Macau Business Daily, Oct 22, 2014

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 650 Wednesday October 22, 2014

Inflation at 8-month low

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Year III

nflation reached 5.82 percent in September. Below 6 percent, thus an eight-month low. Food prices increased 5.2 percent. But rents surged 12.2 percent. After housing and food, health services, recreation and culture, household goods and alcohol reported price increases above 2 percent. Communication services dipped slightly.

As expected, the greatest inflationary pressure was exerted on lower earning households Page

Road rage

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HSI - Movers October 21

Name

Bus drivers are being assaulted.

One is currently recovering from surgery. Discontented passengers are to blame. Bus operator Transmac alone has reported nine such incidents. Violence ranges from verbal abuse to physical confrontation. The New Era bus operator admits some bus drivers are rude. But lack of labour resources, more passengers, and government restrictions are not helping

Page 2

%Day

Sino Land Co Ltd

2.25

Lenovo Group Ltd

1.46

Sun Hung Kai Propert

1.25

Li & Fung Ltd

1.19

Chia Shenhua Energy

1.11

China Unicom Hong Ko

-0.70

China Petroleum & Ch

-0.76

Hengan International

-1.06

China Mobile Ltd

-1.78

Tingyi Cayman Island

-2.41

Source: Bloomberg

The dotted line

InterContinental posts rising revenues Page 7

China likely to close ‘gift’ loophole in corruption fight Page 7

Delays are inevitable. Legislators and government representatives do not see eye to eye on the draft bill on Employment Contracts for Public Services. The primary problem lies in how the new provisions should be structured. While legislators want it simplified, the government is adopting a conservative position

Brought to you by

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Living luxury A luxury villa in Penha Hill has sold for MOP188 million. The purchaser is Macau Property Opportunities Fund. The acquisition adjoins the group’s The Green House.

There’s a possibility the properties may be merged. The transaction is scheduled to complete by December www.macaubusinessdaily.com

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The GDP mirage

China’s GDP growth figures beat experts’ forecasts. But sank to their lowest point since the 2008 crisis. The expanding service sector and middle class wages have to counter sluggish property behaviour

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2014-10-22

2014-10-23

2014-10-24

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22˚ 26˚

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2

October 22, 2014

Macau

Transmac workers just “punching bags” Frontline workers of bus operator Transmac complain about being the target of resentment by residents. The company says that this year there have been nine incidents in which drivers and station chiefs were injured after being assaulted by passengers Joanne Kuai

joannekuai@macaubusinessdaily.com

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half page notice in October 21’s Chinese media outlet Macau Daily issued by the Transmac (Transportes Urbanoes de Macau) labour union states that one of its drivers had liquid poured on him and was hit by a passenger while driving his vehicle on Sunday morning. As a result, his nose was damaged.

The statement reads that ‘innocent colleagues were hit’, claiming that this was not an isolated case. In 2014 alone, nine similar assaults have occurred, leaving the company’s drivers and station supervisors injured.

The workers of the three public bus services operators also said that in recent years they have been subjected to increasing violence – both verbal and physical - from residents because of their discontent with local bus services. They said the routes and shifts of the bus operators are subject to government regulation and that they have already run more shifts than the required level and thus seek residents’ understanding.

Transmac Deputy General Manager Kuan Weng Kai told Business Daily that conflicts between their workers and passengers are common these days, especially at the Border Gate Terminal in the morning and at the Seac Pai Van Terminal near the public housing complex in the evening rush hour.

“There’s a drastic increase in demand in recent years and there are simply not enough bus shifts,” said Mr. Kuan. “We don’t have the flexibility to change the bus schedule due to government regulations. The rules were made in the old times and don’t suit anymore. Adding more shifts based on our own decision can result in the government refusing to pay us.”

Another bus operator confirmed that conflicts between bus drivers and passengers are often seen these days. Daniel Fong, the general manger of New Era (Macau Nova Era de Autocarros Públicos), told Business Daily that he admitted that some drivers’ attitude was

not friendly enough and may have provoked quarrels with passengers. Some even do not pay enough attention to driving safety, such as accelerating suddenly or making sharp turns. Despite the training courses, the company is in a helpless position due to the lack of human resources. Mr. Fong disclosed that some drivers are just not qualified or suitable but the company had only fired three of them this year. Mr. Fong added that the Transport Bureau’s research shows individuals using bus services have increased to the current 530,000 from 360,000 in August 2011.

And with the “free transfer within an hour with Macau Pass” promotion, passengers

used to walking now choose to take buses instead. Due to the traffic conditions and road construction, at rush hours, on busy bus routes, the bus shifts just cannot satisfy the requirements of passengers, resulting in resentment.

In a written email responding to an enquiry from Business Daily regarding the Transmac drivers’ statement, the Transport Bureau said that they are aware of such kinds of conflict happening from time to time and would collaborate with the bus operators to better respond to the needs of residents, in addition to pledging [encouraging] mutual understanding between passengers and drivers.

The Bureau said it has

2013 Macau hotel profits double Hotels in the territory saw operating profits shoot up, with bigger contributions to the local economy Stephanie Lai

sw.lai@macaubusinessdaily.com

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he Macau hospitality sector posted a nearly 52 percent increase in its operating profits last year, with revenue outpacing the growth of the hotels’ expenses on operations and staffing costs, official data shows.

According to a survey released by the Statistics and Census Service yesterday, of the 67 hotels and 33 guesthouses operating in 2013, the sector posted a record operating profit of 3.76 billion patacas (US$479.7 million), up 51.6 percent from 2012.

With more guests staying overnight

and increased guest rooms in service last year, the hospitality sector’s revenue increased by 15 percent year-on-year to 25.3 billion patacas, of which 11.94 billion patacas was generated by room sales.

Of the 11.94 billion patacas from room sales, income generated by the 28 5-star hotels operating in the period occupied nearly 80 percent, official data noted.

By the end of last year, there were 27,764 rooms in hotels and guesthouses operating, a figure that increased by 6.5 percent over a year before, another set

of data from the census service shows.

While the official data notes that the hospitality sector saw more than 10.6 million people staying overnight last year, 11.8 percent more than 2012, the average room rate here rose 4.06 percent to 1,476 patacas for last year, according to the Macau Hotel Association.

Alongside the increased accommodation revenue, the sector saw significant growth in sales of food and beverages (5.58 billion patacas, up 14 percent) and rental of space for events (4.71 billion patacas, up 23 percent).

been actively optimising the bus routes network, reviewing the concession contracts and adjusting the bus schedule. It gave an example of route 25F - run by Transmac between the Border Gate and Seac Pai Van). Shifts have been added and operating hours prolonged on many occasions but the Bureau stressed regarding other adjustments to bus schedule, the Bureau would proceed cautiously to guarantee the reasonable usage of public money.

Mr. Kuan Weng Kai also said that the driver involved in the incident is an experienced male driver and had undergone surgery on the nose yesterday. He is still receiving treatment at the government hospital.

The 2013 revenue registered for the sector grew faster than overall expenses, which increased by 10 percent year-on-year to 21.54 billion patacas.

Most of that money went on operating expenses – mainly incurred from contractual services such as management, cleaning and laundry service, marketing and power usage – and increased by 15 percent to 10.33 billion patacas.

Salaries and employee benefits cost hotel operators 8.18 billion patacas, 4.7 percent higher than in 2012.

Last year, some 39,909 people were engaged in the hospitality sector, only about 1 percent more than the previous year.

The sector’s contribution to the Macau economy for last year increased 17 percent year-on-year to 12.15 billion patacas, a faster growth pace than the 11 percent increase seen for 2012 at 10.34 billion patacas.

The absence of new hotel construction last year, however, also meant that investment tumbled 73 percent year-on-year to 2.26 billion patacas.

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October 22, 2014

Macau

Food prices drive inflation to 8-month low Inflation reached 5.82 percent in Sept.

Food prices increased 5.24 pct, below the 6 percent average of this year. Rents, as usual, grew double-digit Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

Macau Property Opportunities pays MOP188 mln for luxury villa The Macau-based fund has bought a luxury villa on Penha Hill for MOP28,886 per square metre.

Potential value, however, could increase in the future as the property adjoins another house owned by the fund, the Green House, which together could be transformed into one single property João Santos Filipe

jsfilipe@macaubusinessdaily.com

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T

he slowdown in food and non-alcoholic beverage prices caused inflation in Macau to sink to its lowest level in eight months in September. This, despite another record increase in housing and fuel costs for the citizenry.

According to data revealed by the Statistics and Census Services (DSEC) yesterday, inflation in Macau locked in at 5.82 percent in September, meaning that prices on average went up 5.82 percent compared to a year ago. From August, prices accelerated 0.53 percent, the report said.

Despite seeing an almost 6 percent hike in prices, September’s inflation value was the lowest recorded here since February, the statistics bureau data revealed. That month, inflation topped 5.65 percent, still a record low for the year.

The main driver of the slowdown of inflation in Macau last month was food and non-alcoholic beverages, the largest component of the basket used to calculate price variations in Macau, and responsible for 32.8 percent of its value. Food prices increased 5.46 percent in September from a year ago. This hike was not only behind the inflation level last month but also the smallest rise since 2012.

Housing cost rises continue unabated, however. In September, prices of houses and rents went up by 12.15 percent year-on-year, the largest increase since April.

Last month, only communication services registered a price decline (-0.13 percent). All other products’ and services’ prices increased. After housing and food, health services, recreation and culture, household goods and alcohol reported price increases above 2 percent.

In September, the inflation index value reached 132.3 points, which means that since 2009 prices in Macau went up by 32.3 percent. For the 12 months ended in September this year, the inflation rate stayed at 6.03 percent.

Compared to August, prices here increased 0.53 percent last month.

