, 2014

Macau

Sa Sa’s Golden Week sales lose shine The Hong Kong-listed cosmetics retailer attributed Hong Kong’s ongoing demonstrations to having affected its sales for the National Day holiday Stephanie Lai

sw.lai@macaubusinessdaily.com

C

osmetics retailer Sa Sa International Holdings Ltd has blamed the pro-democracy Occupy Central movement as the overriding factor eclipsing its retail sales for National Day Golden Week, as its same store sales in Hong Kong and Macau declined by 3 percent year-on-year for the 7-day holiday of mainland Chinese visitors.

For Golden Week, spanning October 1 to 7, Sa Sa’s retail sales in Hong Kong and Macau recorded a slight decline of 1 percent year-onyear, which is lower than the company’s expectations, it

told the Hong Kong Stock Exchange after trading hours on Wednesday regarding its preliminary figures.

Sa Sa currently runs over 100 stores in Hong Kong and Macau, of which they operate eight stores here.

While not listing a breakdown of sales in Hong Kong and Macau, Sa Sa noted in the filing that the recent Occupy Central demonstrations in Hong Kong had impacted its outlets in the prime tourist districts of Central, Causeway Bay, Mong Kok and Tsim Sha Tsui, where ‘significant decline’ was recorded for these outlets’ overall sales.

In the Wednesday filing, Sa Sa’s chairman and chief executive officer Simon Kwok Siu Ming also noted a drop in spending by mainland Chinese tourists in the cosmetics outlets.

“During the period [National Day Golden Week] sales to mainland Chinese tourists remained unchanged as the number of transactions attributable to them increased by over 10 percent and was offset by a drop in their average spending,” Mr. Kwok noted in the filing.

Another facet demonstrating the National Day sales decline was that Sa Sa saw sales to Hong Kong customers drop about 6 percent, which again the company attributed to the decrease in traffic during demonstrations in Hong Kong.

Golden Week jewellery sales sparkle in Macau The Occupy Central movement in Hong Kong may have scared some Chinese tourists away, leading retail sales in the city to drop, but it did not affect Macau’s retail sales. Jewellery retailer Chao Sang Sang, which has stores in both Macau and Hong Kong, is an example Kam Leong

kamleong@macaubusinessdaily.com

T

he sales of local jewellery stores during National Day Golden Week were probably not affected by the pro-democracy Occupy Central movement in Hong Kong, which severely affected Hong Kong’s sales. On the contrary, retailer Chow Sang Sang Holdings International Ltd recorded a 10 percent increase in its sales in Macau.

Local retailer Seng Fung Jewellery also claimed that its sales had met expectations, although it served fewer high-end consumers.

Chow Sang Sang Holdings International Ltd. saw sales in its five jewellery stores in Macau rise more than 10 percent during National Day Golden Week, with more than 90 percent of customers hailing from the mainland.

“Shoppers in Macau were more willing to spend compared to those in Hong Kong,” Dennis Lau, director of sales operations for Chow Sang Sang Jewellery Group, said yesterday.

“Our Macau sales increase may be partly due to tourists avoiding Hong Kong amid the protests.”

Meanwhile, the executive director of the Group, Winston Chow Wun Sing, claimed yesterday that the sales of his stores in Macau were boosted by the growth of tourists in the city over the holiday, despite sales in Hong Kong being affected by the Occupy Central movement. Its sales in Hong Kong declined some 6 to 8 percent during the period, according to several Hong Kong Chinese news outlets yesterday.

On the other hand, the general manager of local jewellery company Seng Fun Jewellery, Lee Koi Ian, told Business Daily yesterday in a phone interview that the company also saw the flow of customers increase during the holiday, compared to the same period last year.

“High-end consumers, however, decreased by single digits,” Mr. Lei said, conceding that this may partly be due to the anti-graft campaign of the China government, which started to affect high-end business from the beginning of the year.

Meanwhile, the sales of the company’s mass market, according to Mr. Lei, remained flat, compared to last National Day Golden Week; he did not share figures but claimed the company’s performance met expectations.

Business Daily also contacted the Luk Fook Group, which operates jewellery stores in both Macau and Hong Kong. The Group declined to comment on Golden Week sales, saying the information will be released sometime next week.

Occupy Central diverting more tourists to Macau During Golden Week, more than 845,000 mainland tourists entered the territory of Macau, a year-onyear hike of 17 percent. Tourist volumes for Hong Kong during the same period, however, increased by 6.8 percent only compared with an 18 percent jump last year.

“Occupy Central has boosted the retail market and brought more mainland Chinese to Macau,” said Lei Kuok Keong, who plans casino trips for high-rollers and is also vice chairman of local gaming union Forefront of Macau Gaming. “Some Hong Kong people who wanted to avoid the protests also came to Macau.

That helped boost the visitor numbers to casinos”.

On Monday, a survey conducted by the Hong Kong Retail Management

Association among its members revealed that the drop in retail sales in Hong Kong during National Day Golden Week ranged from 15 percent to over 50 percent, ‘in which Watches & Jewellery, Fashion & Accessories and Catering sectors registered the largest drop,’ the Association wrote, saying most of their member companies recorded a mid doubledigit drop in retail sales compared to the same period of last year. with Bloomberg

5

October 10, 2014

Macau

McDonald’s meals not so happy McDonald’s has been forced to revise down its 2014 outlook after profits declined 38 percent in China. Investors are expecting McDonald’s sales to suffer even further as the majority of people associate the US chain with tainted meat supplier Husi, a Citi report finds Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

I

f there were any doubts that the rotten meat scandal that affected major fast food chains in Hong Kong, Macau and mainland China was going to have a much larger cost than solely reputation, the latest figures coming from the market dispels them.

Yum! Brands - which owns KFC, Taco Bell and Pizza Hut - confirmed this week a blow to sales in the third quarter, admitting a scenario “far worse than we’d imagined” in the Chinese market. Investors, however, are predicting an even tougher time for McDonald’s, its main competitor.

The problem for the world’s largest fast food company is that consumers in China associate the rotten meat scandal more with McDonald’s than any of its competitors, a recent Citi Research finds.

The scandal erupted on July 20, when a report from a Chinese TV news broadcast

exposed improper food handling practices and changes to sell-by dates on chicken and beef sold by Shanghai Husi Food, a supplier for the largest international food chains in China, namely McDonald’s and KFC. Yum! Brands wrote this week in its third quarter results report sent to the US financial regulator that ‘this triggered extensive news coverage in China that has shaken consumer confidence and impacted brand usage’.

The drop in sales in China forced Yum! Brands to revise down its 2014 outlook and expected earnings growth from 12 percent to some 6-10 percent. “The recent supplier incident in China has significantly impacted China sales, leading us to reduce our full-year EPS outlook”, David C. Novak, Chairman and CEO, said in the report.

The impact was huge, especially as Yum! Brands

Business Daily Half Page Ad Gala Night October 5th outlines.indd 1

makes 35 percent of its worldwide profits in the Chinese market. In Mainland China, Hong Kong and Macau, KFC sales declined 14 percent, while Pizza Hut dropped 11 percent in the third quarter year-on-year. Operating profit shrunk by 38 percent and restaurant margin by more than a quarter to 14.9 percent. The figures were “far worse” than the KFC owner

anticipated. The headwinds of the Husi scandal are likely to continue. According to the US company, these kinds of scandal take from 6 to 9 months to be erased from the public consciousness.

But if Yum! Brands suffered a big blow, McDonald’s has even bigger problems.

According to Citi Research, McDonald’s is suffering the most, as consumers associate

the company more with the rotten meat scandal than its competitors. Citi’s survey found that 92 percent of people link the scandal directly to McDonald’s versus 82 percent to KFC. In the same report, 90 percent admitted going once a month to McDonalds prior to ‘Husigate’, a number that dropped to 67 percent in August and 74 percent in September.

KFC, on the other hand, saw once-a-month visitors decline from 93 to 71 percent, prior to and following the scandal.

With final numbers for the third quarter yet to be released for the Chinese market, McDonald’s has already felt a glimmer of the punch that‘s coming. Its Japanese unit also affected by the scandal released a statement this week announcing it expects a net loss of US$157 million this year due to ‘Husigate’ and sales to drop by 15 percent. In China, the fall could be much larger.

10/6/2014 1:05:15 PM

6

October 10, 2014

Macau Brought to you by

HOSPITALITY Squeezing added value Since 2008-2009, when travel agencies were hit by the economic turbulence, both their numbers and effectives have been growing steadily. By the end of 2013, the survey for this sector accounted for 211 active establishments, which engaged 3,885 workers in their ranks.

