Macau Business Daily, Nov 26, 2014

MOP 6.00 Year III

Number 675 Wednesday November 26, 2014

Publisher: Paulo A. Azevedo

Closing editor: Luís Gonçalves

Macau Renminbi business needs cooperation PAGE 7 | Gaming shuttles for imported labour PAGE 6

Not all eggs in China basket H

e’s not just another politician. Or a pundit. Robert F. Engle, 2003 Nobel Prize laureate in Economics, specialises in financial stability. Macau should stop pouring so much of its reserves into Chinese assets, he says. Diversification of investments abroad is the name of the game. It’s a hedge against economic woes in China. Engel warned yesterday at a lecture in UM that systemic risk is growing exponentially on the Mainland PAGE

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Porous borders

HSI - Movers November 25

A new border crossing is planned for Ilha Verde.

A public tender will be launched here, inviting bids for various elements from local companies. Meanwhile state-owned Guangdong Nam Yue Group Co Ltd has already been awarded the construction project. A public works official was grilled by the Legislative Assembly yesterday

Name

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Short-term cut The People’s Bank of China has been active. Reducing the yield on 14-day bond repurchase agreements (repos) to 3.2 percent. Down from 3.4 percent, and following similar moves in October and July as growth wobbled

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www.macaubusinessdaily.com

With love and care It can be thankless, but rewarding. A survey on manpower needs and wages for Q3 2014 reveals childcare services had a turnover rate of 9 percent. The highest of several occupations studied.

Women overwhelmingly make up this specialist workforce

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%Day

Kunlun Energy Co Ltd

3.75

China Resources Powe

2.32

China Unicom Hong Ko

1.72

MTR Corp Ltd

1.29

China Merchants Hold

1.16

China Resources Land

-1.46

Hong Kong Exchanges

-1.48

Belle International

-2.12

China Petroleum & Ch

-2.31

PetroChina Co Ltd

-2.45

Source: Bloomberg

I SSN 2226-8294

Booming MICE It could be a game-changer. MICE sector revenues almost doubled in the first nine months of the year. And grew 82 percent in Q3. Expositions, fairs and congresses are generating more money per visitor than ever.

In Q3, attendees jumped 16 percent, while shows grew 5 percent

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2 | Business Daily

November 26, 2014

Macau

Project design, monitoring of new border crossing open to local firms The relocation of the Nam Yue wholesale market to make way for the new checkpoint is only to be completed by 2016, the government has said Stephanie Lai

sw.lai@macaubusinessdaily.com

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public tender for the project design, construction monitoring and quality control for the new border crossing in Ilha Verde will be launched here, inviting bids from local engineering companies, while state-owned Guangdong Nam Yue Group Co Ltd has already been awarded the construction of the project, a public works official told the Legislative Assembly yesterday.

The project of the new border crossing in Ilha Verde, located about 800 metres south-west of the city’s busiest Zhuhai-Macau checkpoint at theBorder Gate, is designed to serve pedestrian traffic only. The local government first announced the plan two years ago. This new border crossing, for which the Macau Government is to foot the bill, is also

expected to operate around the clock.

Speaking in a session answering legislators’ enquiries yesterday, deputy director of Infrastructure Development Office Chau Vai Man reiterated that Guangdong Nam Yue Group was to be responsible for the construction of the new border crossing, despite criticisms from legislators questioning the awarding of the contract.

State-owned Guangdong Nam Yue Group is also the main contractor for the construction of the University of Macau’s Hengqin campus.

The official also did not respond to legislators regarding the estimated budget for the new border crossing project, noting that the construction works could only begin after both the Guangdong and Macau administrations had decided on the

detailed design of the supporting facilities for the new checkpoint.

But Mr. Chau did say that the government would launch a public tender here to invite bids for the new border crossing project design, monitoring and quality control, in which local engineering companies can participate.

The upcoming task for the government is to relocate the Nam Yue wholesale market from Ilha Verde in order to accommodate the new border crossing. The wholesale market will be moved to inside the Cross-Border Industrial Zone, for which related construction works will begin next year and is expected to be completed in 2016, Mr Chau said.

The new border crossing, which is estimated to handle a daily flow of 200,000 to 250,000 pedestrians,

is to be joined to a public transport hub comprising light rapid transit station as well as terminals for buses and taxis plus car park. A major function of the new checkpoint is to alleviate heavy traffic at the Border Gate, Mr. Chau said.

While the completion schedule for the new border crossing remains uncertain, an adjacent checkpoint in the Cross-Border Industrial Zone is about to be opened for Macau residents, students and mainland Chinese labour working in the city crossing from 12:00 midnight to 7:00 am starting December 18.

This late night to early morning border entry hours is of a provisional nature, a special measure that will only cease when the new border project is completed, the local government said before.

KEY POINTS H1 profit HK$2.69 bln vs HK$3.51 bln year earlier Pro-democracy protests cloud outlook for retailers Gold demand surge fails to emerge after price drop

Weak gold sales pull Chow Tai Fook profits down The protests have scared off tourists from mainland China, sapping demand for gold

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how Tai Fook Jewellery Group Ltd, the world’s largest jewellery retailer by market value, announced yesterday that weak gold product sales had translated into a 23 per cent drop in half-year profit.

The Hong Kong-listed company, which competes with Cartier and Tiffany & Co, reported net profit of HK$2.69 billion (US$347 million) for April-September. That compared with profit nearly doubling to HK$3.51 billion in the same period a year earlier thanks to a surge in

gold demand after prices plunged.

The outlook for Chow Tai Fook, a well-known brand in mainland China, has been clouded by more than two months of protests in Hong Kong that have paralysed parts of the Asian financial centre and starved retailers of customers.