The statistics office justified the jump with ‘higher tuition fees in the new academic year, rising rentals and charges for eating out, as well as dearer prices of fresh vegetables, fruits and pork pushed up the price index of Education, Housing & Fuels and Food & Non-Alcoholic Beverages by 2.63 percent, 1.04 percent and 0.92 percent.’

One of the aspects that inflation data in Macau continues to reveal is that families on lower incomes are suffering more price pressure than the ones with higher purchasing power.

Inflation for households with an average monthly expenditure of MOP6,000 to MOP18,999 ( representing 50 percent of Macau families) reached 6.25 percent. Households with a monthly expenditure of MOP19,000 to MOP34,999 saw prices directed at them go up only 5.72 percent, the statistics and census services revealed.

acau Property Opportunities (MPO) Fund has acquired a luxury villa on Penha Hill for US$23.5 million (MOP188 million). The purchase agreement was confirmed to Business Daily by the Director of Sniper Capital, João Afonso.

“The investors decided this was a good investment for the fund and that the conditions were adequate”, Afonso told Business Daily. “We believe the price paid for the property is fair in relation to the market price”.

The acquisition complements MPO’s portfolio given that the purchased property adjoins MPO’s The Green House, which cost the fund MOP28 million patacas.

‘It is the company’s belief that significant marriage value will be created by combining the two properties into a single detached residence, which is a rare and highly sought after asset in Macau’, the company announced in a press release.

“This highly strategic acquisition gives us further exposure to one of our preferred sectors in Macau - exclusive residences - which we believe will become increasingly sought after as Macau continues to transform into a world-class destination”, David Hinde, Chairman of MPO, said in the press release. “The consolidation with The Green House should bring about significant value creation for our shareholders”.

The transaction of the villa is expected to be fully concluded by December. The three-storey building was purchased from a local vendor and has an estimated gross floor area of 6,500 square feet.

The price agreed was US$3,615 (MOP28,886) per square foot and was considered attractive by investors as there is the possibility of consolidating it with The Green House, which is likely to increase the potential value of the property in the future.

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October 22, 2014

Macau

Differing opinions on Employment Contract for Public Services bill Legislator Chan Chak Mo said yesterday that the final approval of the Employment Contract for Public Services bill may not get onto the Legislative Assembly agenda before the end of the year due to government delay Kam Leong

kamleong@macaubusinessdaily.com

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he president of the second standing committee of the Legislative Assembly (AL), Chan Chak Mo, said that he is uncertain if the bill on the employment contract for public services – which simplifies and groups together two current non-permanent-term contracts for public servants into one – can be passed to the Assembly for its second reading by the end of the year as government representatives have not yet responded to legislators’ concerns.

“The work of the government is not so smooth; maybe due to the holidays or because this term of the government will end in a few months,” Mr. Chan told reporters following a closed-door meeting with government representatives on the bill.

The bill, which is being discussed by the second standing committee, passed the first reading in the AL in April and is scheduled for final approval by the end of the year.

Given that the government has

According to legislator Leong Veng Chai, who is one of the members of the committee, the concerns of the committee passed to the government earlier primarily include two regulations – the renewal of contracts and the rehiring of public servants following retirement, he told Business Daily in a phone interview yesterday.

The bill

not responded to the legislators on time, it is suggested that the committee meet one extra time with the representatives, Mr. Chan said.

“Of course [it will affect the progress of sending the bill to the Legislative

Assembly] - we were supposed to send [the bill for final reading] by the end of the year, before this term of government changed or before December 20.”

In addition, Mr. Chan said that the government had promised in June that it would submit new text on the bill in response to the queries of the legislators. However, up to now, the committee has only received the government’s response on the opinions of the Macao Chinese Civil Servants’ Association, in September.

The new bill suggests simplifying the structure of the current nonpermanent contracts for public servants by combining two of them; namely, Fixed-term Employment Contract and Wage-base Contract into the Employment Contract Provision Scheme. Meanwhile, the Individual Employment Agreement, the other type of non-permanent contract, is not included in the new scheme.

Although the bill passed its first reading in the AL, legislators remain dissatisfied. In April, they queried why the new bill only included two types of non-permanent contracts, allowing unequal pay for the same position to appear in government departments.

The new scheme will provide the same remuneration and subsidies as the two current non-permanent contracts.

China Overseas Land posts strong sales Stephanie Lai

sw.lai@macaubusinessdaily.com

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tate-owned developer China Overseas Land & Investment Ltd, known for its upmarket housing project the Paragon and the Carat in NAPE district, informed the Hong Kong Stock Exchange yesterday of its strong property sales performance for the nine months ended September 30, despite its trade looking weaker in the third quarter.

For the first nine months of this year the group’s secured sales of properties amounted to HK$105.6 billion (US$13.6 billion), which made up 75.4 percent of its HK$140 billion annual sales target, the developer said of its unaudited results.

The developer’s operating profit for the first three quarters this year reached HK$22.14 billion, increasing 13.4 percent compared to the same period last year.

The state-owned developer launched sales of the first batch of its upmarket housing project, the Carat, near the Macau Cultural Centre in NAPE district in late March this year. At the time, some 210 flats of

the Carat were sold in two days for HK$2.3 billion.

The Carat project, which is expected to be completed by the third quarter of next year, could supply a total of 414 flats varying from 600 square feet to 1,700 square feet.

Another high-end housing project of the group near the Carat, called the Paragon, will almost be ready by the fourth quarter; the group noted yesterday that it ‘will try its best’ to complete the project for occupation.

The group saw a weaker third quarter result despite the property market ‘performing well’ in both Hong Kong and Macau: operating profit for the quarter reached HK$3.34 billion, which is 47 percent less than a year ago and 74 percent decline when compared to the previous quarter.

The group’s turnover for the third quarter was HK$11.61 billion.

The developer said it saw ‘no obvious improvement’ in sales of the mainland China property market in the third quarter, where it registered sales of HK$32.56 billion.

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October 22, 2014

Macau

Mass to take the lead in Macau It’s just a matter of months. For the first time, mass market revenues are set to overtake those of VIP in Macau. In six months, the mass share in total revenues has jumped from 35 to 44 percent. The high rollers market may be permanently becalmed, analysts tell Business Daily Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

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or years it’s been like this: The mass market is three to four times more profitable than VIP but it’s the high rollers who move the real money in Macau, given they account for three quarters of all gaming revenues. If the former is still true, the latter is past.

The Macau gaming industry is becoming a mass market destination faster than expected and the new flow of casino openings starting in 2015 will boost this trend even further, analysts told Business Daily.

In some areas like Cotai, mass is already a whisker away from being the dominant segment.

In the third quarter of this year, the share of mass market of total

Ultimately, we believe Beijing wants Macau to have a great deal of mass market appeal and wants Macau to become the entertainment destination for all Chinese people – not just VIPs Grant Govertson, Union Gaming

gaming revenues in Macau reached an all-time high of 44 percent versus 56 percent from VIP. For the first time, revenues generated on the mass floors are nudging the 50 percent mark, with Macau weaning itself off its dependence upon high rollers. In the first quarter of the year, the mass market share of total gaming revenues in Macau was only 35 percent. In six months, the segment has grown by 10 percentage points, an historic growth rate. It will only be a matter of time before the mass segment takes the lead in the Macau gaming sector.

“Over the next several months, it’s certainly going to continue to drift towards the 50 percent mark and we see the flip occurring with the opening of capacity over the next two years”, analyst Christopher Jones of the Telsey Advisory Group told Business Daily.

In reality, in Cotai the mix of VIP and mass is currently already a 50/50 business. In September, the mass share in total revenues there was 47.5 percent and in the third quarter 46 percent, Jones said.

The Big Boost The opening of six new mega casinos in Cotai between 2015 and 2018 will double the capacity of tables and accommodation in Macau. But it will also benefit the growth of the mass segment. “We think Cotai is a large boost for the long-term growth of mass market”, Grant Govertson, an analyst with Union Gaming told this paper.

The current and future growth of the mass market in Macau is driven by

We don’t believe that VIP will ever fully leave Macau but question if the VIP market will every really grow again Christopher Jones, Telsey

a host of reasons. Telsey, for example, notes that “the rise of Cotai has not been at the hand of VIPs. Rather it’s been at the hand of premium mass and mass market customers, looking for variety in their experiences beyond gaming”. In addition, says Grant Govertson, the trend is even viewed with some satisfaction by Beijing: “Ultimately, we believe Beijing wants Macau to have a great deal of mass market appeal and wants Macau to become the entertainment destination for all Chinese people – not just VIPs” The fast rise of the mass segment in recent months has also been boosted because casino operators are starting to move high-roller tables to mass premium in search of more profitability. But it’s uncertain if this is a winning strategy. As Mr. Jones of Telsey puts it: “The greatest uncertainty around gaming in Macau is likely the structure of premium

mass”. The brokerage believes that if margins in mass premium continue to be pressured and profitability declines then this table shifting between VIP and mass could be reversed. And if mass core becomes the area of big profits, then “maybe the trend over the coming years will be the shift to just mass market tables”, the analysts added.

Never-ending fall The big question now dividing investors is when - or if – the VIP market will recover in Macau. Telsey tells Business Daily that high-rollers will continue under pressure well into 2015. But it could me a more structural change. “VIP won’t have a resurgence but will continue to consolidate. We don’t believe that VIP will ever fully leave Macau but question if the VIP market will every really grow again”.

For Union Gaming, a VIP recovery is a likely scenario. The brokerage predicts that if high-roller segment recover quickly then the mass share in total revenues in Macau could drag again to 35 percent, like a year ago.

If this happens, then it’s time do the maths again: “We think it could take until the time of licence expirations in 2022 before mass market accounts for 50 percent of total gaming revenue”.