Last year alone saw the creation of 14 new firms. Interestingly enough, though, their average size, as measured in terms of workers, declined noticeably relative to the previous years. The average size of companies created in 2011 and 2012 was over 38 and 26 workers, respectively; last year that number dropped to 15 workers per company, apparently reversing the consolidation of the sector that appeared to be under way earlier on.

Although deemed a labour intensive sector, the amount of wages per se represented, in the period observed here, less than 10 percent of the sector’s total revenue. Since 2009, the average wage went up by 25.8 percent, about 5 percentage points below the corresponding growth in total revenues. But that hides the fact that in 2010 there was a significant drop in the share of wages, which stood then at less than 7.8 percent of the revenues. That share has been rising and has now almost returned to 2009 levels. The share of Gross Added Value followed a similar trend, which could be expected as wages represent usually twothirds or more of that value.

The acquisition of goods and services, including commissions paid, stands out as the biggest slice of the total operating costs.

In the last two years, they amounted to slightly over 77 percent of revenue, a figure that was, nonetheless, noticeably lower, between 2 and 5 percentage points, than in all the other years shown.

MOP221,881 gross added value per worker, 2013

Expanding market attracts Plaza Premium Lounge As the travel and tourism markets expand in Macau, more investors seek to explore new opportunities.

Plaza Premium Lounge installed a private lounge in Macau International Airport in August with the objective of replacing stressful flights with a stimulating experience João Santos Filipe

jsfilipe@macaubusinessdaily.com

S

ince August, Hong Kong-based Plaza Premium Lounge has been supplying independent lounge services in Macau International Airport. The goal of the company is to provide a seamless travel experience for passengers by offering exclusive services, relaxing moments in the airport lounges and even VIP privacy, while their clients wait to embark.

“This is a concept we founded some 16 years ago out of a need of our founder, Mr. Song Hoi See. He observed this need while travelling through Asia for working”, João Soeiro, Product Manager of the group, told Business Daily. “Plaza Premium Lounge is the world’s first Independent Airport Lounge, making Premium Airport Lounge facilities available to everyone”, he added.

The first lounges by the company opened in Hong Kong International Airport and Kuala Lumpur International Airport in 1998. Now the company has 110 venues in over 28 airports from Canada to Australia.

In Macau, the expanding travel and tourism industries were the main attractions.

“The Macau travel and tourism industry contributed over 80 percent GDP in 2013 and is expected to grow by 7.2 percent in 2014. We can see huge growth in the aviation market in Macau. Given our experience in specialising in Airport premium services, we believe that the airport experience can be greatly enhanced for both business and economy class passengers”, Mr. Soeiro replied when asked about the reasons for the company setting up in Macau International Airport.

The fact that such a service is available locally is for the company also a reason that will encourage people to fly via the Special Administrative Region, attracting more visitors to the territory.

“When you have a brand promising seamless travel, taking care of your every need at the airport, providing you with a place to rest, possibly in private, enjoy top notch food and drink, then this is a great incentive to fly via Macau International Airport”, the Product Manager of Plaza Premium Lounge said. “We firmly believe your airport experience starts the moment you walk out of the door and into the airport – we’re there to ensure it’s first-rate”, he said of the philosophy behind the company.

Taste of Macau The company manage a variety of independent lounges but they tend to have a distinct identity that is related to the region they serve.

“Whenever travellers see Plaza Premium Lounge in the world, they know that they will be in good hands at the airport. However, to give a sense of place and a nod to the country we are in, we introduce local elements related to the design, food and beverage offerings and service”, he said. “For example, in Macau we offer signature Portuguese tarts, have this beautiful Portuguese egg custard sago dessert and also other Portuguese dishes on our menu”.

The lounge in Macau currently has a 130-seat capacity, although facilities will be expanded at the end

of the year, at which time passengers will have the opportunity to check in at an independent desk.

“We’ll launch a lounge extension double the size of the existing lounge, and we will extend the number of private rooms, and launch Asia’s first landside-in airside-out lounge, so that our guests can check in through an independent desk, entering our lounge from landside and exiting through airside”, he revealed to Business Daily.

Greater China dominance Not surprisingly, in Macau the majority of customers are from Greater China flights. Although the offer focuses on premium services the company welcomes all kinds of customer.

“Given our concept, everyone is our guest. In Macau International Airport the flights are predominantly from the Greater China region as well as a growing number of East Asian guests”, Soeiro said.

However, Plaza Premium Lounge is not operating alone. The company has built partnerships with other companies operating in the travel and tourism industry.

“We have partnerships with a range of banks/credit cards, who want to give their guests a differentiated airport experience – this is attention to detail. We also work very closely with the leading hotel groups and travel agents, as it is our mandate to work hand-in-hand together with the industry to elevate the travel experience in the airport”, he concluded.

7

October 10, 2014

Gaming

Bankrupt casinos becoming an option for alternative investments Canada’s biggest manager of alternatives to stocks and bonds, Brookfield, made its latest commitment this month to the bankrupt Revel casino and hotel in Atlantic City and is planning a new US$3 billion global buyout fund

B

rookfield Asset Management, Canada’s biggest manager of alternatives to stocks and bonds, is seeking a global private-equity fund three times the size of its last pool, said two people with knowledge of the matter.

The firm is targeting US$3 billion for Brookfield Capital Partners Fund IV LP, after its US$1 billion predecessor, raised in 2011, beat peers, said the people, who asked not to be identified because the information is private.

The assets in the new fund could reach US$5 billion when including investments made alongside the fund in deals, compared with US$3 billion for the prior pool, said one of the people.

Fund IV will make medium to large investments across the globe, a broader mandate than the prior pool that focused on underperforming or distressed mid-size North American companies, the person said. Brookfield, which manages about US$200 billion and is based in Toronto, is moving away from using its balance sheet to invest in private equity in favour of pooled funds.

Revel appeal “In the future the whole private-equity business we have will probably be conducted through a privateequity fund,” Bruce Flatt, chief executive officer, said in

February during an earnings call with analysts.

Brookfield’s privateequity team has invested US$9 billion in the past five years, according to the firm.

The prior fund made its last commitment this month to the bankrupt Revel casino and hotel in Atlantic City, New Jersey, the person familiar said. The third fund produced a 23 percent net internal rate of return as of June 30, and the 2006 pool had a 17 percent net IRR, according to an investor presentation on the firm’s website.

Funds raised in 2011 on average returned 16

percent through December 31, and those started in 2006 produced a net IRR of 8.3 percent, according to data compiled by Cambridge Associates LLC. The team operates in North America, Europe, Brazil, Australia and India.

It is focusing more on opportunities outside of North America, where the economic recovery has driven deal prices higher, according to the presentation.

Property, infrastructure Brookfield has been increasing the size of its fund

offerings focused on property and infrastructure and power as well as private equity.

The firm’s latest property fund was more than eight times the size of the prior pool, and the most recent infrastructure and power vehicle was seven times bigger than its predecessor.

Their successor offerings are likely to reach at least US$7.5 billion and US$10 billion, respectively, according to an investor presentation on the firm’s website.

The next private-equity fund will make large investments similar to the one Brookfield made in

Pachinko operator Niraku purportedly planning US$100 mln HK IPO Niraku is the first foreign company to be listed in the Hong Kong Stock Exchange since December. The pachinko operator is seeking US$100 million from the share sale

N

iraku, a Japanese operator of pachinko parlors, is preparing what would be Hong Kong’s first initial public offering by a foreign company since December last year, people with knowledge of the matter said.

The company, based in northeastern Japan’s Koriyama city, plans to seek about US$100 million from the share sale in the first half of 2015, said the people, who asked not to be identified as the information is private. Niraku has yet to appoint investment banks or apply to the Hong Kong stock exchange for permission to list, they said.

Niraku seeks to repeat the success of Dynam Japan Holdings Co. in selling shares in Hong Kong, where some of the world’s biggest casino

Energy Future Holdings Corp., according to the person familiar. The firm has accumulated debt over the past few years in the bankrupt utility company, Flatt said during a secondquarter earnings call in August.

“We believe that EFH is a good company that had a very bad capital structure, and this is a situation that is similar to many of the restructurings that we have been involved in the past where fundamental business is very sound, but the balance sheet is burdened,” he said.

Bloomberg

operators are traded. Dynam, a Tokyo-based pachinko operator, has surged 47 percent in Hong Kong trading since an August 2012 IPO that raised US$202 million, data compiled by Bloomberg show.