The protests have also scared off tourists from mainland China, sapping demand for gold. Chinese buying typically tends to pick up when prices of the precious metal fall but demand failed to match industry

expectations when prices fell to a four-and-a-half-year low this month.

‘While we believe that the negative impact brought forth by the recent demonstrations (that) happened in Hong Kong should be temporary, we strive to extend our customer reach and improve our customers’ shopping experience to cope with the challenges ahead,’ the company said in a statement.

Revenue for April-September fell 22 percent year-on-year to HK$29.3 billion. Overall same-store sales fell

31 percent. China same-store sales fell 20 percent and Hong Kong, Macau and Taiwan same-store sales dropped 41 percent.

Sales of gold products fell 41 percent to HK$14.5 million.

Shares in Chow Tai Fook closed 0.4 percent higher ahead of the earnings release, compared with a 0.2 percent fall in the benchmark index.

Earlier this month, Chow Tai Fook said Hong Kong same-store sales for October had dropped 24 percent from a year earlier because of the protests that put 100,000 people on the streets at their peak.

Protest numbers have dwindled to a few hundred scattered across two main demonstration sites where barricades erected by activists continue to disrupt traffic near key shopping areas.

Luxury retailers are also feeling the heat from Beijing’s ongoing anticorruption campaign, which has seen many Chinese visitors curb lavish spending in the city.

Hong Kong accounts for about US$9.7 billion of global luxury sales or 4 per cent of the worldwide total, according to estimates by Bernstein Research.

Hong Kong’s retail sector relies heavily on mainland Chinese visitors, who contributed around one-third of the city’s retail sales in 2013, according to Credit Suisse.

Reuters

Business Daily | 3

November 26, 2014

Macau

MICE revenues almost double to September Most of the events were meetings, with only a few exhibitions. Yet, the minority attracted the majority of participants. In addition, the receipts of these exhibitions soared Kam Leong

kamleong@macaubusinessdaily.com

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he latest data from the Statistics and Census Service (DSEC) shows that 240 MICE events were held in the third quarter of the year, an increase of only 14 events compared to the same period last year.

Receipts from the exhibitions held in the period, however, surged 81 per cent year-onyear in the quarter, while the accumulative receipts from exhibitions soared by 94 per cent year-on-year in the first nine months.

During the third quarter, the total number of participants and attendees of these MICE events reached 724,800, up 16 per cent compared to the same period of last year. Some 214 of the total events - nearly 90 per cent – were meetings, which nevertheless only attracted some 4 per cent of total participants and attendees. The other 96 per cent - 695,456 individuals - joined the 26 exhibitions instead.

Receipts and expenditure by exhibitions soars According to DSEC, which interviewed 24 exhibition organisers, a total of 1,429 exhibitors participated in the exhibitions during the third quarter. Receipts from these exhibitions exceeded MOP37 million (US$4.6 million) in the quarter, up 81 per cent compared to MOP21 million in receipts during the same period last year.

The increase in expenditure was not low either, posting a jump of 41 per cent year-on-year in the quarter, reaching MOP37.3 million patacas.

Some 243 of these 1429 exhibitors indicated that sales of products accounted for 82% of receipts, while rental paid for exhibition booths shared 84% of expenditure, according to DSEC. In addition, professional

visitors attending exhibitions in the quarter totalled 39,632, of whom 64 per cent were from Macau while some 20 per cent were form Hong Kong.

On the other hand, in the first three quarters of the year the accumulative receipts of these exhibitions achieved more than MOP125 million, surging 94 per cent year-onyear, while the accumulative expenditure in these nine

months reached some MOP146 million patacas, up 46 per cent year-on-year.

The total number of MICE events during these nine months was 743, up by 59 events year-on-year. The total number of participants increased by some 48 per cent year-on-year, reaching in excess of 1.5 million.

Of the 214 meetings held in the third quarter, 108 comprised corporate meetings, accounting for the biggest part of the total.

In addition, 56 association meetings were held.

Government meetings and conferences organized a total of 52 events, 26 each.

Meanwhile, more than 50 per cent – 121 - of the MICE events in the third quarter were related to commerce, trade and management, with 31 dedicated to medical and health. In addition, events related to banking & finance plus IT & other technology accounted for 23 and 24 of the total, respectively.

4 | Business Daily

November 26, 2014

Macau

Nobel laureate economist advises Macau to invest abroad Robert F. Engle, the winner of the 2003 Nobel Prize in Economics, has delivered a lecture at the University of Macau saying that the Special Administrative Region should try to invest more abroad João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he 2003 winner of the Nobel Prize in Economics Robert F. Engle yesterday advised Macau to invest more money abroad in order to diversify its investment portfolio. This option, according to the 72-year old American, would have limited impact but would make the Macau economy more resilient against downturns in the Chinese economy.

“If the Chinese economy collapses the whole world economy is going to collapse. It will be devastating for Macau. It is going to be a bit hard to ‘uncorrelate’ the Macau economy with the Chinese economy but you may try your best not to be perfectly correlated”, he said regarding the use of Macau reserves. “If the biggest risk to the Macau economy is the Chinese economy, then you do not want to invest all your money in the Chinese economy. You should invest in other assets around the world”, he said.

“If you are investing abroad and the Chinese economy does well, the value of your portfolio may go down.

However, in this scenario money will be flowing in and Macau will be prosperous”, Mr. Engle explained.

The decision to invest in international markets has its risks and there is the possibility of losing

investments abroad should not be related to gambling.

“It certainly does not make sense to invest in Las Vegas because if gaming is doing well you will be doing well in Macau. If gaming does badly

Conservative approach

money with such investments.