For both analysts, with Macau gaming industry turning to mass, Sands China is the operator best placed to profit as it has the largest exposure to the segment. Galaxy and Melco Crown (with its upcoming Studio City) are also likely to be winners in this new race.

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October 22, 2014

Macau Brought to you by

Health services ramp up Ebola prevention measures The Commission for Hospital Hygiene and Infection Control at Hospital Conde de São Januário has ramped up its guidelines for infection control related to Ebola, the Health Bureau has announced. These changes have been implemented after cases involving Spain and the United States were analysed by Macau health authorities. Although the risk for Macau is considered low, the health of individuals arriving from Guinea, Liberia and Sierra Leone that want to visit the Chinese territory is being monitored. Now, and following the latest development of the disease, individuals coming from Nigeria will also be screened.

According to the World Health Organization, of 9,191 cases of Ebola worldwide 4,546 have resulted in death.

HOSPITALITY Mixed bag Different types of expenses amount to different shares in the total expenditure of visitors and are therefore given different weightings in the Tourist Price Index (TPI). No surprise, lodging tops the ranking, representing alone almost a quarter of the Index. If we add expenses in restaurants, we get to more than 40 percent of visitors’ expenditure. That explains why the Index’s overall behaviour is strongly influenced by these two types of expenses and, in particular, by the patterns of consumption of overnight visitors. The chart below displays the growth differential or gap between the categories represented and the overall Index.

To facilitate comparison, the original series was rebased to the first quarter of 2010 and converted to a four-period moving average.

It clearly shows that lodging and restaurants have been the main drivers of TPI changes.

These two components are consistently running ahead of the average. For lodging, that has been the case since early 2011, with a margin of 5 to 15 percentage points. A similar pattern is apparent for restaurants, although it started later and runs at lower levels.

Delta Cafés jumps from Macau to China The Portuguese coffee roasting group is expanding its operations to China after consolidating its position in Macau.

Delta is betting on Shanghai, with the strategy to be adopted the same as that employed in the Las Vegas of the East João Santos Filipe

jsfilipe@macaubusinessdaily.com

The results of this year have been encouraging but we’re very clearly in a learning stage João Manuel Nabeiro, Delta Cafés Group manager

The trickiest issues, however, arise with the residual category, miscellaneous expenses.

Set at about 14.4, its weight in the Index is a substantial one, ranking it above, for instance, food, alcohol and tobacco, and almost on a par with clothing and footwear (items that have consistently trailed the average, helping to moderate Index growth). In the first half of the period, shown prices in the miscellaneous category flew high above the average. Then, they started a sustained decline and entered negative territory last year. It is possibly time to break down the category into more homogeneous bits so that better sense can be made of these numbers.

45.2%

restaurant price increases, Q3, 2010-14

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he Portuguese coffee roasting and coffee packaging company Delta Cafés is expanding to Mainland China, where it expects to boost its sales in the coming years, having consolidated its position in Macau. So far, the strategy of the company in Shanghai has mimicked the one used in Macau.

“We’ve been in Macau for many years through many distributors and last year we entered Shanghai, also through an agreement with a single distributor”, the manager of Delta Cafés Group, João Manuel Nabeiro, told Portuguese news agency Lusa.

Mr. Nabeiro revealed as well to Lusa that at this moment the Chinese market accounts for only one percent of the company’s exports. However, he said that the goal of Delta is to transform China into one of the five more important external markets for

the company in five years. The external market of Delta already includes countries such as Brazil, Luxembourg, France, South Africa and Australia.

“The Chinese market is very attractive as the growth rates are very high. Also, consumers are open to experimenting with high-quality products from foreign countries”, he stressed. “Our bet in China is based on the high quality and unique taste of our coffee”.

The investment in the Mainland Chinese market was made in partnership with Bright Foods, one of the largest food and beverage distributors in the country. During the first year of activity the revenue of the Portuguese company was “thousands of Euros but below one million”, Nabeiro said.

For the time being, the group is not overly concerned about financial

results as 2014 is considered a testing period. “The results of this year have been encouraging but we’re very clearly in a learning stage”, he said.

“In 2015 it will be our first true resultfocused year”.

The company is introducing two brands to the Chinese market: Delta, a traditionally roasted coffee, and Delta Q, based on a system of single-serving capsules.

“The single-serving capsules is an extraordinary brand to create the consuming habits of espresso”, the manager said.

Delta Cafés Group China is also serving as a platform for a large expansion into other Asian markets.

“China is a key market for the Asian continent, and so it will be the centre of our operations and strategy to internationalise the brand in Asia” Nabeiro said.

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October 22, 2014

Macau

China likely to close “gift” loophole in corruption fight Xi Jinping’s anti-graft campaign has also impacted Macau and the gaming industry here

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hina’s largely rubber stamp parliament is likely to close a loophole when it meets next week to ban officials from getting around corruption allegations by claiming money received was simply a gift, a state-run newspaper said yesterday.

Currently, officials can defend themselves from accusations of receiving bribes by saying money or other goods received, like luxury watches or bags, were just a present from a friend, the official China Daily reported. It is only considered a crime if a link can be made to some sort of abuse of power, it said.

President Xi Jinping has launched a sweeping campaign against deepseated graft since assuming office last year, warning, like others before him, that the Communist Party’s very survival is at stake.

Xi has vowed to take down highflying “tigers” as well as lowly “flies” in an anti-graft campaign that has felled Zhou Yongkang, once the powerful domestic security tsar, as well as Jiang Jiemin, the

former top regulator of state-owned firms.

The gift rules will probably be changed at a regular meeting of the National People’s Congress opening on Oct. 27, the newspaper said.

“The draft is likely to deem that accepting gifts or money of a considerable amount would be punishable for all government officials,” it added.

“The draft proposal will discuss the possibility of handing down punishment to public servants for accepting goods or money of a certain amount without a direct link to misconduct.”

The amendment is almost certain to be approved as state media generally does not flag such changes if they are not going to be passed.

Under the present system, gifts are meant to be handed over to the government within a month of being received, and some provinces have even set up special bank accounts to handle such money, the newspaper said.

Reuters

InterContinental posts rising revenues

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nterContinental Hotels Group yesterday booked rising quarterly revenues per room, buoyed by the United States, and expressed optimism over the annual outlook.

Global revenue per available room (RevPAR) – a key industry measure – rose by 7.0 percent in the third quarter, compared with a year earlier, the group said in a statement. The performance was led by 8.4-percent growth in the United States and 6.1-percent growth in Europe.

RevPAR is calculated by multiplying a hotel’s average daily room rate by its occupancy rate. “We delivered our best quarterly RevPAR performance in over two years with growth in each of our four regions,” said IHG chief executive Richard Solomons.

He added that “whilst some of our markets face heightened uncertainty and risks, we continue to see strong momentum in the business and remain encouraged by current trading and positive booking trends.”

The impact of pro-democracy protests in Hong Kong was “minimal”, the group added.

“RevPAR at InterContinental Hong Kong was up 5.4 percent in the quarter with increased group business and corporate events, despite the disruption from the on-going redevelopment adjacent to this hotel,” the group said.

“We have seen minimal impact so far from recent protests.”

The company owns the InterContinental, Crowne Plaza and Holiday Inn hotel chains.

8

October 22, 2014

Greater China World Bank recommends faster reforms China needs to accelerate reforms and not rely solely on monetary and fiscal policy to drive growth, a top World Bank official said yesterday. “I would recommend not really relying more on their macro policy, specifically on the monetary and fiscal side, because it’s been done before, especially post the global financial crisis,” Managing Director Sri Mulyani Indrawati told Reuters in an interview in Beijing. “It is now time for really deepening and doing the reforms in a much faster way.”

Vehicle sales to slow China’s vehicle sales will probably miss a revised growth forecast for the year as demand slows in the world’s secondlargest economy, according to the country’s main auto association. Dong Yang, secretary general of the statebacked China Association of Automobile Manufacturers, said total passenger and commercial vehicle sales for the full year would likely hit 23 million units, or an increase of about 4.6 percent. In July, the group lowered its projection for the increase in China vehicle sales to 8.3 percent, or 23.83 million units, down from the 10 percent increase it predicted in January.

AgBank to name PBOC official as chairman Agricultural Bank of China Ltd plans to name Liu Shiyu, a central bank deputy governor, as its new chairman, sources with direct knowledge of the matter told Reuters. Liu, who is 53, started work at the People’s Bank of China in 1996, and was promoted to deputy governor in 2006. He will replace Jiang Chaoliang, who left the country’s third largest lender on August 31. The Communist Party frequently moves senior officials between government administrative roles and posts at China’s top regulators and financial institutions.

Growth’s evolution leads to mo

The weaker gross domestic product figure fed speculation that Chin full-year growth target of 7.5 percent Jake Spring and Xiaoyi Shao

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hina’s economic growth slowed in the third quarter to its weakest since the 2008/09 global financial crisis as a slumping property market dragged on manufacturing and investment, adding to concerns about flagging global growth.

The world’s second-largest economy grew 7.3 percent between July and September from a year earlier, slightly above the 7.2 percent forecast by analysts but slowing from 7.5 percent in the second quarter.

The slowdown reinforced expectations that Beijing will need to unveil more stimulus measures to avert a sharper slowdown, though analysts appeared divided over whether policymakers would continue to roll out more modest support steps or take more aggressive action such as cutting interest rates.

The weaker gross domestic product figure fed speculation that China will miss its official full-year growth target of 7.5 percent, even though Premier Li Keqiang has stated repeatedly Factory output appeared to be the lone bright spot in the data

GDP is higher than we expected. We guess it may be due to better growth in the services sector Wang Tao analyst UBS

Chinese lead NZ immigration Indians and Chinese led a record annual net gain of 45,500 migrants in New Zealand in the year to the end of September, the government statistics agency announced yesterday.