No foreign companies have conducted first-time share sales in Hong Kong this year, according to the data. The last to list in the city were Singapore’s Kingbo Strike Ltd. and Japan’s Econtext Asia Ltd., which completed IPOs in December that raised a combined US$77 million, the data show.

Pachinko games are a hybrid of pinball and slot machines, which have skirted a nationwide gambling ban to become an industry that takes in bets of 19 trillion yen (US$175 billion), according to the Japan Productivity Center.

Niraku, founded in 1950, operates 54 pachinko parlors in Tokyo and surrounding areas, as well as the northeastern prefectures of Fukushima and Miyagi, according to its website. A spokesman for Niraku declined to comment.

The company’s sales for the year ended March fell 2.2 percent to 235.4 billion yen, after rising 15 percent over the previous two years. Its home prefecture of Fukushima was hit by an earthquake and tsunami in March 2011.

Bloomberg

8

October 10, 2014

Gaming

Bad bet Judge rules that Phil Ivey, a 10-time winner of the World Series of Poker tournament, did cheat to win US$12.4 million from a London casino run

by Genting, Southeast Asia’s biggest gambling operator

P

rofessional poker player Phil Ivey’s use of edge sorting to win 7.7 million pounds (US$12.4 million) at a form of Baccarat was tantamount to cheating, a London judge ruled today.

Judge John Mitting, who said Ivey was an honest witness, ruled against the 38-year-old gambler’s bid to recoup money a Genting casino had withheld. While he might not have realized it was cheating, Mitting said Ivey and a companion influenced a croupier to deal the cards in certain ways.

Ivey, a 10-time winner of the World Series of Poker tournament, won the money playing Punto Banco at Genting’s Crockfords casino in London. He argued that edge sorting was a legitimate tactic to gain an advantage over the casino.

“He gave himself an advantage which the game precludes,” Mitting said yesterday following a weeklong trial. “This is in my view cheating.”

Genting is Southeast Asia’s largest casino operator with a market capitalization

of about US$35 billion, according to data compiled

by Bloomberg. Last year it bought a Las Vegas site, once home to the Stardust resort, for US$350 million.

“We attach the greatest importance to our exemplary reputation for fair, honest and professional conduct and today’s ruling vindicates the steps we have taken in this matter,” Crockfords said in an e-mailed statement after the verdict.

He gave himself an advantage which the game precludes…

This is in my view cheating Judge John Mitting

2012 game Both sides agreed at trial that Ivey was in the casino in August 2012 and that he won the money. “The issue is whether it amounted to cheating,” Christopher Pymont, Genting’s lawyer, said in documents filed at London’s High Court.

Edge sorting is a way a card player can gain an advantage by working out the value of a card by spotting flaws or particular patterns on the back of some cards.

Ivey and a companion unfairly influenced a croupier to move and deal the cards

Phil Ivey

in certain ways without her knowing what she was doing, the judge said.

Ivey cheated “by using the croupier as his innocent agent or tool,” Mitting said.

Ivey has career earnings of more than $21 million from live tournaments alone, according to his website. The judge described him as one of the “world’s finest poker players.”

Ivey describes himself as an “advantage player,” someone who is highly skilled at trying to tip the odds in his favor.

“It is not in my nature to cheat,” Ivey said through a spokesman after today’s ruling. “I believe what we did was nothing more than exploit Crockford’s failures. Clearly the judge did not agree.”

Judge Mitting turned down Ivey’s permission to appeal his verdict.

Bloomberg

9

October 10, 2014

Greater China Suspects emerge over HK leader pay-out Lawmakers yesterday demanded an investigation into a US$6.4 million business pay-out to Hong Kong’s embattled leader Leung Chun-ying, as political fallout grew from massive student-led protests in the Chinese-controlled city.

Australia’s Fairfax Media reported this week that engineering firm UGL Ltd paid Leung a total of more than US$6 million in 2012 and 2013 in relation to its acquisition of DTZ Holdings, a property consultant that employed Leung as its Asia Pacific director before he took office in July 2012. Leung’s office denied any wrongdoing.

TPP incomplete without China, says official China’s Vice Finance Minister Zhu Guangyao said that a Trans-Pacific Partnership (TPP) agreement is incomplete without China, as China has been aware that the United States would like to keep the TPP closed to its current members. “For the TPP, frankly speaking, there have been internal debates within both the United States and the Chinese government. But now our position is clear. As China becomes more open, it’s very important for us to be integrated into the global trade system with a high standard,” Zhu said here at the Peterson Institute of International Economics in Washington D.C.

Guangzhou Party ex-chief expelled from CPC Former Guangzhou Party chief Wan Qingliang was expelled from the Communist Party of China (CPC) and removed from his public post, according to the CPC Central Commission for Discipline Inspection (CCDI) yesterday. His case will be transferred to judicial departments; his stripped membership will be confirmed in the upcoming plenary session of the CPC Central Committee, according to a CCDI statement.

Investigations show that Wan sought profits for others by taking advantage of his post, demanding and accepting huge bribes. He also frequented highend private clubs, which opposes the CPC’s eight-point rules against extravagance and graft.

Spence supports anti-graft campaign

China’s massive anti-corruption campaign will affect economy for a short term, but is crucial to maintaining growth in the long run, Michael Spence, a Nobel Prize winner on economics said. The anti-corruption campaign has essentially displaced some reform agenda for a short run and caused the bureaucracy “frozen,” said Spence at a seminar titled “Challenges of Job-Rich and Inclusive Growth” held by the International Monetary Fund (IMF). He believed there are three reasons for China to pursue the anti-corruption campaign “aggressively.” Spence said real estate posts the biggest risk for the Chinese economy right now.

Plans to ease capital controls outlined Chinese nationals will be able to buy equities and real estate via a Qualified Domestic Retail Investor scheme

C

hina outlined plans to allow its citizens invest in overseas stocks and property as well as let the nation’s companies sell yuan-denominated shares abroad, furthering efforts to internationalize its currency.

Chinese nationals will be able to buy equities and real estate via a Qualified Domestic Retail Investor scheme, Wang Dan, a deputy director general at the central bank, said today at a conference in Beijing.

There are also talks under way to give locals access to yuan capital markets in Singapore and London, she said, without giving any start dates or sizes for the programs. Agricultural Bank of China Co. announced plans today to become the first company to offer yuan-denominated Global Depository Receipts in London.

China, which is also scheduled to start an exchange link between Hong Kong and Shanghai this month, is seeking to give its citizens more investment channels amid a slumping property market and increased risks from local wealthmanagement products. The world’s second-largest economy is also trying to promote use of the yuan, which ranked seventh for global payments in August from 12th a year earlier.

“China is planning another step in capital account opening, this time for outflows,” Dariusz Kowalczyk,

There are talks under way to give locals access to yuan capital markets in Singapore (pictured) and London

Hong Kong- based strategist at Credit Agricole CIB, wrote today.

“This will limit upside for the yuan.”

Train QDRI was the name used for a program known as the through train, announced in August 2007 and then later abandoned, that would have allowed Chinese nationals to buy Hong Kong stocks directly.

The People’s Bank of China said in January 2013 it had started preparations for a trial expansion of the Qualified Domestic Individual Investor program to enable some

individuals to invest in capital markets abroad.

Agricultural Bank of China, the nation’s third-largest lender, has set up a team to work with securities firms in preparing depositary receipts that will be listed on the London Stock Exchange, Li Zhenjiang, an executive vice president, said today at the conference in Beijing.

“This is conducive to accelerating the internationalization of the yuan” Li said. “It will help the Chinese capital markets to further open up, and better connect with the markets of the advanced economies.”

Bloomberg News

U.S. regulators approve shipping pact The China Shippers’ Association, which represents exporters and cargo owners, lobbied against the earlier so-called P3 alliance between Maersk, MSC and CMA CGM Keith Wallis

M

aersk Line and Mediterranean Shipping Co (MSC), the world’s two largest container shippers, won approval from U.S. maritime regulators on Wednesday for a planned vessel sharing pact.

The so-called 2M alliance would see the two carriers pool 185 ships on European, transatlantic and transpacific services, which Maersk Line says would save it US$350 million a year in costs.

The proposal follows the rejection in June of a larger planned venture involving Maersk, MSC and France’s CMA CGM by China’s Ministry of Commerce on competition grounds.