“As manager of the portfolio I would be diversifying it internationally, by holding stocks, bonds and commodities around the world. But before such a decision is taken, the people of Macau will have to consider how they would feel if the investments in Europe and in the United States go wrong”, he said.

Engle also stressed that such

Corporate

“Safety first. You need to keep that liquidity for when it is needed. I would say to leave it in the bank because when you need it, it will be there and there is no risk involved”, Jack Yuk Chow So, Dean of Faculty of Business of the University of Macau, said yesterday about the use of Macau fiscal reserves.

“Some people say that a return of three per cent is too low. But you have to look at the risk as well. You may increase the risk a little bit but I would not advise increasing it too much because you may lose your shirt”, he explained. “For instance, some people believe the renminbi will only go up. But it actually dipped a little bit recently. And then you will be hurt. For this kind of project I would advise using a conservative approach”, he added.

CEM and Zhuhai initiate cultural exchange Companhia de Electricidade de Macau, S.A. (CEM) and Guangdong Power Grid Corporation (GPG) Zhuhai Power Supply Bureau, together with representatives of the two companies’ labour unions, jointly rolled out the cultural exchange event for young employees on November 21, commemorating the 30th anniversary of the power grid interconnection between Guangdong and Macau and strengthening the partnership of the two power companies. The activity seeks to enable young employees from the two places to learn from each other by visiting each other’s power facilities.

CEM and Zhuhai Power Supply Bureau each assigned 15 employees to partake in the activity. The 30 participating staff members not only paid a visit to the two enterprises’ power facilities but held a symposium in the multi-purpose room of the Qinyun 220kV substation.

Okura Macau selected as one of Best Urban Hotels The readers of Travel+ Magazine selected Hotel Okura Macau as one of the best Urban Business Hotels this year. The ‘Best Urban Business Hotels’ award was presented two weeks ago at the 2014 China Travel Awards Ceremony in Shanghai.

The management of Hotel Okura Macau celebrated the achievement on the occasion of the visit on November 13th of Okura’s Vice Chairman Marcel van Aelst and President Toshihiro Ogita, together with Mr. Roger Lienhard - Senior Vice President Hospitality at Galaxy Macau and Mr. Harmen Dubbelaar – General Manager of Hotel Okura Macau. “We are very proud to receive this wonderful recognition by our guests and visitors who have highlighted our hotel’s continued delivery of hospitality excellence. This award demonstrates our commitment to our guests to deliver the Best Accommodation, Best Cuisine and Best Services,” said the management of Hotel Okura Macau.

you will be doing badly. You want to invest in something besides Las Vegas”, he said.

Growing systemic risk in China Robert F. Engle was awarded the Nobel Prize in 2003 for his research on the concept of autoregressive conditional heteroskedasticity (ARCH), which is a method for statistical modelling of time-varying volatility. Yesterday, his lecture in the University of Macau was on the prospects of global financial stability.

One of the focuses of his lecture was the growing systemic risk within the Chinese economy.

“Systemic risk is increasing in Asia, while it is diminishing in the United States and Europe, the latter at a slower pace. But the largest contributor to this increase in Asia is China”, he said. “After the financial crisis the systemic risk grew exponentially in China, while before it was close to zero”, he added.

According to his model, the financial institutions that have the largest systemic risk for China are Bank of China, Agricultural Bank of China, China Construction Bank and Industrial and Commerce Bank of China.

He stressed, however, that despite being of increasing concern the system risk is not yet great. He also said that due to its vast reserves, China will have the capacity to capitalise its banks, if it is needed.

L’Occitane profits more than double with Macau and HK

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rench cosmetics retailer L’Occitane International S.A. saw the group’s interim net sales reach 485.9 million euros (4.85 billion patacas) with net profit more than doubling to 37.3 million euros, a performance boosted by foreign currency gains and sales growth in Japan, Hong Kong and Macau, China and the United States, the company informed the Hong Kong Stock Exchange after trading hours on Tuesday.

L’Occitane, which currently runs three stores in Macau, saw its interim net sales for the six months ended September 30 jump year-on-year by 8.9 per cent. The overall same store sales growth for the cosmetics retailer in the period was 6.1 per cent.

Operating over 2,700 stores in almost 100 countries worldwide, L’Occitane’s net sales in Hong Kong and Macau in the period was 54.5

million euros, which occupies about 11.2 percent of the group’s total net sales. The sales contribution of Macau and Hong Kong over the total net sales in the same period last year was 10.4 percent.

The interim net sales of the French cosmetics retailer in both Hong Kong and Macau has grown by 17.1 per cent when compared to the same period last year The group’s interim pre-tax profit surged by a year-on-year 204 percent to 40.3 million euros, an increase driven by the foreign currency gains of 8.9 million euros in the period as compared to a currency loss of 7.4 million euros in the same period last year.

The basic earnings per share of L’Occitane are 2.5 euro cents.

The group has declared no interim dividend.

S.L.

6 | Business Daily

November 26, 2014

Macau

Gaming shuttles for imported labour on the road

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HOSPITALITY Real gains The statistics department conducts surveys on staff needs and compensation in several economic activities. These surveys are conducted every six months for each activity. For some sectors they fall in the first and third quarters, for others they are undertaken in the second and fourth quarters. In that sense, figures for different sectors may not be fully comparable, as they are collected at different times. But they nevertheless convey a good sense of their relative positions and how things are changing. The most relevant from the hospitality point of view – hotels and restaurants - are collected in March and September, and the latest figures are just out. The first common and dominant feature is, obviously, their upward trend. Hotel employees, especially waiters in their restaurants and cleaning staff, have had the biggest relative rises. In the period shown their average compensation increased about 41 percent – a bit over in the first case, a bit below in the second. That corresponds to an average annual growth of about 7.5 percent, a rate above inflation, implying a rise in real compensation for these workers. In any case, that compares favorably with the average for the overall hotel and restaurant sector, which stood, in the same period, at 34 percent.

he Transport Bureau (DSAT) said on Monday that three gaming operators are already providing shuttle buses for their own imported labour to relieve the pressure on the public bus service. The capacity of these shuttle buses, according to the acting director of the Bureau, Chiang Ngoc Vai, reached 2,000 persons during the daytime, while 1,600 persons use them at night in the peak hours.