Migrant arrivals of 105,500 reached a new high in the September year, while migrant departures fell due to fewer New Zealanders leaving for Australia, according to Statistics New Zealand. The net loss of 6,000 people to Australia in the September year was the smallest since 5,900 were recorded in the December 1994 year, said a commentary from the agency.

Top consumer of Vietnam’s fruits China remained the largest market for Vietnamese vegetables and fruits in the first nine months of 2014, according to the latest report by Vietnam Customs.

Local Bao Cong Thuong (Industry and Trade News), an online newspaper under the Ministry of Industry and Trade, said yesterday that during the period, China imported 321.4 million U.S. dollars worth of vegetables and fruits from Vietnam, up 37.7 percent year-on-year, accounting for around 27.7 percent of Vietnam’s total export revenue of vegetables and fruits.

that the country can tolerate slightly lower growth.

Li has instead indicated that the leadership’s bottom line is maintaining robust employment levels to ward off social unrest, a policy priority for China’s stability-obsessed Communist government.

“GDP is higher than we expected.

We guess it may be due to better growth in the services sector,” said Wang Tao, an analyst at UBS in Hong Kong.

“But the weakest part of China’s economy is still the property sector. The government has relaxed some controls recently and property sales may pick up in the fourth quarter. However, we may not see improvement in sectors

like heavy industry and we expect the economy to continue to slow down.”

UBS expects the central bank to cut interest rates by the end of the year, though some other economists believe Beijing is unlikely to take bolder action unless conditions threaten to sharply deteriorate.

On a quarter-on-quarter basis, growth eased to 1.9 percent versus expectations of 1.8 percent and down from 2.0 percent in the second quarter.

A raft of lacklustre and at times alarming economic data presaged slowing third-quarter growth in China, with the growing drag from the property market blunting the impact of stimulus measures rolled out earlier in the year.

Property investment slows further Developers have massive inventories of unsold homes and banks remain reluctant to extend new loans and increase their exposure to the ailing sector

G

rowth in China real estate investment slowed in the first nine months of 2014, while property sales and new construction tumbled, helping to drag broader economic growth to a near six-year low.

Real estate investment, which affects more than 40 other sectors from cement to furniture, rose 12.5 percent in January-September from a year earlier, down from 13.2 percent in the first eight months of the year, the National Bureau of Statistics said on Tuesday.

Revenue from property sales dropped 8.9 percent during the same period, while new construction fell 9.3 percent. Mortgage loans fell 4.9 percent by value in the nine

months, though they did tick higher in September.

The figures were released alongside data showing the world’s second-largest economy grew 7.3 percent between July and September from a year earlier, slightly above expectations but down from 7.5 percent in the second quarter and its weakest expansion since the global financial crisis.

“The weakest part of China’s economy is still the property sector,” said Wang Tao, an analyst at UBS in Hong Kong.

In late September, China cut mortgage rates and downpayment levels for some home buyers for the first time since the 2008 global financial crisis, making one of its

biggest moves this year to boost an economy increasingly threatened by a sagging housing market.

But analysts said it is too early to tell if the move will halt price declines, which have spread to a record number of Chinese cities.

Du Changchun, a Shanghai-based analyst at Northeast Securities.

Facing a tougher time getting credit, developers have been cutting prices and offering increasingly sweeter promotions to entice home buyers and reduce the backlog of unsold units. They have also been cutting back on land purchases, which are crimping revenues for local governments, many of which are saddled with high levels of debt.

Reuters

9

October 22, 2014

Greater China

ore stimuli HKSE wants Shanghai link na will miss its official for commodities While there are many differences between the Hong Kong and Shanghai markets, the link will make adjustments for 90 percent of them Eric Onstad and Harpreet Bhal

T

Other data released alongside the GDP report yesterday showed factory output rose 8.0 percent in September from a year earlier, beating expectations for a 7.5 percent increase and up from August’s six-year low of 6.9 percent.

Fixed asset investment, a key driver of the Chinese economy, was weaker than expected, as were retail sales, and the real estate sector continued to cool.

Fixed asset investment climbed 16.1 percent in the first nine months compared with the same period a year earlier, below forecasts for a 16.3 percent rise and cooling from 16.5 percent in the first eight months of the year.

Retail sales rose 11.6 percent in September from a year earlier, below analysts’ predictions of 11.8 percent and down from the previous month’s 11.9 percent.

With house price declines spreading to a record number of cities and new construction tumbling, the government took aim at reversing the housing slowdown in September, cutting mortgage rates for some home buyers for the first time since the global financial crisis.

But it’s too soon to say whether those measures will turn the market and the economy around. Developers have huge inventories of unsold homes and increasingly risk-averse banks are wary about financing new mortgages which would only increase their exposure to the weakening sector.

While leaders have offered a steady stream of aid to more vulnerable sectors of the economy, they have ruled out massive stimulus as China is still struggling with a mountain of local government debt, the hangover from 4 trillion yuan (US$650 billion) in spending rolled out in 2008/09 to cushion the impact of the global crisis.

However, authorities may resort to bolder and broader measures such as interest rate cuts if quarterly growth threatens to slip below 7 percent, government economists at top think tanks involved in policy discussions said.

Reuters

he Hong Kong stock exchange (HKEx) said it aimed to create a link to trade commodities with mainland China by adapting a share trading system with the Shanghai Stock Exchange that is on the cusp of going live.

No firm date has been announced for the launch of the link between HKEx and the Shanghai exchange, but sources have told Reuters it is due to begin on October 27.

Analysts have hailed the trading scheme as a milestone in the opening up of China’s capital markets, because it allows foreign investors to trade in and out of Chinese stocks in real time.

“If that works and is successfully launched in the coming weeks, there’s no reason not to believe you can replicate that in the commodity space,” HKEx Chief Executive Charles Li said on Monday.

Hong Kong Exchanges and Clearing Ltd took an expensive gamble in December 2012 by paying US$2.2 billion to buy the London Metal Exchange (LME) and diversify into commodities.

Expanding into China, which accounts for about 40 percent of global copper demand and similar shares of other metals trade, is a central strategy in making the LME profitable, officials have said.

“If we are able to find a way to replicate Hong Kong Shanghai Stock Connect in commodities, that will be a transformation,” Li told a seminar

in London during LME Week, the top annual gathering for the industrial metals sector.

“We have to create a platform in Hong Kong with products the Chinese feel they can appreciate and identify with.”

Chinese currency eventually While there are many differences between the Hong Kong and Shanghai markets, the link will make adjustments for 90 percent of them, allowing investors on both sides to carry on trading mostly as usual, Li said.

KEY POINTS HK-Shanghai link for shares due to be launched shortly HKEx wants to replicate that for commodities trading LME metal contracts seen eventually moving to renminbi

Eventually, the main industrial metals contracts on the 137-yearold LME will be denominated in the Chinese currency, other speakers said.

Open interest originating from China in global industrial metals markets has surged to about 22 percent from 7 percent in 2006, and it’s likely that share could rise to over 50 percent in coming years, said Michael Camacho, co-head of global commodities at JP Morgan.

“I see no reason why we couldn’t see a critical mass of volume develop in what is the most important local currency,” he said.

Arthur Fan, chief executive of the commodities business of Bank of China International, said the move to trading LME metals in renminbi was inevitable. “It’s not a matter of whether we will see it, but when. It’s a matter of timing.”

HKEx already plans to launch “mini” contracts in copper, aluminium and zinc based in renminbi, but the main LME contracts in dollars still serve as global benchmarks, and it may take time for those to change, said Rebecca Brosnan, head of Asia commodities for HKEx. The lot size for these contracts will be 5 tonnes, rather than the 25 tonnes that trade on the LME. The LME’s new clearing house plans to add the Chinese currency as acceptable collateral before the end of the year.

Reuters

10

October 22, 2014

Greater China

M&A watchdog halves time taken to approve deals MOFCOM is reducing legal costs by up to 40 percent to about US$80,000 on average for simple cases

C

hina’s M&A watchdog is getting much faster at approving both domestic and foreign deals, cutting legal costs for companies and marking a shift in the outlook of a regulator that has been a thorn in the side of bankers since its creation.

While the Ministry of Commerce’s anti-monopoly bureau has blocked only two deals since its inception in 2008, the entity known as MOFCOM has attracted international criticism from merger and acquisition lawyers and bankers.

MOFCOM has been slammed for being slow to clear even small-sized deals and for imposing conditions, such as business divestments, on foreign-to-foreign mergers that barely touch the China market and which have been unconditionally cleared by the United States and Europe.

But the introduction of a new procedure in April for what MOFCOM describes as “simple cases” has nearly halved the length of time it takes to win clearance. Lawyers say the move is part of a broader strategy to increase efficiency at the resource-strapped regulator and to help improve its professional image.

This month, MOFCOM also published its most comprehensive data set yet tracking both transaction filing and approval dates. Lawyers say it is a milestone for the agency, which has become notorious for its opacity.

MOFCOM is making it easier for companies to plan and execute acquisitions, and that is reducing legal costs by up to 40 percent to about US$80,000 on average for simple cases, lawyers say.

The regulator took an average of 26 calendar days to approve deals

Shanghai, business’ heart of China

that were filed under the new simple case procedure, according to law firm Norton Rose Fulbright’s analysis of the transaction data.

The data covers 20 transactions filed and cleared between May and the end of September. The fastest clearance - Rolls-Royce Holdings’ move to take full control of its joint venture Rolls Royce Power Systems - was approved in just 19 days.

A pre-acceptance period of around four to eight weeks during which lawyers work with MOFCOM to prepare the filing is not captured by this data.