The tie-up won U.S. approval after four out of five commissioners at the Federal Maritime Commission (FMC) voted not to seek further information from the two shippers about the impact of the alliance on exporters and ports.

The approval will come into force on Saturday, Richard Lidinsky Jr, Federal Maritime Commission commissioner, told Reuters.

The two shippers still need to win over regulators in Europe and China before the pact can be launched.

Lidinsky, who voted against giving the alliance the green light, said in a statement there were many unanswered questions about the tieup, including the nature of the dayto-day Maersk-MSC relationship.

He believed the commission, whose role includes preventing uncompetitive behaviour, should establish a vigorous monitoring system for the alliance.

The Maersk-MSC pact would have the largest market share of all main shipping alliances on key trade routes, with 35 percent of the Asia-Europe route, 31 percent of transatlantic trade and 22 percent of transpacific, according to FMC figures.

Maersk chief executive Soren Skou met Chinese commerce and transport officials last month to discuss the 2M alliance, which it has said previously it hoped to start as early as January next year.

The China Shippers’ Association, which represents exporters and cargo owners, lobbied against the earlier so-called P3 alliance between Maersk, MSC and CMA CGM. Association head, Cai Jiaxiang,

said at the time he was concerned that Chinese shippers would be squeezed out of the market, despite China being the world’s largest container cargo import and export country.

Maersk and MSC began talking about the smaller tie-up in July, soon after China’s decision to block P3 which had previously been approved by the FMC and European Union.

Executives from Maersk and MSC, including Anders Boenaers, Maersk vice president of operations for the Far East, met FMC commissioners and officials on Sept. 13, to discuss the proposed 2M alliance.

Container shipping lines have been seeking to pool resources in response to overcapacity and low freight rates that have beset the shipping industry since the financial downtown in 2008.

CMA CGM, United Arab Shipping Co (UASC) and China Shipping Container Lines (CSCL) have announced plans to form a vessel and space sharing agreement called Ocean Three (O3) covering the AsiaEurope, transpacific and transatlantic trades, although they have still to seek regulatory approval from the FMC. Reuters

10

October 10, 2014

Greater China

Bank of China Tier 1 sale may raise costs The planned transaction may raise Bank of China’s Tier 1 ratio to 10.12 percent from 9.7 percent, according to the preliminary offering circular

I’m concerned about oversupply of Chinese bank capital paper in the short run. We have to use careful analysis and look at the relative value Ken Hu, Invesco Ltd

B

ank of China Ltd.’s sale of as much as US$6.5 billion in offshore preference securities may push up high-yield borrowing costs in Asia as investors sell to make room in their portfolios for the deal, Morgan Stanley says.

Bank of China hired nine banks for its Basel IIIcompliant Reg S issue, which will count as additional Tier 1 capital, and plans to meet with investors in Asia and Europe from tomorrow, people familiar said. Meetings finish October 14 and the sale could come as early as next week, the people said, asking not to be identified because the matter is private.

Reg S transactions can’t be

marketed or sold to investors in the U.S. Almost 40 percent of investors would sell other Chinese non-investment grade bonds to buy Tier 1 bank capital securities from the world’s second-largest economy if they offer a similar yield, a Morgan Stanley survey by analysts Desmond Lee and Kelvin Pang found. Average rates for speculative-grade debt in Asia climbed to 7.26 percent yesterday, the highest since May 27, JPMorgan Chase & Co. indexes show.

High-yield bonds Bank of China, the nation’s fourth-largest by

market value, has regulatory approval to issue as much as 40 billion yuan (US$6.5 billion) of offshore preference shares, according to a preliminary offering circular dated October 8 and obtained

by Bloomberg News. Chinese companies have sold some US$8.8 billion of high-yield Reg S dollar-denominated securities this year, data compiled by Bloomberg show.

The yield on Bank of China’s US$2.5 billion of 5.55 percent 2020 notes sold in February 2010 has risen 12 basis points to 3.715 percent since mid August, when news of its planned transaction was first reported. The yield touched 3.989 percent on September 30.

Bank of China’s new securities are expected to be rated Ba2 by Moody’s Investors Service and BBby Standard & Poor’s. That’s seven levels below the ratings companies’ issuer grades for Bank of China of A1 and A. The lower credit score is because the securities can be converted into Bank of China’s Hong Kong-listed shares at HK$3.44 (US$0.44) apiece if the lender’s common equity Tier 1 capital adequacy ratio falls to 5.125 percent or below.

Fair value Morgan Stanley’s survey, dated October 5 and conducted during September,

indicated respondents viewed the fair value for new additional Tier 1 securities from China’s biggest banks at about 7.16 percent.

“Investors, on average, would turn overweight if yields reached 7.69 percent and underweight if yields fell to 6.29 percent,” according to the study.

Beijing-based Bank of China said in August it more than doubled the amount set aside for bad loans as profit growth cooled to the slowest pace in five quarters amid a weaker economic expansion.

Its capital adequacy ratio, a measure of financial strength, was 11.8 percent, down from 12.5 percent in December.

Bloomberg News

China solar demand in doubt In the first nine months of the year less than two GWs of distributed solar has been built

C

hina has only completed a quarter of its rooftop solar installation target for this year, industry sources say, raising further concerns about the growth potential of domestic solar panel manufacturers

in the world’s largest solar market.

Early this year, China set a goal of building about 14 gigawatts (GW) of solar generating projects in 2014 - close to Finland’s entire power capacity. Of that, it expects 8 GWs to

Rooftop solar water heaters are ubiquitous in modern China

be so-called distributed solar, which includes rooftop panels and other small installations.

“It will definitely miss the distributed solar target, which is way too ambitious,” said Glenn Gu, former solar analyst with IHS in Shanghai and now an independent consultant.

The aim of distributed solar is to redress an imbalance caused by a glut of large solar farms in China’s vast western region, where there is plenty of sunshine but not enough infrastructure to harness and transmit the power to the densely populated south and east. Over 80 percent of China’s some 26 GWs of existing solar projects are solar farms.

Beijing has pinned high hopes on distributed generation, which turns power users into producers, to drive more sustainable demand for solar.

But analysts have said distributed solar faces a series of challenges from insufficient subsidies and bank support to difficulties in acquiring rooftop rights

as well as a lack of creditworthiness among industrial users.

Unless Beijing takes concrete measures to address these concerns, industry analysts say the growth potential for Chinese solar panel manufacturers at home will be limited, forcing them to focus more on overseas markets.

Competition is stiff in China’s solar panel market, which is expected to account for a quarter of global demand this year. This is due to oversupply, partly caused by the reluctance of local governments to allow inefficient plants to fail.

Major Chinese solar panel makers like Trina Solar, JinkoSolar and ReneSola have already been boosting exports. They have set up plants overseas to circumvent U.S. and EU anti-dumping tariffs or quotas on Chinese solar products, and where they can get higher margins than at home.

Reuters

11

October 10, 2014

Asia

Australian employment slips The unemployment rate ticked up to 6.1 percent from a revised 6.0 percent

A

ustralian employment reportedly fell in September while the jobless rate ticked higher, but such were the doubts over the reliability of the figures that analysts and financial markets chose to discount the apparently soft outcome.

The Australian Bureau of Statistics (ABS) estimated a net 29,700 jobs were lost in September, with all the fall in part-time work as full-time jobs rose 21,600.

However, the ABS has had to restate all the figures since July because of problems with its seasonal adjustment process. Instead, it is now reporting the raw, unadjusted series which makes it harder to judge the true state of the labour market.

August’s record rise in employment of 121,000 was restated to show an increase of 32,100, while July’s shock spike in unemployment to 6.4 percent was also revised away and is now shown as 6.0 percent.

“I’m ignoring the employment numbers for a few months until we find out how exactly they’re going to be measured,” said David de Garis, a senior economist at National Australia Bank, echoing the frustration of many analysts.

“Leading indicators of labour demand suggest that we’re going to get some employment growth in the months ahead. Whether that will be sufficient to counter the growth in the workforce from the increase in the population remains to be seen.”

Embarrassing The ABS said that while compiling the September data, it found that the normal seasonal pattern evident from July to September was not apparent, so it had decided to report the raw numbers instead.

The Australian Bureau of Statistics headquarters

It was a highly embarrassing admission from an agency that prides itself on its professionalism. The bureau has suffered stiff budget cuts in recent years and had to cut back on some data collection and streamline its surveys.

Treasurer Joe Hockey on Wednesday acknowledged the agency had insufficient resources to be able to upgrade its computer systems, but said he would not write a “blank cheque” to get things fixed.