Attending an oral interpellation session at the Legislative Assembly, Mr. Chiang said that the government is also discussing with gaming corporations about integrating the routes of their gaming buses, which currently drive residents and tourists between casinos and various borders. In addition, they are discussing adjusting the time of the operations of these buses.

Meanwhile, legislator Angela Leong On Kei - also executive director of gaming operator SJM Holdings Ltd - said during the session that casino gaming buses are actually helping [relieve] traffic pressure, claiming the situation would be worse without them. Mr. Chiang said he agreed with the legislator’s perspective but indicated that these buses had to be supervised by the government.

In fact, in addition to offering transportation to non-resident workers, the gaming corporations

may have to provide accommodation for such workers in the future, as Chief Executive Fernando Chui Sai On stated in his political manifesto for his new term. He said at the time that the gaming operators should take more social responsibility such as providing accommodation as well as transportation for imported labour.

Although there is no information so far on how the CE wants the gaming operators to provide accommodation, it is very likely that all these ‘requirements’ may present more challenges to the gaming operators, particularly with gaming revenues

dropping for five consecutive months whilst labour costs have climbed.

Following the first wave of gaming workers’ protests against their employers for better remuneration in July and August, Credit Sussie and Deutsche Bank both estimated that the operators will face a hike in staff expenses in the coming years.

Credit Suisse predicted that labour costs will increase by 8 to 10 per cent in 2015, while Deutsche Bank forecast that staff costs will increase by between 10 per cent and 15 percent per annum from 2014-17.

K.L.

Credit Suisse: Substantial decline in November gaming revenue Assuming average daily revenue remains at the same level as last week - at around MOP800 to MOP850 million - for the rest of November, gross gaming revenue this month may drop by 18 to 20 percent yearon-year, says Credit Suisse Joanne Kuai

joannekuai@macaubusinessdaily.com

Waiters in the restaurants associated with hotels have also fared much better than those in the regular restaurant trade. The latter have seen their average compensation rise some 26.3 percent, almost 15 percentage points below their brethren at hotels. For reference, the figures for the gaming and lotteries activities – collected in the second and fourth quarters - are also shown, highlighting the noticeable and sustained gap in compensation levels between these activities.

J.I.D.

MOP 13,380 average staff compensation n hotel and restaurants, Q3

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acau’s November gaming revenue is tracking a yearon-year decline having already recorded five straight months of plunging figures since June this year, according to a gaming industry report by Credit Suisse.

The Swiss-based bank’s analysts Kenneth Fong and Isis Wong noted that up to 23 November, Macau’s gross gaming revenue is MOP18.7 billion, implying an average daily revenue of MOP813 million monthon-date, which is lower than that of MOP850 million in October and MOP852 million for September.

But the equity researchers have also indicated a pick-up – the average daily revenue of last week (17-23 November)

increased week-on-week from MOP750 million to MOP850 million in the wake of the city’s major event, the Macau Grand Prix, coming in at the high end of the researchers’ anticipated range of MOP800-850 million.

The Swiss bank, however, remains pessimistic. ‘Despite the week on week improvement, mass business continued to remain soft.

By revenue mix, adjusted for the impact of Melco premium mass revenue reclassification, we estimate VIP revenue to decline by 25-28 per cent and mass by 5 to 6 per cent, respectively,’ the report reads.

‘China easing of monetary policy helped sentiment and a steady macro should gradually help Macau longer

term, in our view,’ wrote the Swiss bank. ‘That said, we are not overly optimistic on that yet as its near-term impact is likely to be muted and the gaming revenue is still finding its bottom.’

Four reasons are identified for Macau’s gaming revenue slowdown: the smoking ban, transit visa restrictions, anti-corruption campaign in China suppressing demand, and tight junket liquidity.

In terms of market share, except for MGM and Galaxy posting increases of 3 percent and 0.6 percent, respectively, the other gaming operators all suffered a decline in November, according to the research team’s calculations.

Business Daily | 7

November 26, 2014

Macau Jeffrey H. Schwartz Former non-executive director of Sands China Jeffrey H. Schwartz passed away on November 19, Las Vegas Sands Corp has announced. Mr. Schwartz was 55 years old and a member of the Las Vegas Sands board. ‘Mr. Schwartz was a valued member of our board of directors who made many contributions to our company and the community,’ Las Vegas Sands Corp, parent company of Sands China, said in a statement released on Friday. Jeffrey H. Schwartz was appointed to his role at Sands China in October 2009 but resigned last May because of ‘other business commitments’, the company said at the time. At the time of his death, Mr. Schwartz was also co-founder and chairman of the Global Logistic Properties Ltd. committee, one of China’s biggest warehouse operators, which is listed in Singapore. Schwartz is survived by his wife and four children, according to Global Logistic Properties.

Biggest turnover witnessed in childcare services A survey on manpower needs and wages for the third quarter of 2014 shows that those employed in childcare services had a turnover rate of 9 percent, the highest of eight categories listed Sara Farr

sarafarr@macaubusinessdaily.com

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ith the shortage, and in some cases lack, of human resources in Macau it is not surprising to see a high turnover rate, especially in the more sought after professions.