All told, however, lawyers say

Rising incomes defy GDP slowdown

C

hina’s economy is slowing. Yet for the person on the street, incomes are rising, jobs are secure and inflation is restrained, helping explain the government’s restraint in eschewing broadbased stimulus.

Obscured among the avalanche of data accompanying yesterday’s report that China’s economic growth slowed to the weakest pace since 2009 in the third quarter are income statistics. They showed a rising share of output in the world’s second-largest economy is landing in the pockets of its citizens.

Urban resident’s disposable incomes rose 9.3 percent in the first three quarters from the same period a year ago, while rural resident’s cash income jumped 11.8 percent, the National Bureau of Statistics said.

Monthly wages of the 176 million migrant workers who fill factories and construction sites are also rising, the statistics agency said.

China’s middle class -- more populous than the combined peoples of France and Germany -- is leading a surge in consumer power that’s

This is on par with a simple case in the EU Marc Waha Norton Rose Fulbright partner

acquisitions that previously took five to eight months to clear can now be passed in between three and five months using the simple process.

To be sure, MOFCOM still has a long way to go. Some law firms are reluctant to use the new procedure because the bases on which a deal could qualify as “simple” are not yet 100 percent clear.

And the blockbuster international deals that China believes could threaten its industrial policy goals remain shrouded in uncertainty, as evidenced by its decision to block a planned alliance of the world’s top three container shipping lines in June.

MOFCOM did not respond to faxed and emailed requests for comments.

Speaking at a press briefing in February, Shang Ming, the bureau’s director-general, said MOFCOM was introducing the simple procedure to “improve efficiency” at the agency.

After five years, MOFCOM has learnt that the vast majority of cases do not harm domestic competition, he added.

“There has been a change in philosophy at MOFCOM,” said Liyong Jiang, a partner at Beijingbased Gaopeng & Partners and a former MOFCOM official. He and others said the agency has worked hard to improve its sector knowledge and has more confidence to identify and approve simple cases.

The simple case procedure is expected to speed up complex transactions, since MOFCOM will have more time to devote to these deals. Lawyers also believe MOFCOM is trying to encourage parties which in the past have taken a risk not to seek clearance, to comply with the law.

Reuters

Urban residents’ disposable incomes rose 9.3 percent in the first three quarters from the same period a year ago

creating billionaires like Alibaba Group Holding Ltd.’s chairman Jack Ma. Rising incomes and spending are also underpinning an economy weighed by a property slump.

Consumption contributed 48.5 percent to gross domestic product growth in the first three quarters, statistics bureau data showed, from 45.9 percent in the same period last year.

Strong jobs Despite the economy’s slowdown, the surveyed jobless rate in Chinese cities remained about 5 percent through the January to August period, Premier Li Keqiang told a forum in Tianjin last month. China’s consumer-price index rose 1.6 percent in September, data showed last week, below estimates for a 1.7 percent gain and down from August’s 2 percent increase.

Labour authorities in Guangdong, China’s manufacturing powerbase, said the benchmark guideline for wage increases was 9 percent for 2014. In Hebei province, which reported the

second- lowest GDP growth in the first half, the government last week announced it will raise minimum wages by an average of 12 percent this year.

Inequality is the downside of the

incomes story: Per-capita cash income of 8,527 yuan (US$1,400) for the nine months through September in rural China was less than half of the 22,044 yuan urban disposable income.

Bloomberg News

11

October 22, 2014

Greater China

Australia poised to seize assets of corrupt Chinese A

ustralia is poised to help China seize assets from corrupt officials and assist Beijing in extraditing economic fugitives, a report said yesterday.

Corruption has caused widespread public anger in China, and President Xi Jinping has vowed to root out crooked officials ranging from high-ranking “tigers” to low-level “flies”.

Recent reports said several of Beijing’s most-wanted had been tracked to Australia -a country, along with the United States and Canada, is seen as a favoured destination for illicit Chinese money.

Commander Bruce Hill, the manager of the Australian Federal Police’s operations in Asia, said authorities were ready to seize assets of corrupt officials within weeks, in an unprecedented joint operation with their Chinese counterparts.

He told the Sydney Morning Herald that both sides had agreed on a priority list of alleged economic fugitives who have taken residence in Australia.

Among them are naturalised Australian citizens and permanent residents who for years have laundered money under the guise of being genuine investment or business migrants from China, according to a report

A typical scenario involved officials sending their spouses and children overseas, often using them as a conduit to shift assets offshore

Australia, along with the United States and Canada, are seen as a favoured destination for illicit Chinese money

published in the newspaper yesterday.

“They don’t all of a sudden leave overnight and take a bag of money with them. In some cases they’re very carefully planned,” said Hill, who is based in Beijing.

He explained that a typical scenario involved officials sending their spouses and children overseas, often using

them as a conduit to shift assets offshore.

With barely any assets to their name, the official can then join their family overseas.

Hill said the priority list was culled from a broader list of “less than a hundred people”, and that the assets being pursued were in the “many hundreds of millions

of dollars”.

Last week China’s foreign ministry expressed concern that Australia’s introduction of a new “premium investor visa” -- giving immigrants residency after a year if they invest Aus$15 million (US$13 million) -- could be abused by corrupt Chinese officials.

“I need to point out China

is ramping up its campaign on corruption,” said spokesman Hong Lei. “Part of that campaign is to retrieve the embezzlements that have been siphoned to overseas.

“We need the Australian cooperation on this. We don’t want these corrupt officials or fugitives to find safe havens overseas.”

AFP

CNR to pitch high-speed trains to California Manufacturers are expected to send in expressions of interest by October 22 to the California High Speed Railway Authority

S

tate-backed China CNR Corporation is making a pitch to sell its high-speed trains to California, signalling China’s growing export ambitions for such technology after building the world’s longest network in just seven years.

It marks the first concrete attempt by China to sell high-speed locomotives abroad and establish itself as a credible rival to sector leaders such as Germany’s Siemens, Canada’s Bombardier and Japan’s Kawasaki.

CNR, its unit Tangshan Railway and U.S.-based SunGroup USA are submitting an expression of interest to California’s US$68 billion highspeed rail project for a contract to supply up to 95 trains that can travel as fast as 354 kilometres per hour, SunGroup told Reuters.

Manufacturers are expected to send in expressions of interest by October 22 to the California High Speed Railway Authority, which will later issue formal requests for proposals. About a dozen firms from places such as Japan and Spain are expected to compete, it said.

California has been candid about

its desire for Chinese investment in the 1,287 kilometres line from Los Angeles to San Francisco; U.S. media reports said governor Jerry Brown met Chinese rail officials in April last year, including those from Tangshan Railway, to discuss the project.

No estimates for the contract’s value have been published, but in its 2014 business plan the California High Speed Railway Authority estimated each train set would cost US$45 million, based on a purchase of 70 vehicles.

KEY POINTS

Lofty ambitions China has made no secret of its desire to export its high-speed technology abroad, having built over 12,000 kilometres of track at home in less than a decade. CNR and CSR Corp are China’s largest locomotive makers, while China Railway Construction and China Railway Group build track.

The country has helped or indicated its interest to build thousands of kilometres of high-speed track in countries such as Turkey, Saudi Arabia and Venezuela, though it has

yet to sell a high-speed train abroad.

Premier Li Keqiang - dubbed by local media as China’s high-speed rail salesman - has led a drive to promote its technology in Thailand, Britain, Russia and India.

A Chinese consortium was the only competitor to present a bid for a tender to build a 210-km highspeed rail line in Mexico, the Mexican government said last week.

Reuters

State-backed China CNR Corp to bid to sell high-speed trains China has world’s longest high-speed train network California seeking expressions of interest by October 22 US$68 bln project seeks up to 95 trains as fast as 354 kph

12

October 22, 2014

Asia

India steps closer to ending monopoly on coal Only companies incorporated in India will be allowed to bid in privatization auctions Rajesh Kumar Singh and Rakteem Katakey

I

ndia stepped closer to ending a four-decade-old government monopoly on mining and selling coal as Prime Minister Narendra Modi seeks to tackle fuel shortages.

The government approved a decree enabling it to permit commercial mining in future, Finance Minister Arun Jaitley said at a briefing in New Delhi, without giving a timeline. The ordinance also allows auctions of coal mines to private companies for their own use, he said.

Modi made curbing blackouts a priority after sweeping to office in May on a pledge to revive growth in Asia’s third-largest economy from near the slowest pace in a decade.

State-owned Coal India Ltd. has missed output targets in at least the past four years, and easing its grip may allow companies such as Sesa Sterlite Ltd. and NMDC Ltd. to profit from the world’s fifth-biggest reserves.

Enabling private companies to mine and sell coal would be “one of the key game-changing reforms,” said Sonal Varma, an economist at Nomura Holdings Inc. in Mumbai.

Opening up the coal industry risks stoking protests by some of Coal India’s about 325,000 workers and executives, at the same time as the government prepares to sell a 10

percent stake in the company that would fetch about 228 billion rupees (US$3.7 billion).

Earlier attempt The government has previously attempted to open coal mines for non-state companies. A bill to allow mining and sale of coal commercially was introduced in the parliament in April 2000. Successive governments failed to push the law through, after protests from various trade unions, according to a statement on the Press Information Bureau’s website.

Modi on October 18 scrapped controls on diesel prices and increased natural gas tariffs for the first time in four years in his biggest steps toward curbing subsidies, spurring energy output and boosting growth.

State-owned companies requiring coal, such as NTPC Ltd. and Steel Authority of India Ltd., will be allocated coal mines, according to Jaitley. Private companies can bid for mines in an electronic auction, he said.