Instead, he floated the idea of making users pay for some data.

“That’s one of the things we’ve been actively looking at and I’ll be taking initiatives to cabinet in the next few weeks,” Hockey told reporters in Washington, where he is attending a

meeting of the International Monetary Fund.

Many of the ABS’s releases are closely tracked in financial markets and billions of dollars change hands depending on whether the results beat or miss forecasts.

With the employment numbers under a cloud, analysts have fallen back on other indicators of the labour market such as job ads and business surveys.

These suggest employment is growing moderately at perhaps 1.0 to 1.5 percent a year, just enough to keep up with growth in the workforce but not enough to pull down the unemployment rate.

The RBA itself has said there might not be a sustained fall in unemployment

KEY POINTS Sept employment -29,700, unemployment at 6.1 pct Reliability of data in grave doubt, lessens market impact Government floats idea of making users pay for data until late next year or early 2016. That, in turn, is one reason markets are not pricing in much risk of a rise in rates until very late in 2015.

Reuters

Thailand cuts 2014 GDP growth forecast The Finance Ministry is due to release its new official forecast later this month

T

hailand’s Finance Ministry yesterday cut its 2014 economic growth forecast to 1.7 percent, one-third of what it projected a year ago, due to the country’s still-weak exports and investment.

A series of economic problems, some worsened by months of political unrest, have made the ministry as well as Thailand’s central bank steadily cut forecasts for this year.

One year ago, before political tensions flared, the ministry foresaw gross domestic product (GDP) expanding 5.1 percent.

“Thailand has a problem with exports and subdued private investment,” Rungson Sriworasat, the ministry’s permanent secretary, told reporters yesterday. “That makes us expect GDP growth this year will be only 1.7 percent.”

The ministry’s forecast remains higher than the

The Government palace in Bangkok

latest one from the central bank, for 1.5 percent growth, and well above those of many private economists.

On Wednesday, OCBC in Singapore cut its forecast to 0.0-0.5 percent from 1.5 percent.

This week, the World Bank forecast Thai GDP

growth of 1.5 percent, down from 3 percent earlier.

Sluggish exports Thailand’s exports, which are equivalent to more than 60 percent of the economy, have remained sluggish this year, while investment has

not picked up from slump in late 2013, when political unrest flared up.

The military seized power in May in a bid to restore stability and kick-start the economy, which contracted 0.1 percent in the first half of the year.

There has still been little

investment from the private sector despite getting their projects approved by the investment board, Rungson said.

Last week, Finance Minister Sommai Phasee said the government’s recently announced measures could lift growth this year to 2 percent or higher if exports improved.

Recent data has been disappointing. In August, exports fell the most since the bad flooding in late 2011, factory output slid for a 17th straight month and a central bank index showed consumption and investment were lower - putting pressure on the junta to take more action to jack up growth.

The government said last week it planned to spend 364 billion baht (US$11.2 billion) from this quarter on projects that will create jobs and income, such as repairing schools, hospitals and irrigation systems.

Reuters

12

October 10, 2014

Asia Sime Darby plans bid for palm oil firm Malaysia’s Sime Darby Bhd, the world’s top oil palm planter by land size, said yesterday it would offer 1.073 billion pounds (US$1.74 billion) to buy smaller producer New Britain Palm Oil Ltd (NBPOL). The offer is at an 85 percent premium to the last closing price of NBPOL’s shares, which ended at 7.15 pounds each, Sime Darby said in a stock market filing. The company did not say why it was paying such a steep premium. Sime Darby will use cash and credit to fund the deal, which it expects to finalise by end-December.

Australia keeping close eye on home lending Australia’s regulators are keeping a close eye on bank lending for investment properties as risks are building in the sector, a top central bank official said yesterday.

The Reserve Bank of Australia’s (RBA) head of financial stability, Luci Ellis, said risks were mainly growing in Sydney and Melbourne. The Australian Prudential Regulation Authority, which oversees the banks, is consulting with the RBA on whether it should adopt macroprudential rules aimed to limit the build up of leverage and risk-taking in the banking system as a whole, rather than just at individual banks.

Viet oil tanker released by pirates

Japan machinery orders rise Although economy figures still worry the Government and the Bank of Japan Tetsushi Kajimoto

J

apan’s leading gauge of capital spending rose for a third straight month in August, in a tentative sign firms are investing their profits in plants and equipment that could bolster growth in the world’s thirdlargest economy.

But analysts say the 4.7 percent gain in core machinery orders is not enough to dispel concerns the economy is losing traction even as the Bank of Japan keeps ultra-loose monetary policy and the government stands ready to deploy fresh stimulus.

A sales tax hike that went into effect in April triggered the deepest economic slump in the April-June quarter since the 2008-09 global financial crisis.

The data followed a shocking slump in August factory output and other soft indicators including exports and household spending, complicating the government’s decision by the year-end on whether to proceed with a second sales tax hike next year.

“Today’s data in itself is positive as it confirms steady capital spending,” said yesterday Takeshi Minami, chief

economist at Norinchukin Research Institute.

“But companies remain far from being assured about the outlook. If consumption and factory output

remain sluggish, that could force them to revise down their capital spending plans.”

Minami added that a weak yen was positive to business investments

A panorama of Kawasaky Heavy Industries facilities

Surveys forecast Indian industrial output rising The government will release the output data on Friday Pirates that captured a Vietnamese oil tanker last week after it left Singapore have released the vessel, the company that owns the ship said yesterday.

Two of the tanker’s 18 crew have been injured and the pirates took part of its cargo of more than 5,000 tonnes of gas oil, said Nguyen Vu Diep, a manager at the Haiphong Sea Product Shipbuilding Co. The Sunrise 689 had vanished from radar 40 minutes after leaving Singapore on October 2 when it was bound for Quang Tri province in central Vietnam.

Rio Tinto to eliminate iron ore supply Rio Tinto said falling iron ore prices would lead to the elimination of 125 million tonnes of iron ore supply among higher cost producers in 2014. The world’s second-biggest iron ore miner also said it intends to sell 85 percent of its 2014 iron ore output under term contracts and the rest on the spot market, according to a statement released on the Australian Securities Exchange. The iron ore price ended September with a loss of almost 12 percent, its steepest monthly fall since May. The price has stabilised since and was sitting at US$78.80 yesterday.

Siddharth Iyer

I

ndian industrial output probably bounced in August from a fourmonth low, driven by solid growth in core industries, although a broader economic recovery is likely still some distance away, a Reuters poll found.

Production at factories, mines and utilities likely rose an annual 2.4 percent in August, up from July’s 0.5 percent rise, according to the survey of 26 economists. The consensus reflects optimism about higher production in the electricity, cement, coal and steel industries.

Data last week showed output in eight core industries, which account for more than a third of overall factory production, rose 5.8 percent in August on a year earlier, up from 2.7 percent in July.

But manufacturing output has more catching up to do. Growth there is well below the near 10 percent peak in late 2009 and 2011 - in part due to stubbornly-high inflation and borrowing costs which have led to weak investment and demand.

Prime Minister Modi has injected optimism in Indian economy

“The more important point really is that even if it (factory output) shows a slight pickup...it is still extremely weak and shows a lot more work still needs to done,” said Shilan Shah, economist at Capital Economics.

Private surveys are telling a similar story. Factory activity expanded at its weakest pace in nine months in September as growth in new orders slowed, according to HSBC’s PMI survey of businesses.

“PMIs in the last couple of months have...fallen back and although the relationship isn’t exactly one-to-one, (they) suggest that IP is going to remain very weak,” Shah added.

Prime Minister Modi is yet to launch big-bang reforms needed to propel the economy back to a near double-digit annual growth and bring down stubbornly high inflation. Soaring prices of essential food items have squeezed India’s consumers and in turn, has hurt capital investment.

Reuters

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

13

October 10, 2014

Asia as it helps boost profits at exporters but the effects would depend on how external demand fares from now on.

Prime Minister Shinzo Abe is due to make a decision on the sales tax increase in December, looking at economic indicators in JulySeptember for clues on whether the economy is strong enough to withstand the impact from the higher levy.

The government plans to increase the sales tax rate to 10 percent in October 2015, after having raised it to 8 percent from 5 percent in April.

Cabinet Office data showed core machinery orders, a highly volatile data series regarded as a key gauge of capital spending in six to nine

months, rose 4.7 percent in August from the prior month, much faster than a 0.9 percent gain expected by analysts.