The latest survey on manpower needs and wages conducted by the Statistics and Census Services (DSEC) shows that of the eight categories listed, childcare services experienced the highest turnover rate of 9 per cent, a slight year-onyear increase of 0.9 percentage points. In addition, this is the

category of the eight with the highest recruitment rate of 12.5 percent, a yearly increase of 2.4 percentage points.

Second to childcare are restaurants with a turnover rate of 7.7 per cent at the end of the third quarter of the year, followed by elderly care with 7.2 per cent and manufacturing at 7 percent.

However, when it comes to recruitment, after childcare come restaurants with 9.6 per cent, followed by elderly care with 7.5 per cent and hotels with 6.9 per cent.

The overall average monthly salary of a person working in childcare services was MOP11,800 at the end of September, a 10.3 per cent increase from that of a year ago. While that for Macau residents was MOP11,910, up 10.7 per cent from September 2013; that for non-resident workers was MOP8,900, up 4.3 per cent from MOP8,530 from a year earlier.

While this is the category with the highest recruitment and turnover rates recorded in the third quarter of the

year, it employed a total of 974 fulltime staff at the end of September, the great majority of whom were women, accounting for 961 of the total.

The big bucks The highest average earnings were accrued by those employed in the electricity, gas and water supply sector, with an overall monthly wage of MOP27,790, up 7.8 percent from the end of September 2013. Of these,

Macau residents made an average of MOP26,670 a month, while non-residents earned MOP16,480.

However, the most notable monthly salary increase was in the manufacturing sector, where employees received an overall MOP9,650, up 13.4 percent from the third quarter of 2013, followed by hotels, whose employees made an average of MOP15,750 at the end of September from MOP14,230 a year earlier.

The only sector in which employees actually suffered an average salary drop was in ‘financial intermediation activities,’ with monthly salaries averaging MOP13,120 at the end of September, down 1.7 percent from MOP13,350 in September 2013. In addition, salaries of residents increased slightly by 3.5 percent to MOP14,610, while those of non-residents dropped considerably by 18.3 percent to MOP9,270 from MOP11,350 a year earlier.

A total of 394 people were engaged in financial intermediation activities at the end of September, of whom 383 were employed fulltime.

Regional cooperation critical for Macau renminbi business While the cross border renminbi settlement in Macau for the first 10 months of 2014 has exceeded 150 billion yuan, an academic has said that in order to profit the SAR needs regional cooperation to sustain its advance Joanne Kuai

joannekuai@macaubusinessdaily.com

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rom January to October this year, cross-border renminbi settlement in Macau has exceeded 150 billion yuan, a 40 percent increase compared to the same period last year and 24 times the volume of 2010, said Vice Director of Bank of China Macau Wang Jun at the 10th anniversary celebration of Macau’s RMB clearing bank on Monday night.

Mr. Wang says that since the establishment of Macau’s RMB clearing bank service in 2004, some 28 banks have joined the platform, double the number since the beginning.

The volume of clearing in the first ten months of 2014 has also exceeded 1,000 billion yuan, 24 times that of 2010. By the end of September this year, Macau had renminbi deposits of 118.7 billion yuan, ranking fourth in overseas markets, following Hong Kong, Taiwan and Singapore.

In order to develop Macau’s renminbi businesses, the Bank of China Macau Branch is studying

the possibility of Macau’s renminbi capital market, such as introducing companies to issue bonds in renminbi in Macau, to play the advantage of simpler taxation policies in Macau, and to deepen the connection with Portuguese-speaking countries and attract companies in those countries to issue bonds in Macau as well, said Mr. Wang.

Regional Cooperation Despite the huge amount of clearing and settlement, the profit from this renminbi business is relatively small as the technical content of such services is low, said Lin Jiang, head of the public finance and taxation department of Linnan College at Sun Yat-sen University.

Professor Lin Jiang pointed out that in order to boost the margins of renminbi businesses Macau has to deepen cooperation with Zhuhai and the Pearl Rive Delta in the financial sector in order to launch more profitable products.

This comment came after the news that in early November the State Council had approved the policy of supporting Nansha in Guangzhou to promote financial cooperation between Guangdong, Hong Kong and Macau and to explore the possibilities of renovating financial reform, according to Tencent Finance newswire.

The report also pointed out that the policies supporting Nansha share many similarities with the outlines for the Shanghai free trade experimental zone, operational since the end of last year.

Mr. Lin said that compared to Shanghai, Nansha in Guangzhou enjoys more advantages as the geographic location gives Nansha the easier approach to both of the Special Administrative Regions and more privately-owned enterprises that are more liberal located in the Pearl River Delta. Mr. Lin added that the beneficiary policies that the central government would grant to Nansha would only be better than the ones for Shanghai.

Products such as share options and futures will be launched to help companies develop with financing after financial reform, said Mr. Lin, and Macau would enjoy its slice of the pie.

“Macau can as well benefit from the financial reform that is going to take place in the neighbouring region,” said Mr. Lin. “As Macau has basically no industrial sector, its financial sector needs support from regional cooperation as most of the demand would be generated by the bigger area.”

The professor envisages an even bigger blueprint.

“Despite the gaming industry and the MICE businesses among other sectors the SAR is developing, Macau is not a financial centre,” said Mr. Lin. “But using Hengqin as a backbone and Nansha to infiltrate the region its role as a major offshore renminbi business centre would become more and more important and become a driving force for the development of west Guangdong Province and the Pearl Rive Delta.”

8 | Business Daily

November 26, 2014

Greater China Closer legislative ties with Colombia Top Chinese and Colombian legislators vowed to promote exchanges and cooperation between legislative bodies.