Indian companies Only companies incorporated in India will be allowed to bid in the

Modi on October 18 scrapped controls on diesel prices and increased natural gas tariffs for the first time in four years in his biggest steps toward curbing subsidies

auction, which will include some of the 214 mines allotted to companies for their own use that were cancelled by the Supreme Court last month, Power Minister Piyush Goyal told reporters yesterday.

Companies which are convicted of wrongdoing in coal mine allocations will be barred from bidding, Jaitley said. The Central

Sumitomo to increase unhedged foreign bonds

KEY POINTS Expects markets to calm down after volatility

The company increased its holdings of foreign bonds by around 700 billion yen in April-September

Increased foreign bonds by Y700 bln in April-Sept

Hideyuki Sano

S

Bureau of Investigation is probing the case.

The ordinance will lapse if parliament fails to support the measure in a vote within six weeks of the opening of its next session, expected next month. The decree will also allow the transfer of land over the cancelled mines to the winning bidder. The price for the land would

Unhedged foreign bonds up by more than Y100 bln

umitomo Life plans to gradually raise foreign bonds in its portfolio without currency hedging, a senior company official said yesterday, as it expects the yen to weaken further.

Although the yen has strengthened in the past two weeks on safe-haven buying from growing concerns over

the health of the global economy, Japan’s fourth-largest life insurer expects risk appetite to come back eventually.

“Investors will likely be risk averse for the time being. But there is no change in our view that the U.S. recovery will continue. Markets will regain calmness,” said Iwao

Matsumoto, general manager of investment planning at the insurer.

Investment plans by Japanese life insurers, which collectively manage more than 180 trillion yen (US$1.7 trillion) of assets, are closely watched by financial markets.

Sumitomo Life Insurance Co, with total assets of about 26 trillion yen

Yen bond holdings up by Y200 bln in H1, sees smaller rise in H2

(US$243.5 billion), started taking on currency exposure only last year after having fully hedged currency risks on foreign bond investments for years in the wake of the 2008/09

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 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.

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13

October 22, 2014

Asia Japan’s new minister determined on nuclear restart Miyazawa, a former vice economics minister, replaces Obuchi, who resigned on Monday Mari Saito and Kentaro Hamada

J We’ll resist every move to privatize the sector Jibon Roy All India Coal Workers Federation general secretary

be decided by a committee later, Jaitley said.

Modi’s government implemented th e ordinance to boost coal production and curb imports of the fuel amounting to US$20 billion a year, Jaitley said. The move doesn’t count as de- nationalization of the industry, he added.

apan’s newly appointed trade minister, Yoichi Miyazawa, said yesterday that he would continue with the policy of seeking to restart nuclear reactors deemed safe by the atomic regulator.

Miyazawa, speaking to reporters, also said he would move towards restarting Kyushu Electric Power Co’s Sendai plant in south-western Japan.

As head of Japan’s powerful Ministry of Economy, Trade and Industry (METI), Miyazawa faces the tough task of selling the unpopular policy of restarting the country’s idled nuclear plants amid continued safety fears after the Fukushima disaster.

The new minister’s comments could help ease concerns of nuclear power supporters from the sudden departure of his predecessor, Yuko Obuchi, who was viewed as a favourable candidate to sell the government’s policy of restarting nuclear plants.

“There is no question that atomic power is an important base load energy source for Japan’s future,” said Miyazawa, adding he planned to visit Kagoshima, home to Kyushu Electric Power Co’s Sendai plant,

at the earliest opportunity to meet with local authorities.

Miyazawa, a former vice economics minister, replaces Obuchi, who resigned on Monday.

Obuchi’s sudden departure from METI was seen as a disappointment for some, who hoped her role as a mother would soften public scepticism towards Prime Minister Shinzo Abe’s policy of restarting nuclear plants.

All 48 of Japan’s nuclear reactors were gradually taken offline after 2011 and opinion polls have consistently shown that a majority of Japanese are opposed to restarting reactors since the meltdowns at the Fukushima Daiichi station after an earthquake and tsunami.

Kyushu Electric’s two-reactor Sendai plant passed the Nuclear Regulation Authority’s (NRA) key safety check last month and is expected to be the first to be restarted under strict guidelines set by an independent regulatory agency.

The utility still needs to pass operational safety checks by the nuclear regulator, making it difficult to determine the timing of the restart even after local approval.

Reuters

Bloomberg News

financial crisis.

The company increased its holdings of foreign bonds by around 700 billion yen in April-September, including more than 100 billion yen without currency hedging, Matsumoto said.

In contrast, it increased yen bonds -- the core part of the portfolio for Japanese insurers -- by just 200 billion yen.

Sumitomo has said in April it planned to shift some funds out of long-term domestic bonds to foreign bonds in the current year to March, as bond yields in Japan are too low.

But it brought forward its plans to shift earlier than planned, Matsumoto said.

In the second half-year of the year, however, it does not plan to increase the holdings further and is taking a flexible stance as it has already “front-loaded” its investment in foreign bonds, he added.

Instead Sumitomo plans to increase yen bond holdings in October-March, though its buying will be smaller than in April-September because the company has already bought them ahead of plans as well, Matsumoto also said.

JGB yields have fallen to historic lows due largely to the Bank of Japan’s massive asset purchases since April 2013.

The 10-year JGB yield fell to a 1-1/2-year low of 0.465 percent last week.

Reuters

S.Korea warns it may cancel BAE systems contract

S

Startup growth in South Korea slowed for two straight months due to less business days, central bank data showed yesterday. The number of newly established firms registered in the court as a corporate body stood at 6,400 in September, down 151 from a month earlier, according to the Bank of Korea (BOK). It was attributed to the Chuseok holiday, equivalent to the Thanksgiving Day in the United States, which reduced the country’ s working day by one in September compared with the prior month. The figure continued to fall after peaking at 8,129 in July.

Myanmar, Brunei mutually exempt visa Myanmar and Brunei have mutually exempted visa for ordinary passport holders of the two countries, according to a press statement published yesterday.

The mutual visa exemption for a stay period of not exceeding 14 days is aimed at strengthening the existing friendly relations in all fields between the two countries and simplifying the procedures and facilitating travel of citizens of the two countries, the statement said.

Both Myanmar and Brunei are members of the Association of Southeast Asian Nations (ASEAN).

S.Korea Oct 1-20 exports rise South Korean exports for the first 20 days of this month rose 4.1 percent over the comparable period last year, customs agency data showed yesterday, while imports slipped by 3.7 percent. Exports for the October 1-20 period totalled US$29.592 billion and imports amounted to US$27.204 billion, Korea Customs said on its website. The trade surplus for the 20-day period is US$2.388 billion, according to Thomson Reuters calculations. The trade ministry will release preliminary trade figures for the whole month on November 1.

Singapore slowing housing supply

Large cost increase could force Seoul to reopen the competition since current rules allow for only a 20-percent cost rise in weapons programs outh Korea said it could cancel a planned US$1 billion-plus deal for BAE Systems Plc. to upgrade its F-16 fighter jets and seek a new different contractor if talks with the British company do not proceed smoothly.

The contract, which is between the U.S. and South Korean governments with the work outsourced to BAE, has run into trouble after the U.S. Air Force added on significant risk “reserves” to proposed costs, said two U.S.-based sources familiar with the matter.

While BAE has been on cost and schedule with an initial US$140 million development contract for the upgrades of the 134 jets, the U.S. government has warned South Korea the projected cost of 1.75 trillion won (US$1.7 billion) could rise by 800 billion won, said one source familiar with the matter.

“We hope to remain committed to the existing contract,” Baek Younhyeong, a spokesman for South

S.Korea’s startup growth slows

Korea’s arms procurement agency, told Reuters in Seoul.

The large cost increase could force Seoul to reopen the competition since current rules allow for only a 20-percent cost rise in weapons programs, said the source, who asked not to be identified as the procurement process is confidential.

BAE has assured Seoul that it would cover any cost overruns on its part of the contract, and that the projected cost increase was based on false assumptions, said the two sources.

BAE spokesman Brian Roehrkasse said his company remained committed to the terms of the firm-fixed price contract initially negotiated, despite disagreements between the Air Force and South Korea about the overall cost.

Vice Admiral Joe Rixey, who runs the Pentagon’s Defence Security Cooperation Agency, is due to meet with South Korean officials about the issue this week, said the sources.

Reuters

The housing supply in Singapore, including both units developed by the government and those by the private developers, will continue to slow next year, National Development Minister Khaw Boon Wan has said. Khaw said that it was not the time yet to re-examine property cooling measures, local daily Straits Times reported yesterday.

The minister said in a blog post and on a Mandarin television that there will be 25 percent fewer build-to-order flats next year. Build-to-order flats are the main type of public housing projects.

Korean corporate bond sales increased Corporate bond sales in South Korea posted a double-digit increase in September on expectations for the Bank of Korea’s additional rate cut, financial watchdog data showed yesterday. Corporate debt financing, including bond sales by industrial companies, banks and financial firms, expanded 57.5 percent from a month earlier to 10.59 trillion won (US$10 billion) in September, according to the Financial Supervisory Service.

The increase came amid expectations that the central bank would cut interest rates further. Bonds issued by industrial companies advanced 85 percent from a month earlier to 3.9 trillion won in September.

14

October 22, 2014

International Codelco’s Rajo mine

Total CEO’s plane crashed in bad visibility Russia’s transportation watchdog said yesterday that the plane in which the head of French oil major Total, Christophe de Margerie, was killed in a Moscow airport late on Monday crashed in “bad visibility”. Rostransnadzor also said it had started investigating the accident at Moscow’s Vnukovo Airport, where the private jet collided with a snow plough as it was taking off.

Air France offers NY slots to end probe SkyTeam’s Air France-KLM Group, Delta Air Lines Inc. and Alitalia SpA offered to give up landing and take-off slots on routes to New York to resolve a European Union antitrust probe. The three airlines’ offer would make arrival and departure windows available at both ends of the Amsterdam-New York and Rome-New York routes to facilitate the market entry of competitors, the European Commission said today in a statement. The EU will review industry reaction to the proposed deal before deciding whether to accept the proposals.