“Machinery orders show a moderate pick-up move,” the Cabinet Office said, upgrading their assessment. Previously, machinery orders were described as seesawing.

The rise followed monthly gains of 3.5 percent in July and 8.8 percent in June, after a record 19.5 percent drop in May. While manufactures’ orders fell 10.8 percent in reaction to a big gain in July, non-manufacturers’ orders rose 10.7 percent, helped by a big order for battery chargers at a leasing sector.

Compared with a year earlier, core orders, which exclude ships and power utilities, fell 3.3 percent in August, versus a 5.1 percent decline seen by economists, it showed.

The Japanese economy shrank an annualised 7.1 percent in the second quarter, the biggest contraction since early 2009, as the April tax hike dealt a heavy blow to consumer demand.

With ex p o r ts a n d p r i v a te consumption both lacking momentum, policymakers hope firms capitalise on higher profits to boost investment and raise wages to generate a virtuous economic cycle and sustain growth in the broader economy.

The Bank of Japan’s key tankan corporate survey showed last week that big firms expect to raise capital expenditure by a more-than-expected 8.6 percent in the current fiscal year to March.

Reuters

National Australia Bank affected by UK charges The hit to earnings surprised some analysts and signalled new Chief Executive Officer Andrew Thorburn, who took the reins on August 1, is taking a tougher line on the struggling UK operations

N

ational Australia Bank Ltd warned yesterday its full-year cash earnings will fall as much as 14 percent due to almost A$1 billion (US$881.4 million) in higher charges from its troubled UK business.

NAB, Australia’s fourth-largest bank by market value, said it would post annual cash earnings of A$5.1 billion to A$5.2 billion, compared with an average estimate of A$6.2 billion from 16 analysts polled by Thomson Reuters and a record cash profit of A$5.9 billion a year earlier.

“The size of the provisions were higher than I expected,” Morningstar analyst David Ellis said.

The provisions related to payment protection insurance and interest rate hedging costs further cloud the prospect of an easy turnaround for the UK business.

The British unit, which includes Yorkshire and Clydesdale bank branches, has been weighing on NAB’s performance, and investors are watching for the bank’s potential exit of its assets there.

Thorburn said write-downs and provisions would cut the bank’s common equity tier 1 capital ratio by 33 basis points.

“We’ve obviously got a new CEO, I would suggest that he’s taken the opportunity to take a far more conservative view on assessment of the required provisions,” Ellis said.

In July, NAB had agreed to sell a US$1 billion portfolio of mostly non-performing UK commercial property loans, and said it would continue to look at accelerating the sale of non-core assets.

“Taking these decisions gives us more clarity going into the future and allows us to focus on the core Australian and New Zealand franchises, which remain in good shape,” Thorburn said in a statement.

Alongside the write-down, NAB announced it will add about A$1.6 billion in capital through a discounted equity investment option where investors’ dividends are directly reinvested in new shares of the bank.

Reuters

Bank merger to create Malaysia’s biggest bank The planned merger comes as members of the Association of Southeast Asian Nations slowly work on plans to partially integrate their economies and financial systems Saeed Azhar and Yantoultra Ngui

M

alaysia’s CIMB Group Holdings Bhd and two smaller domestic lenders have agreed to create the country’s biggest banking group, with deal terms set to be worked out over the next year, sources with direct knowledge of the matter said.

Proposals submitted to the central bank call for CIMB, Malaysia’s No. 2 banking group, to be combined with RHB Capital Bhd, the country’s fourth-biggest lender, via a share swap, the sources said.

Malaysia Building Society Bhd (MBSB) may be acquired through a cash and shares deal, one of the sources said.

The pact comes after the banks unveiled in July they were in talks to merge.

A three-way combination would give birth to a banking group with assets totalling around US$190 billion, surpassing Malayan Banking Bhd (Maybank) and making it Southeast Asia’s fourthbiggest bank.

Although little progress has been made and financial system integration is not due to start until 2020, countries in the 10-nation alliance

KEY POINTS Proposals have been submitted to the central bank -sources Deal will involve share swap between CIMB and RHB -sources Islamic banking arms of CIMB, RHB may merge with MBSB -source

are keen to build national champions.

Shares of the three banks were suspended yesterday pending an announcement.

Representatives for CIMB and Malaysia Building Society declined to comment. RHB did immediately respond to a request for comment.

Sources declined to be identified as they were not authorised to talk to the media.

The Islamic banking arms of RHB and CIMB would

CIMB offices inw w Kuala Lumpur

merge with Malaysia Building Society to form a bigger Islamic bank, according to one of the sources.

CIMB and RHB are also discussing the sale of RHB’s investment banking unit, the sources said.

Malaysia’s Employees Provident Fund (EPF), a big shareholder in all three

banks, is seen as instrumental in deciding how the merger will be shaped.

The EPF owns about 41 percent of RHB, 65 percent of Malaysia Building Society and 14.5 percent of CIMB. JPMorgan is advising CIMB, Credit Suisse is advising RHB, while EPF has hired Deutsche Bank

as an advisor and Malaysia Building Society is being advised by Citigroup, the sources said.

The investment banks have all declined to comment on whether they have been hired. The EPF has not responded to requests for comment.

Reuters

14

October 10, 2014

International Renzi wins vote on controversial labour law Italian Prime Minister Matteo Renzi won a confidence vote on a proposed overhaul of the country’s labour laws, showing he’s willing to push changes through regardless of opposition. Senators voted 165 to 111 to pass a so-called “delegating law,” which sets general guidelines aimed at modifying the country’s rigid labour market and gives the government the power to work out the details and submit specific measures for parliament’s approval at a later stage. He has shown willingness to face Italy’s biggest labour union, the CGIL, which has already called a demonstration in Rome on October 25 to protest against the plan.

Russia could temporarily freeze prices Russia could temporarily freeze the price paid by consumers for some “vital products” if inflation soars, Trade Minister Denis Manturov said in an interview published yesterday. The weakening rouble, sanctions on Moscow over its role in the Ukraine crisis and a Russian ban on food imports from a number of Western countries have pushed annual consumer price inflation to 8 percent.

Asked what measures the government might take if inflation continued to rise, Manturov told state-owned Rossiiskaya Gazeta: “We have a huge amount of leverage of an administrative nature.”

Portugal’s budget deficit to last five years Deficit will keep decreasing but not be eliminated till 2019, the International Monetary Fund (IMF) said. The IMF confirmed its prediction for Portugal’s budget deficit at 4 percent of GDP in 2014 and 2.5 percent in 2015, in line with the government’s estimates. However, the IMF’s latest forecast for 2016 through 2019 is gloomier than that projected in April. It now expects Portugal to have a budget deficit of 1.7 percent in 2019, instead of 1.2 percent. The Portuguese government has insisted in recent months that the country must reduce its high debt to maintain credibility.

German recession fears mount German exports plunged in August by their largest amount since the height of the financial crisis and leading institutes slashed forecasts for growth, fuelling debate on whether Berlin is doing enough to prop up the domestic and European economies. Exports slumped by 5.8 percent in August, data from the Federal Statistics Office showed yesterday, the latest sign that Europe’s largest economy is faltering amid broader euro zone weakness and crises abroad which have battered confidence and delayed German firms’ investment plans.

Liechtenstein plans push into Islamic finance The European principality of Liechtenstein is launching a drive to attract Islamic financial business, aiming to capitalise on its well-established wealth management industry. Competition is increasing among financial centres around the world to capture a slice of Islamic finance, which is expanding beyond its traditional bases in southeast Asia and the Middle East. Most efforts so far have focused on the booming market for sukuk (Islamic bonds); Luxembourg, Britain and Hong Kong, seeking to draw more issuance activity, have made debut issues of sovereign sukuk this year.

World Bank’s chief economist unsure about global recovery The slowdown areas were primarily eurozone and Japan

G

lobal economic outlook is gloomier than six months ago, and there are a couple of dangerous signs that the economy could stall once again, the World Bank’s chief economist Kaushik Basu told Xinhua in an interview.

Six months ago, economists believed the global economy was going to undertake a slow and clear take-off, but data over the past few months suggests the take-off is unsure, according to the economist, who is also the senior vice president of the bank.

This judgment is echoing the International Monetary Fund’s (IMF) latest research result, in which the Washington-based institution lowered its global economic growth forecasts for 2014 and 2015 and said the global economic recovery was weak and uneven.

Basu also warned of the possibility that the world economy would stall once again and said it was a “risk we need to contend with”.