The pledge came out of top Chinese legislator Zhang Dejiang’s separate talks with Colombian Congress President Jose David Name Cardozo and President of Chamber of Representatives Fabio Raul Amin Saleme. Zhang, chairman of the Standing Committee of the National People’s Congress (NPC), said exchanges and cooperation between legislative bodies are an important part of China-Colombia relations and play an irreplaceable role in enhancing the friendship and boosting practical cooperation.

Central bank cuts key short-term money rate Expectations for further easing have stimulated stock markets in China and abroad Pete Sweeney

Large rare metal discovery in Xinjiang Geologists have discovered a large field containing rich deposits of rare molybdenum in northwest China’s Xinjiang Uygur Autonomous Region, local officials said yesterday.

Molybdenum is a hard, silvery mineral mainly used as an alloying agent in steel and tungsten. It is used in the aviation, construction and military manufacturing industries. With at least 573,000 tons of proven reserves, worth an estimated 60 billion yuan (US$10 billion), it is the largest deposit of molybdenum ever discovered in the resource rich Xinjiang.

The mine is located 100 kilometres south of Yumin County, north-western Xinjiang, according to the regional mining authority.

Longtop CFO must pay damages A U.S. jury said a former top executive of China’s Longtop Financial Technologies should pay damages to shareholders that could reach several million dollars, in one of the rare securities class actions to go to trial. The damages verdict followed an earlier decision by the Manhattan federal jury on Friday finding Derek Palaschuk, the former CFO, liable for being reckless in making untrue statements or omitting facts about the Chinese technology company.

Daniel Berger, the investors’ lawyer, said Palaschuk could be forced to pay around US$5 million after Monday’s verdict.

China mulls tougher tobacco controls China is mulling a ban on all forms of tobacco advertising, sponsorship and promotion of tobacco products, according to a draft regulation on Monday. The draft, published on the legislative affairs office of the State Council website, pending public consultation, also includes plans to ban certain smoking scenes in films and TV shows. The draft bans smoking in all kinds of indoor public places and outdoor space in kindergartens, schools, colleges, women and children’s hospitals as well as in fitness venues.

Smoking in outdoor space is only allowed in designated smoking areas.

People’s Bank of China headquarters in Pudong, Shanghai

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hina’s central bank cut the yield for a key short-term money rate yesterday for the fourth time this year, as regulators step up efforts to reduce funding pressure on Chinese companies.

The reduction of the yield on the 14-day bond repurchase agreement (repo) to 3.2 percent, from 3.4 percent, follows a surprise cut to benchmark lending rates on Friday to support the cooling economy, and follows similar moves in October and July as growth wobbled.

Expectations for further easing have stimulated stock markets in China and abroad, while depressing domestic bond yields and putting downward pressure on the yuan.

“This signals the central bank will make further efforts to lower borrowing costs for investors and support liquidity,” said a trader at a city bank in Shanghai.

The People’s Bank of China cut one-year benchmark lending rates by 40 basis points to 5.6 percent late on Friday, and at the same time increased the maximum payable deposit rate to 3.3 percent from 3.2 percent.

Yesterday, it drained 5 billion yuan (US$814.17 million) from money markets through 14-day repos. The size of the issue was negligible, but traders read the decision to cut the official yield as a further reminder to Chinese financial institutions to lower the cost of money.

The traded yield on the 14-day repo had already fallen sharply on Monday, and is now down over 60 basis points (bps) from Friday’s weighted average rate. But it did not respond strongly to the announcement, with the average standing at 3.81 percent at midday.

Other money rates continued to decline, with the benchmark seven-day repo weighted average at 3.3013 percent at midday, down 20 bps from 3.5052 on

Monday, when the rate plunged nearly 50 bps as the market opened.

Message received?

Chinese banks rely on the interbank market to keep enough cash on hand to run ATMs, make loans, and repay investors in wealth management products, but insiders say they have abused the market at times, borrowing quick cash for short periods to fudge their balance sheets to meet regulatory requirements.

Traders say the PBOC has therefore increasingly relied on sending discreet messages through issuance amounts, tenors and official yields to encourage banks to take on more or less risk given economic conditions, and its moves have been watched by stock investors for signs of changes in monetary stance.

KEY POINTS C.bank cuts guidance rate for key repo contract Seen as reinforcing policy easing signals Fourth reduction in rate in 2014 as growth slows Comes days after surprise lending rate cut Chinese banks may remain reluctant to lend - analysts

China’s economy is heading towards its slowest expansion in nearly a quarter of a century as factory growth stalls and the property market weakens. Many firms are also struggling with debt, as slowing sales crimp their ability to pay back loans.

“Corporate leverage has exploded in China,” warned Ron Temple, managing director at Lazard Asset Management, during a recent UBS investor forum.

“We’ve gone from 136 percent of GDP in 2011 to 168 percent in 2013. Taking into account 10 percent nominal GDP growth, that means corporate debt in China grew 50 percent in two years.”

Weak appetite for credit A study of Reuters data showed the lending rate cut by itself could bring little relief to smaller firms struggling with the most worrisome debt burdens, as banks increasingly favour companies that are either highly solvent or backed by an implicit government guarantee.

While at least eight mid-sized banks have raising deposit rates to the new maximum to compete for customers, whether the guidance loan rate will spur more lending remains in question, given that banks have been legally free to decide their own loan rates since June 2013, and yet have remained reluctant to lend.

Government insiders told Reuters that concerns about debt loads at Chinese firms, combined with fears of deflationary risks, have triggered a change in attitudes, and regulators are now considering embarking on a longer loosening cycle that could even include a cut to bank reserve requirement ratios, which would flood markets with fresh cash.