Rwanda preparing next Eurobond issue Rwanda still plans to launch another Eurobond to fund infrastructure projects in the fast-growing economy, though the size and timing of it is still being worked out, Finance Minister Claver Gatete said. The landlocked African nation of 11 million people has been attracting a steady stream of investors and firms drawn by a small but growing market, and its debut US$400 million Eurobond in 2013 was heavily oversubscribed. Rwanda will also continue its quarterly issuance of local bonds in 2015 to deepen its capital markets.

Staples probing payment card data breach Staples is investigating a possible breach of payment card data and has contacted law enforcement about the matter, making it the latest U.S. retailer to become a possible victim of a cyberattack. “Staples is in the process of investigating a potential issue involving credit card data and has contacted law enforcement,” company spokesman Mark Cautela said in a statement late Monday. The office-supply retailer disclosed the investigation after security reporter Brian Krebs reported on his blog that several banks have identified a pattern of payment card fraud.

Ackman warns on discredit campaign Billionaire investor William Ackman, whose fund is the largest shareholder in Allergan and Valeant Pharmaceuticals said the botox maker’s Chief Executive Officer David Pyott tried to discredit Valeant as it was making a hostile takeover bid, court documents showed. The court filing made late on Monday in California further raises the tensions between the two sides in a deal that could become the year’s biggest if it is completed. Ackman’s hedge fund has been working with Valeant for months to craft a deal for Valeant to buy Allergan, but Allergan has rejected all of Valeant’s overtures and tried to find other potential partners to avoid a deal.

Codelco promises clarity on growth plan The company is relying on debt in addition to funds from the government and its next bond issue is likely to be in the next two months for fuelling its plan

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orld No. 1 copper producer Codelco will announce the results of a projects review in the coming months, including whether there are any delays to its ambitious -but vital -- multi billion-dollar growth plan, its chairman told Reuters.

State-owned Codelco produces about a tenth of the global supply of mined copper and is a key engine of Chile’s economic growth and development.

But it is at a critical stage: it needs to invest roughly US$30 billion to upgrade its mines and counter falling production in the next few years -- a task which many analysts warn will be technically challenging and could be hit by delays.

Like other copper miners, it is also grappling with a fall in the copper price, down more than a third from a 2011 peak.

As part of the terms of his employment, Nelson Pizarro, who took over as chief executive of the company in September, asked to carry out a 2-3 months technical review of all the projects Codelco is planning to ensure their viability.

“Our commitment is if we have to give bad news, we are going to give it straight away to the people of Chile who own this company,” Chairman Oscar Landerretche said in an interview in Codelco’s London office, during the annual LME Week industry gathering.

He added, however, that whatever the results of the review, Codelco cannot consider shelving any of its big three projects -- Chuquicamata, Andina and El Teniente -- and that funding was no longer an excuse after earlier this year the government committed US$4 billion through 2018 to at least partly finance Codelco’s ambitious plan.

Under the growth programme, Codelco should boost production to some 2.5 million tonnes per year in 10 years time, and then settle at 2.22.3 million for another two decades or more. This compares with current production of about 1.7-1.8 million tonnes a year. Without the expansion, its output would halve within 6-8 years on the back of lower copper grades at aging mines.

Landerretche said Codelco had been a victim of procrastination of the projects under previous administrations

but the silver lining was that the cost of project construction was now falling, given far fewer companies are embarking in mining projects at a time of weaker commodity prices.

The mining company gives all its money to the state, which then decides on an annual basis how much to return to the miner. That exposes it to the spending priorities of the government.

Landerretche said he was satisfied with the funding mechanism and happy with the US$4 billion earmarked, adding that this was a strong signal of confidence that would raise investors’ interest in buying the company’s bonds.

The miner has already issued about US$800 million in debt this year out of a planned annual issuance of US$1.7 billion.

With increased confidence in funding, a main focus for the company is now to improve its technical capabilities, potentially by hiring operational staff from outside Chile.

A second main effort will be to improve corporate governance by strengthening auditing and imposing restrictions on conflicts of interest.

Reuters

New Microsoft CEO pay tops US$80 mln Most of it Nadella cannot actually receive until 2019

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icrosoft Corp’s new Chief Executive Satya Nadella has become one the technology industry’s biggest earners, with a total compensation package worth US$84.3 million this year, according to a document filed with securities regulators.

The massive stock awards, valued at US$79.8 million overall, were designed to keep Nadella at Microsoft while the company was hunting for a new CEO and to give him long-term incentives as CEO. Large stock awards have not been necessary for Microsoft’s previous two CEOs, Bill Gates and Steve Ballmer, as both had multi-billion dollar holdings in the company. Microsoft is also slightly hampered in ensuring the loyalty of its top executives as none of them have employment contracts with the company.

According to Microsoft’s proxy statement filed with the U.S. Securities and Exchange Commission, Nadella is slated to receive stock worth an estimated US$59.2 million under a long-term incentive scheme that

Disclosure of Nadella’s rich pay package comes at an awkward time for the new CEO, just 11 days after he urged women in technology not to ask for pay raises but trust in “karma” to get a fair salary

stretches out over seven years and is dependent on Microsoft’s shares beating the Standard & Poor’s 500 index. He got a further award

worth US$13.5 million to stay at the company while it was searching for its next CEO. Excluding those one-time stock awards, Nadella’s pay package totalled US$11.6 million this year, including US$918,000 in salary, a US$3.6 million cash bonus, and an annual stock award valued at just over US$7 million.

Nadella was not the only executive to benefit from the uncertainty at Microsoft between August last year and February, as the company looked for its next CEO. Chief Operating Officer Kevin Turner was awarded shares valued at US$10 million and head lawyer Brad Smith was awarded US$9.6 million worth.

In the future, Nadella’s compensation is set to be more modest, with “total target compensation” for fiscal 2015 set at US$18 million, according to the company’s proxy filing. That includes a base salary of US$1.2 million, a maximum cash bonus of three times his salary, plus shares worth US$13.2 million.

Reuters

15

October 22, 2014

Opinion Business

wires

Leading reports from Asia’s best business newspapers

THE PHNOM PENH POST

America, the balanced Jeffrey Frankel

Professor of Capital Formation and Growth at Harvard University

Edible bird’s nest producers have called on the Ministry of Commerce (MoC) to facilitate the industry’s access to the Chinese market. Nang Sothy, president of the Cambodia Bird’s Nest Federation, said on Monday that the association had requested the MoC to include the delicacy on the list of items eligible to apply for China’s strict Sanitary and Phytosanitary (SPS) protocols. “Cambodia has never officially exported to China. But now we want to be their official supplier so that we no longer depend on Vietnam and Thailand to access the market,” Sothy said.

THE JAKARTA POST Foreign leaders congratulated Joko “Jokowi” Widodo on Monday on his presidential inauguration, saying that they were looking forward to working with Indonesia’s seventh president to strengthen ties and boost bilateral cooperation. Speaking to local reporters after attending Jokowi’s swearing-in ceremony at the People’s Consultative Assembly (MPR) building in Senayan, Central Jakarta, Malaysian Prime Minister Najib Razak said that he saw Jokowi’s leadership as a “good sign” for future relations between the neighbouring countries.

VIETNAM NEWS The State Bank of Viet Nam approved the addition of 19 projects to a pilot programme that offers preferential loans for agricultural development.

The beneficiaries of the soft loans are 19 projects from 16 cities and provinces nationwide. They will get a total of VND1.926 trillion (US$90.42 million) at preferential interest rates of 7 per cent per year for short-term loans, 10 per cent for medium-term loans and 10.5 per cent for long-term loans. Short-term loans will be given to farmers to buy fertilisers, seedlings and poultry and livestock breeds, as well as agricultural equipment.

THE KOREA HERALD South Korea’s top fixedline network operator KT Corp. said yesterday it has launched the Asia Pacific Gateway (APG) Network Operation Centre in Busan to manage the submarine cable connecting South Korea and eight Asian countries.

“By opening the centre, KT will take its role as the leader of the APG by managing the overall operation of the submarine cable,” the company said. The APG is a11,000-kilometer-long submarine cable that connects nine Asian countries, including South Korea, China and Japan, and is set to be completed next year.

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hen the United States’ current account fell into deficit in 1982, the US Council of Economic Advisers accurately predicted record deficits for years to come, owing to budget deficits, a low national saving rate, and an overvalued dollar. If the US did not adjust, knowledgeable forecasters intoned, it would go from being the world’s largest creditor to its largest debtor. Many of us worried that the imbalances were unsustainable, and might end in a “hard landing” for the dollar if and when global investors tired of holding it.

The indebtedness forecasts were correct. Indeed, every year for more than three decades, the US Bureau of Economic Analysis (BEA) has reported a current-account deficit. And yet now we must ask whether the US current-account deficit is still a problem.

For starters, the world’s investors declared loud and clear in 2008 that they were not concerned about the sustainability of US deficits. When the global financial crisis erupted, they flooded into dollar assets, even though the crisis originated in the United States.

Moreover, a substantial amount of US adjustment has taken place since 1982 – for example, the dollar depreciations of 1985-1987 and 2002-2007 and the fiscal retrenchments of 1992-2000 and 2009-2014.

The big increase in domestic output of shale oil and gas has also helped the trade balance recently.

As a result, the US current-account deficit in 2013 had narrowed by half in dollar terms from its 2006 peak, and from 5.8% of GDP to 2.4%. This is a decline of two-thirds when

expressed as a share of global output.

A symmetric adjustment has also occurred in China, via real appreciation of its currency and higher prices for labour and land.