Germany, the centre pillar of the region, is growing slightly above zero, and other euro countries, such as Italy, are experiencing negative growth. And the Japanese economy is in stagnation.

Although the U.S. economy is the bright spot in advanced economies and has achieved progress in reducing unemployment rate, the economy is still facing underlining weakness. The large size of the long-term unemployed in the U.S. is threatening to erode its labour market skills.

According to Basu, the global labour market is gradually becoming a common pool.

“Today you can sit in Beijing and work for a U.S. company, and work in Manila or Bombay for a European

As they are trying all kinds of policies to get the economy going, the Eurozone might recover Kaushik Basu, World Bank’s chief economist

World Bank’s chief economist Kaushik Basu

or Australian company,” said the economist.

Beneath the risks from 2007 financial crisis is the changing structure of the global labour market, he said, adding that job creation is important to both advanced and emerging economies.

Despite dangerous signals, the world economy still has some bright spots, according to the economist.

The U.S. economy seems to recover from the crisis and is doing “reasonably” well, with growth rate above 2 percent.

According to Basu, the U.S. labour market is open and flexible, and immigrants will energize the economy. In addition, in view of its investments around the world, the U.S. is an important drive for the world economy.

As for the Eurozone, he said that the European Central Bank was taking measures.

Basu mentioned the impact of

slower Chinese economic growth to the world economy. The slowdown of Chinese economy will affect its trading partners, such as Africa, Germany and India, as well as its outbound investment destinations, he said.

However, the growth drive will mainly come from emerging economies, such as China and India, over the next 15 or 20 years, said the economist.

He expected the Chinese economy to grow 7.4 percent this year, slightly lower than the previous forecast Despite the slower growth, China is still the growth leader, said Basu.

He noted that the Chinese economy does face short term challenges, such as overinvestment and debt issues, but the long-term outlook is fine.

The Chinese authorities were fully aware of the risks, and China was moving toward a more consumptionled economy, said the economist.

Reuters

World food prices dip to 4-year low The figure was 12.2 points or 6.0 percent below September 2013

W

orld food prices fell to their lowest since August 2010 in September as prices of all major food groups except meat dropped, led by a sharp decline in dairy prices, the UN’s food agency said on Thursday.

The Food and Agriculture Organisation’s (FAO) price index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 191.5 points in September, down 5.2 points or 2.6 percent from August.

It was the sixth consecutive slip in the index, which FAO said was the longest period of continuous falls since the late 1990s. Affecting all international commodity prices is “the US dollar’s broad appreciation,” FAO said.

The Russian ban on dairy imports from countries that have imposed sanctions on Moscow over the conflict in Ukraine continues to weigh on dairy prices, FAO said.

European Union dairy farms are moving away from cheese production and raising butter and skimmed milk output, which is in turn stimulating powdered milk

production “as manufactures seek to adjust products to ensure the best returns,” FAO said.

Bucking the trend, meat prices gained marginally to 207.8 points in September, 0.3 of a point higher than its revised value for August. At historic highs, meat prices may have “reached a peak,” FAO said.

Underpinning falling prices are strong output forecasts for cereal and wheat, and expected high levels of cereal stocks at the end of the year.

Grain storage facilities in Israel

FAO raised its forecast for global cereal production for 2014 to 2.523 billion tonnes, 65 million tonnes higher than its May forecast.

The agency also raised its world wheat output forecast to 718.5 million tonnes, a new record, versus 716.5 million tonnes previously, and predicted world cereals stocks at the end of the 2015 season would be 627.5 million tonnes, versus 616.0 million tonnes in its previous forecast.

Reuters

15

October 10, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

The ECB’s leap into the unknown Jürgen Stark

Former Member of the Executive Board of the ECB and former Deputy Governor of the Deutsche Bundesbank

THE JAPAN NEWS The basic tie-up agreement between Tokyo Electric Power Co. and Chubu Electric Power Co. in areas such as natural gas purchasing and rebuilding old thermal power plants is expected to lead to the further realignment of the electric power industry, which has been dominated by effective regional monopolies since World War II. The retail electricity market for households is set to be liberalized in April 2016. The tie-up between companies preparing to compete nationally will likely be followed by more agreements across regional and industry lines.

VIETNAM NEWS Vietnamese enterprises are preparing for further integration as the country is close to signing many free-trade agreements (FTAs), which will bring not only opportunities but also challenges. According to Pham Xuan Trinh, general director of the Phong Phu Corporation which operates in the garment and textile sector, foreign firms are pouring investments into this sector to take advantage of the benefits that the Trans-Pacific Partnership Agreement will bring. Domestic producers, as a result, will face increased competition from international firms that have the advantages of capital and technology.

THE BANGKOK POST The economy is unlikely to make a V-shaped recovery due largely to high household debt causing weak consumption, say business leaders. Surong Bulakul, chairman of the Thai Listed Companies Association, said Thailand now faced the threat of deflation as the prices of commodities such as rice and rubber continued to fall. Kobsak Pootrakul, an executive vice-president of Bangkok Bank, said a V-shaped recovery as happened in 2011 was unlikely, as the purchasing power of middle- and low-income earners was limited by high household debts.

TAIPEI TIMES Twenty-three foreign companies signed letters of intent with the Ministry of Economic Affairs at a Taiwan Business Alliance conference in Taipei, pledging investments worth a total of NT$97 billion (US$3.18 billion) over the next three years. The number was higher than the NT$92 billion signed by 19 foreign companies at last year’s conference and set a new record for the annual ministry-organized investment gala. The ministry’s Department of Investment Services said a total of 87 letters of intent worth NT$317.6 billion had been signed at conferences between 2010 and last year.

T

he European Central Bank is in the middle of a big, risky experiment. Key interest rates have remained close to zero for six years now. Financial markets are flooded with liquidity. Crisis management has resulted in major market distortions, with some segments’ performance no longer explainable by fundamental economic data.

The unintended consequences of this policy are increasingly visible – and will become increasingly tangible with the US Federal Reserve’s exit from post-2008 ultra-loose monetary policy.

And yet Europe’s crisis is far from over, as the decisions by the European Central Bank’s Governing Council in June and September demonstrate. This reflects two factors: too little ambition in carrying out essential balance-sheet corrections, and slow progress – negligible in France and Italy – in restructuring Europe’s national economies.

The ECB’s decision to double down on monetary stimulus should thus be regarded as an act of desperation. Its key rate has been cut to 0.05%, the deposit rate is negative, and targeted longer-term refinancing operations are supposed to support bank lending. Moreover, the asset-backed securities market is to be revived by the purchase of ABSs. All of this is intended to flood the markets, expand the euro system’s balance sheet by €700 billion (US$890 billion), and return

Europe must aim for sustainable, non-inflationary growth and the creation of competitive jobs

to the balance-sheet volume recorded at the start of 2012.

The expansion of the ECB’s balance sheet and the targeted depreciation of the euro should help to bring the eurozone’s shortterm inflation rate close to 2% and thus reduce deflationary risks.

For the first time in its history, the ECB appears to be pursuing an exchange-rate target. As was the case for the Bank of Japan, the external value of the currency will become an important instrument in the framework of a new strategic approach.

Financial markets have applauded the ECB’s recent decisions.

Moreover, having “effectively thrown off all of the Maastricht Treaty restrictions that bound

the bank to the model of the Deutsche Bundesbank,” as former Fed Chair Alan Greenspan put it, the ECB is prepared to break further taboos.

But for what purpose? Particularly by guaranteeing highly indebted countries’ sovereign bonds, the ECB has actually weakened the willingness to reform, particularly in the larger European Union countries, whose decrepit economic structures are an obstacle to potential growth, and where more room must be given to private initiative.

The ECB’s willingness to buy ABSs is especially risky and creates a new element of joint liability in the eurozone, with European taxpayers on the hook in the event of a loss. The ECB lacks the democratic legitimacy to take such far-reaching decisions, with potentially substantial redistributive effects, which implies an even greater risk to monetary-policy independence.

Indeed, the ECB already has been driven onto the defensive by the International Monetary Fund, the OECD, financial-market analysts, and Anglo-Saxon economists in the wake of feverish discussion of the risk of deflation in the eurozone. But what is the appropriate eurozone inflation rate, given de facto economic stagnation?

Should higher nominal (that is, inflation-driven) growth replace debt-driven growth?

Europe must aim for sustainable, non-inflationary growth and the

creation of competitive jobs. The current inflation rate of 0.3% is due to the significant decline in commodity prices and the painful but unavoidable adjustment of costs and prices in the peripheral countries. Only Greece currently has a slightly negative inflation rate.