Reuters

Business Daily | 9

November 26, 2014

Greater China

State firms’ profit growth quickens slightly Companies in steel, transportation, automobile, property construction and power industries enjoyed profit rises

Petroleum sector is one of the less profitable lately as oil price plummeted acutely this year

P

rofit growth of China stateowned firms quickened slightly in the first 10 months of 2014, but there is little sign of a turnaround

as factories struggle to cope with falling prices and sluggish demand.

State-owned non-financial companies made combined profits

of 2.1 trillion yuan (US$342 billion) between January and October, up 6.1 percent from the same period of 2013, the Ministry of Finance said yesterday.

The pace picked up slightly from 5.9 percent in January-September, but trailed the 8 percent rise seen in the January-August period.

China’s manufacturers are struggling to cope with persistent factory-gate deflation, which has eroded their profitability as borrowing costs stay elevated.

China’s central bank cut interest rates unexpectedly on Friday, stepping up efforts to support the world’s second-biggest economy as it heads towards its slowest expansion in nearly a quarter of a century.

Profits of firms owned by the central government rose an annual 6.8 percent in the first 10 months while companies owned by local governments reported a 4.5 percent rise in profits, the ministry said.

Companies in steel, transportation, automobile, property construction and power industries enjoyed profit rises, but firms in the non-ferrous metal, coal, chemicals, petroleum and telecommunications sectors saw profits fall, it said without giving details.

The ministry added that the total assets of state firms rose 11.9 percent to 100.4 trillion yuan (US$16.35 trillion) at the end of October, while total liabilities climbed 12.1 percent to 65.5 trillion yuan.

Chinese state firms - which control sectors regarded to be of vital national interest - are often criticised for being inefficient and not turning over more of their profits to the nation despite being generously subsidised by the state.

Reuters

US$342 billion

state-owned nonfinancial companies combined profits

BoC plans to double Aussie mortgages in two years

Sinopec starts crude storage base in Hainan

Total loan volumes from Chinese banks have exploded since the global financial crisis, rising to more than A$15 billion as of September 30

The facility is connected via pipeline to subsidiary Sinopec Corp’s refinery

B

ank of China Ltd. plans to double its mortgage lending in Australia in two years and wants to offer more home loans to locals, the bank’s country head said.

There is demand for dwellings from Australians of Chinese origin and investors from the mainland, Shanjun Hu said in an interview last week in Sydney.

Bank of China is seeking a bigger slice of a A$1.4 trillion (US$1.2 trillion) mortgage market that’s almost 80 percent controlled by Commonwealth Bank of Australia and its three largest rivals. Chinese buyers overtook Americans to become the biggest foreign acquirers of Australian real estate in the 12 months through June 2013, government data show.

Lawmakers are probing foreign property ownership and the central bank has signalled concern about prices even as it holds its cash target at a record low of 2.5 percent.

Residential property prices across the nation’s capital cities climbed 8.9 percent in the year.

Bank of China, the fourth-largest Chinese lender by market value, held A$672 million of Australian mortgages as of September 30, according to Australian Prudential Regulation Authority data. That’s up 13 percent from a year earlier, about twice the pace of growth for the Australian home-loan market as a whole.

“In the coming two years, I hope that we can double the amount” of mortgages that Bank of China

currently has, Hu said.

Commonwealth Bank, Australia & New Zealand Banking Group Ltd., National Australia Bank Ltd. and Westpac Banking Corp. held A$1.08 trillion in mortgages at the end of September, APRA data show.

Residential term loans from subsidiaries of foreign banks climbed 5.8 percent to A$54.9 billion in the 12 months through September, with 33 percent of those mortgages on investment properties, figures published today by APRA show.

Bank of China’s mortgage customers include people of Chinese origin who come to the bank through Chinese brokers based in Australia, Hu said. It has nine branches across four cities and about 300 employees in Australia, he said.

Bloomberg News

C

hina’s Sinopec opened a new 16-million-barrel commercial crude storage base in southern China’s Hainan province last week, receiving a first crude shipment of 100,000 tonnes, or roughly 5 percent of its tank space, the state energy group said.

The start-up of the Sinopec tank farm came amid market talk that Chinese oil refiners may be taking advantage of low global oil markets to stock up.

Sinopec’s Yangpu base has about 16 million barrels of storage capacity, with 25 100,000 cubic metre crude tanks and one 50,000 cubic-metre tank, the company said in a report carried on www.sinopecnews.com.cn.

China’s total commercial crude stocks inched down 0.7 percent in October over September, reversing a three-month gain, China OGP, an oil and gas newsletter run by official Xinhua news agency, reported earlier yesterday.

In absolute volumes, the inventory by end-October would be 35.4 million tonnes, or 258 million barrels, according to Reuters calculations, roughly just under four weeks of Chinese consumption.

Construction of the Hainan base, which cost 2.33 billion yuan (US$379 million), began in January 2013 and was completed in September, Sinopec said.

The facility is connected via pipeline to subsidiary Sinopec Corp’s refinery, the 160,000-barrels-per-day Hainan plant, about 40 kilometres away.

China made its first official announcement about the country’s strategic petroleum reserve (SPR) last week, saying the first phase of the government emergency stockpile is storing about 91 million barrels of crude oil, or about nine days of oil use. The announcement did mention its phase-two reserves which have been partially filled.

Reuters

10 | Business Daily

November 26, 2014

Asia

S.Korea household credit grows amid hesitation

South Korea’s top department stores were weaker than estimated fall estimated earlier this month but a shortened drop compared to a 6.3 percent decline seen in September.

The ministry attributed the fall in sales to fewer discount events at stores during October.

Sales at major discount-store chains edged down 0.9 percent in October from a year earlier, the same government data showed, nearly unchanged from a 0.4 percent fall estimated earlier and compared to a 10.1 percent drop in September.