China’s current-account surplus peaked in 2008 at more than 10% of GDP and has since narrowed dramatically, to 1.9% last year. China’s trade adjustment in some respects followed that of Japan, the original focus of American trade anxieties in the 1980s.

I propose a third, more speculative reason why it may be time to stop worrying about the US current-account deficit. It is possible that, properly measured, the true deficits were smaller than has been reported, and even that, in some years, they were not there at all.

Every year, US residents take some of what they earn in overseas investment income – interest on bonds, dividends on equities, and repatriated profits on direct investment – and reinvest it then and there.

For example, corporations plow overseas profits back into their operations, often to avoid paying the high US corporate income tax implied by repatriating those earnings.

Technically, this should be recorded as a bigger surplus on the investment-income account, matched by greater acquisition

of assets overseas. Often it is counted correctly. But there is reason to think that this is not always the case.

The world has long run a substantial deficit in investment income, even though the correct numbers should sum to zero.

The missing income must be going somewhere.

Even for officials as highly competent as those at the BEA, it is impossible to keep track of all of the stocks and flows in the international economy.

Everyone knows that errors and omissions are large, especially when it comes to financial transactions. Underfunding of statistical agencies exacerbates measurement problems, but it does not create them.

Less well known, however, is a particular pattern in the revisions of the US international investment position.

The currently available historical statistics show that in every year from 1982 to 2000, the initial estimate of the net international investment position was subsequently revised upward, as statisticians found overseas assets about which they previously had no way of knowing.

Since then, some subsequent revisions have been positive and some negative. But, despite more frequent surveys of portfolio holdings in recent years, certain new asset acquisitions – for example, some held with foreign custodians – still most likely go unreported.

And yet now we must ask whether the US currentaccount deficit is still a problem

The numbers are potentially large. The reported US current-account deficits from 1982 to 2013, based on subsequent revisions, total $9.5 trillion. And yet the deterioration in the US international investment position over this period was not much more than half of that amount (US$5.7 trillion if measured relative to the revised estimate for 1981).

Certainly a lot of the discrepancy is attributable to valuation effects: since 1982, the dollar value of overseas assets has increased repeatedly, owing to increases in the dollar value of foreign currency and increases in the assets’ foreign-currency value. But part of the discrepancy also reflects the discovery of missing assets, some of which may have originated in the reinvestment of overseas income.

The missing credits also originally could have been earned in other ways. For example, US multinational corporations sometimes over-invoice import bills or under-report export earnings to reduce their tax obligations. Again, this would work to overstate the recorded current-account deficit.

Consider an (admittedly extreme) illustration. If true investment income were double what is reported, the difference was reinvested abroad in the years 1982-2000, and those assets were discovered by 2014, that would explain about half of the upward revision in the US net international investment position.

If something like this under-reporting of reinvested earnings or other balance-of-payments credits has gone on in the past, it may still be going on today – especially with US firms becoming aggressive about arbitraging corporate income tax.

And if true investment income is indeed as large as double what is reported, the true US current-account balance entered the black in 2009 and has been in surplus ever since.

Project Syndicate

16

October 22, 2014

Closing Hong Kong’s inflation quickens to 6.6 percent

China weighs letting local governments issue bonds

The overall Consumer Price Index of China’s Hong Kong in September rose 6.6 percent from a year ago, larger than the 3.9 percent increase in August this year. This was mainly due to the low base of comparison resulted from the government’s payment of public housing rentals in September, the city’s statistics department said here yesterday.

Netting out the effects of all government’s one-off relief measures, the year-on-year rate of increase in the CPI in September was 3.3 percent, slightly larger than the 3.2 percent in August, due to the upward adjustment in public housing rentals.

China’s Ministry of Finance has circulated a draft document on how it might let local governments (Shanghai local government headquarters pictured) raise funds for projects under way, including allowing them to issue bonds to replace outstanding debt, people knowledgeable about the document said. If such issuance is allowed, that could generate a massive expansion of the country’s fledgling municipal bond market. The draft comes after Beijing earlier this month cut access to the financing vehicles that localities had relied on for funds. The draft is not yet policy but has been distributed to officials to seek their opinions.

Daily steel output rises to near record high Persistent overproduction in the world’s biggest steel market has driven prices to record lows this year

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hina’s daily crude steel runs rose 1.3 percent in September to the highest level in three months, data from the country’s statistics agency showed, suggesting mills were still close to full capacity despite weak demand and a steep slump in prices.

Persistently high steel output from the world’s top producer could further drag on Shanghai rebar futures, which sank 13 percent last month, and also dent spot iron ore prices that are reeling from a supply glut as global miners of the steelmaking ingredient push ahead with expansion plans.

China produced 67.54 million tonnes of crude steel in September, down 2 percent from the previous

month and flat compared to the corresponding month of 2013, data from the National Bureau of Statistics showed yesterday.

But the daily output rate rose to 2.25 million tonnes from 2.22 million tonnes in August, driven by a slight improvement in industrial activity. This was the highest since June when output touched a record of 2.31 million tonnes per day.

China’s total crude steel output is expected to reach around 820 million tonnes this year, short of its overall capacity estimated at 1.1 billion tonnes but still outstripping

demand which has been hit hard by a sluggish economy.

Little upcoming joy Persistent overproduction in the world’s biggest steel market has driven prices to record lows this year, and despite a surge in imports, iron ore prices have also slumped around 40 percent since the beginning of 2014.

Crude steel output over the first three quarters of the year reached 618 million tonnes, up 2.3 percent on year, the National Bureau of Statistics said.

Based on September daily runs,

KEY POINTS Output dips 2 percent on month, but daily rates inch up Daily crude steel output at highest in three months Daily steel product output at record high of 3.2 mln T Sector hopes rest on supply cut ahead of APEC summit

output stood at 821.25 million tonnes on an annualised basis, up 5.4 percent from the official 2013 rate, according to Reuters calculations, which do not take into account a 3.7 percent upward revision to last year’s January-September production data.

While production has remained close to record highs, the China Iron and Steel Association (CISA) has said that apparent steel demand actually fell in the first eight months of 2014, with all additional production over the period diverted to the export market.

Mounting losses and financing problems have already forced a number of steel producers to halt their operations, but the impact on overall output has been negligible, with other mills stepping in to fill the gap.

October production also appears to be holding up, with CISA data showing daily output from large steel mills reached 1.804 million tonnes in the first 10 days of the month, up 0.8 percent from Sept. 21-30.

However, steel product output fell 11.4 percent over the period, with several mills taking advantage of the October 1-8 National Day holiday to overhaul their rolling facilities.

Many in the sector are now hoping that efforts to guarantee air quality during the Asia-Pacific Economic Cooperation (APEC) summit in Beijing in early November will serve to reduce supply and provide a shortterm boost to steel prices.

All steel production within a 100-kilometre radius of Beijing is likely to be suspended during the summit, industry consultancy Mysteel said.

Substandard facilities within 200 kilometres of the capital - which would cover the major steel producing city of Tangshan - could also be closed over the Nov. 1-12 period.

Reuters

Tata’s Land Rover aims at 10% share

Easing inflation leads Philippines to hold rates

Japan downgrades economy again

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ata Motors Ltd.’s Jaguar Land Rover aims to capture 10 percent of China’s premium SUV market as its first local plant allows the luxury marque to cut prices and boost sales in the world’s largest auto market.

JLR opened the 130,000-unit-a-year factory in Changshu city, about 110 kilometers northwest of Shanghai. The brand’s best-selling Range Rover Evoque will be its first local production model, according to Chief Executive Officer Ralf Speth.

The carmaker plans to build three models in China by 2016, including a Jaguar, he said.

The unit expects to sell 120,000 cars this year in China, which is already its biggest market, according to Bob Grace, the Gaydon, England-based division’s China president. Tata Motors is the latest foreign automaker to set up factories in the country to avoid duties that make imported vehicles less competitive.

JLR has said it expects local production to help cut prices by 15 percent, which may assist in extending a lead over Fiat Chrysler Automobiles NV’s SUVcentric Jeep brand and narrow a gap with Volkswagen AG’s Audi.

Bloomberg News

he Philippine central bank is expected to hold its benchmark rate steady on Thursday and possibly signal a pause in its tightening cycle until the end of the year, as inflation pressures have eased recently.

But an anticipated power shortage, which could raise consumer prices, plus eventually higher interest rates in the U.S. could mean the Philippines needs to hike rates again as early as the first quarter of 2015, according to some analysts.

Nine of 11 economists polled by Reuters expect the central bank on Thursday to keep the overnight borrowing rate steady at 4.0 percent. Eight of the 11 forecast no change that day in the short-term special deposit account (SDA) rate, now at 2.5 percent.

Four of seven participants who gave year-end forecasts for the main policy rate said the central bank would likely leave it on hold at its last meeting for the year, on Dec. 11.

Cuyegkeng expects a 25 basis point hike for both the main policy and SDA rate in the first quarter of 2015.

Reuters

overnment cut its overall economic assessment for the second straight month as weak consumption after a sales tax hike in April is causing companies to reduce production.

The government yesterday also cut its view on industrial output for the first time in five.

The dour assessment follows the Bank of Japan’s tankan survey earlier this month, which showed that sentiment in the services sector worsened in the third quarter as the economy struggled to shake off the impact of the sales tax hike.

Economists say Japan will probably avoid a recession, but consistently weak consumer spending and manufacturing could fuel speculation Prime Minister Shinzo Abe will delay a second sales tax rise scheduled for next year.

The BOJ is preparing to roughly halve its 1 percent economic growth forecast for this fiscal year at a meeting on October 31 but stand by its prediction that inflation will hit its 2 percent target in the year that begins April 2015.

Reuters