In other words, price stability reigns in the eurozone. This strengthens purchasing power and ultimately private consumption. The ECB has fulfilled its mandate for the present and the foreseeable future. There is no need for policy action in the short term.

It is, instead, the eurozone governments that must act. But any clear division of tasks and responsibilities between governments and central banks has, it seems, been jettisoned. Government action in many problem countries ultimately ends in finger pointing: “Europe,” the ECB, and Germany, with its (relatively) responsible policy, have all been scapegoats.

Against this background, the ECB has yielded to immense political pressure, particularly from France and Italy, to loosen monetary policy further and weaken the exchange rate. But indulging the old political reflex of manipulating the exchange rate to create a competitive advantage will yield a short-term fix at best. It will not eliminate the structural weaknesses of the countries in question.

The ECB is moving ever farther into uncharted territory. In view of the insufficient balance-sheet corrections in the private sector and inadequate structural reforms, macroeconomic demand-management tools will not work. Despite the ECB’s aggressive approach, monetary policy in the absence of structural economic reform risks being ineffective.

Simply put, more liquidity will not lead to more active bank lending until there is more transparency regarding the extent of non-performing loans and the relevant economies have become more flexible. The ECB’s asset quality review and bank stress tests are expected to bring some clarity to the first question. Then, more lending will occur on acceptable terms – assuming that there is corresponding demand. But the uncertainty regarding the extent and pace of economic reforms remains.

The ECB’s recent decisions, with their focus on short-term effects, indicate that monetary policy is no longer targeted at the eurozone as a whole, but at its problem members. Ad hoc decisions have replaced a feasible and principled medium-term strategy. The problems created by this approach will be compounded by the unavoidable conflicts of interest with monetary policy implied by the ECB’s assumption of its new financial-stability and banking-supervision roles. The first casualty will most likely be price stability.

Project Syndicate

16

October 10, 2014

Closing U.K. hires banks for debut non-Chinese yuan bond sale Tech manufacturer Hon Hai says resolves strike The U.K. has picked banks to sell its first yuan-denominated bonds as it seeks to develop Europe’s off-shore trading centre for the currency. Bank of China Ltd., HSBC Holdings Plc. and Standard Chartered Plc. will organize the benchmark-sized sale of securities and hold an investor presentation on October 13 in London, the Treasury (pictured) said in an e-mailed statement yesterday. Proceeds from the offering, the world’s first non-Chinese sovereign bond in yuan, will be used to finance the U.K.’s foreign-exchange reserves. Prime Minister David Cameron is looking to boost trade with emerging-market economies.

Hon Hai Precision Industry Co Ltd, the world’s largest contract electronics manufacturer, said yesterday it had resolved a strike by about 1,000 workers at one of its factories in China, and that production from the plant was unaffected. Hon Hai, also known by its trading name Foxconn Technology Group, said the workers at its Chongqing factory had gone on strike on Wednesday, and agreed to return to work four hours later after discussions with the company.

In its statement, the company did not give any details about the discussions or why the workers had gone on strike.

Softer demand clouds China’s economy forecasts The export sector is the only part of the economy expected to show any signs of buoyancy

I

nternational investors are showing greater interest in Chinese capital market, despite a slower growth of its economy, said, chief executive officer (CEO) of the London Stock Exchange (LSE), in an interview with Xinhua.

Chinese economic development has entered the so-called “new normal” and shown a slowdown in growth, but its fundamental story is “absolutely of interest”, as the global

investment community is still interested in and focuses on assessing Chinese capital market, Justham said.

The LSE CEO will visit China later this week and kick off the London Stock Exchange Group Beijing IPO Conference on October 9.

Right way and time Justham said, “China is the second largest economy in the world. The statistics show that th e fo r ei g n

Retail sales likely grew at their slowest pace in about 3-1/2 years

Singapore announces REIT market rules change

S

ownership inside China’s stock is very low, so the global investment community is clearly underweight in China in terms of the scale of economy versus the scale of investment, I think that fact will drive investment for a very long time.”

The investment from global investors will also detect the pace of opening up of capital market, the capital flows, like the licenses and quotas of the RQFII (RMB Qualified Foreign Institutional Investors), said Justham.

The Shanghai-Hong Kong Stock Connect, which offers the seamless interinvestment channel between the two stock markets, is another way of expanding access to the capital market of the Shanghai Stock Exchange, and the global investors are very interested to watch, as lots of them do have access in Hong Kong, said Justham.

Regarding the pace of opening up the capital market, Justham commented that the opening up of China’s capital market needs to take time and to be

KEY POINTS Sept data to show economy still faltering Trade data due Oct 13, no fixed time Inflation data due Oct 15 at 0130 GMT Money supply data due anytime between Oct 10-15 Activity indicators to be released Oct 21 at 0200 GMT

“definitely managed,” as the wider access to capital flows can have various impacts.

“You always want to avoid the problems that come with that, and the Chinese authorities have their plan, and they are also on the course,” he said.

As of the end of September, 60 Chinese

companies are now quoted on the LSE, with seven on the Main Market, and 53 on Alternative Investment Market (AIM), or start-ups sector.

Regarding the Renminbi (RMB) investment vehicles, four RQFII Exchange Traded Funds (ETFs) and dozens of RMB bonds are now listed or traded on the bourse.

Though the number of China-A share linked RMB ETFs is tiny compared to the more than 1,000 ETFs now listed on the LSE, the bourse is bullish on its outlook.

“The (RMB investment) products are new, but they are all going well, and are all successfully subscribed.

We understand that people are looking forward to more ETFs here, or other instruments with exposure to China’s market, and we are of course looking to see more in the future,” said Justham.

“I think fundamentally the investment community here in Europe and in London is interested in finding ways to buying into or expose into China, and the RMB trading is skyrocketing, I think this is the fundamental change,” he added.

In order to better facilitate the RMB trading in London, in the context of the ChinaBritain financial cooperation deepening, the LSEG signed the Memorandum of Understanding with the Bank of China, Agricultural Bank of China and China Construction Bank this year.

Xinhua

Beijing to use odd-even traffic ban during APEC

Sony to start console packaging by December

B

S

ingapore announced a series of proposed reforms to its real estate investment trust market (REIT) yesterday, which include a change in debt limits and more safeguards to try to ensure trust managers act in the interests of investors.

The Monetary Authority of Singapore (MAS) said it was proposing to change the leverage limit for REITs to 45 percent of their property assets.

Currently REITs that have a credit rating can leverage up to 60 percent of their assets, while those that are unrated can leverage up to 35 percent.

The central bank is also proposing new safeguards to ensure that the performance fees paid to REIT managers are set by a clear methodology that takes into account the long-term interest of REIT investors.

Currently, there are concerns that REIT managers’ pay may encourage them to take actions contrary to the interests of investors, such as buying more property to raise the trust’s market value but potentially lower the yield investors receive.

eijing Municipality will launch an oddeven license plate system to ease traffic on roads during the Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting slated for November, transport authorities announced yesterday.

The traffic control system will allow cars to drive on alternating days based on odd or even license plate numbers from November 3 to 12, aiming to decrease total traffic by 35 percent, said a statement issued by the municipal transport commission. During this period, the city will increase the number of buses by 400, or 2 percent of total public transport capacity, to ensure public transit, said the statement.

Beijing Municipal Government also announced Thursday that the State Council has approved a six-day holiday from work from Nov. 7 to 12 for workers from government departments, institutions, and organizations in the city. However, they will be required to work Sunday, November 2 and Saturday, November 15 instead. The holiday is another move to reduce the number of cars on the road.

Reuters

Xinhua

ony Corp. plans to start packaging new video game consoles for the China market from December as it seeks to win sales in the world’s most populous nation after the end of a 14-year ban on the machines.

Sony’s venture for China intends to package 200,000 consoles annually, according to a filing on the website of the China (Shanghai) Pilot Free Trade Zone. Masaki Tsukakoshi, a Tokyo-based spokesman for Sony Computer Entertainment Inc., confirmed the document’s authenticity and said actual production amounts may differ.

Gaming is one of the few bright spots for Sony, which is headed for its sixth annual loss in seven years despite selling more than 10 million units of its PlayStation 4 console. Microsoft Corp. has already started selling its Xbox One in China, with a limited range of titles because of government restrictions.

“There’s an opportunity” in China, said Atul Goyal, a Singapore-based analyst at Jefferies Group LLC. “But it remains to be seen if the upside is large or small.”

Bloomberg News