Discount-store chain sales also declined for a second straight month with weak sales blamed on an increased number of stores shutting on Sundays by regulations aimed at promoting traditional markets.

Deflation risk

The South Korean central bank (headquarters pictured) data attributed the rise in borrowing to a sharp increase in mortgage loans

S

outh Korea’s household credit growth in July-September expanded by the fastest rate in 10 quarters compared with the same period a year ago, central bank data showed yesterday.

Household credit during the third quarter, including loans and other credit owed by South Korean households, was up 6.7 percent onyear, the Bank of Korea’s preliminary data showed.

This was up from a revised 6.0 percent growth registered in the previous quarter and the quickest increase since a 7.1 percent rise in the first quarter of 2012.

Loans owed to financial institutions climbed 6.8 percent to 1,002.9 trillion won (US$901.16 billion) as of endSeptember on a year-on-year basis while credit purchases, including creditcard transactions, gained 4.9 percent.

In August, South Korea’s central bank cut its policy interest rate for the first time in more than a year, following government plans to introduce more stimulus including

a boost in public spending.

The government’s US$40 billion stimulus package unveiled in July included measures to support real estate transactions by easing rules on mortgage loans.

It needs to be noted that the recent sharp slowing in the GDP deflator growth possibly foretells a deceleration in the CPI growth rate Korea Development Institute report

Recent data has indicated that these measures have succeeded in lifting consumer sentiment as South Korea’s bank lending to households in October posted its biggest monthly gain in 7 years.

Household credit growth estimates are subject to revision, and revised figures are released by the Bank of Korea in the following quarter.

Cash registers disappoint However, sales at South Korea’s top department stores were weaker than estimated, government data showed yesterday, as they fell for a second straight month in annual terms and added to concerns over weak domestic consumption in Asia’s fourth-largest economy.

Combined sales last month at department stores run by Hyundai Department Store, Lotte Shopping and Shinsegae Co slipped 2.2 percent in October from a year earlier, the trade ministry said in a statement.

This was worse than a 0.9 percent

Amid the battery of data, South Korea’s top state-run research institute warned the Bank of Korea yesterday against underestimating the danger of Asia’s fourth-largest economy falling into deflation and called on the central bank to take pre-emptive action.

The Korea Development Institute said in a report that the gross domestic product deflator, a measure of inflation used to calculate economic growth in real terms, has been undercutting the more commonly used consumer price index (CPI).

The institute did not say outright if it wanted the Bank of Korea to lower interest rates immediately. The central bank has cut its policy rate three times since early last year.

Central bank data showed the GDP deflator has been growing slower than the CPI in each quarter since January-March 2011, and posted no growth at all in the second quarter of this year over a year earlier.

The report came after the Chinese central bank’s surprise cut in benchmark lending rates on Friday, which bond traders in South Korea interpreted as putting the Bank of Korea under greater pressure to further lower its own policy rate.

Reuters

Japan cuts view of job market Government expresses caution on consumption in November report

J

apan’s economy continues to recover despite a surprise slide into recession in the third quarter, the government said in its overall economic assessment in November, but cut its view on the labour market to reflect a blow to demand from a sales tax hike.

The government’s economic report yesterday followed two consecutive months of downgrades to the overall assessment as consumer spending and factory output struggled more than expected after the April tax increase.

Japanese Prime Minister Shinzo Abe has called a snap election next month to seek a fresh mandate after delaying a second sales tax hike, but his party could lose seats as many households say they are not benefiting from his policies.

Recent gains in labour demand have paused, but the job market overall is improving, the Cabinet Office said. This was a downgrade from last month when the government said the labour market is clearly improving.

The jobs-to-applicants ratio fell in September from levels not seen in 22 years and the number of new jobs available is starting to decline, which led to the downgrade, according to a Cabinet Office official.

Abe has repeatedly argued that a tightening labour market is one sign that his policies of massive monetary easing, spending and regulatory reforms, known as “Abenomics,” are working, so the downgrade could be a source of concern.

The Cabinet Office also turned a little more cautious about future

Japanese Prime Minister Shinzo Abe speaks during a news conference after dissolving the powerful lower house of parliament for snap elections in December

conditions due to declines in consumer sentiment and cautious business confidence.

Policymakers were taken aback after data last week showed the economy fell into recession in the third quarter as the sales tax hike to 8 percent from 5 percent clobbered consumer spending and chilled

broader economic growth.

The economy is expected to resume growing in the current quarter, but there is still a lingering sense that Abe’s drive to end deflation and shift growth into a higher gear has not produced enough results after two years in office.

Reuters

Business Daily | 11

November 26, 2014

Asia Richest consumers: NZ goal New Zealand’s primary sector exports will double in value over the next decade under a goal to target the world’s wealthiest consumers outlined by Primary Industries Minister Nathan Guy yesterday. “The export double goal is an ambitious but achievable target, which will require export growth of around 5 percent a year,” Guy said in a published speech to industry leaders in Wellington.

“This target is based on 2012 export figures of 32 billion NZ dollars (US$25.07 billion) for the primary sector, with the aim of raising this to 64 billion NZ dollars (US$50.14 billion) by 2025.”

Singapore Q3 GDP beats forecasts The economy grew 2.8 percent in the third quarter from a year earlier, faster than the 2.3 percent expansion of the previous three months

Aussie economy bio-risks Scientists from the Commonwealth Scientific and Industrial Research Organization (CSIRO) have warned that a significant decline in European honey bee populations across Australia could cost the Australian economy up to US$5.1 billion. The dramatic prediction came in a CSIRO report released yesterday -- “Australia’s Biosecurity Future” -- which identified 12 “biosecurity megashocks” that posed a threat to Australia’s agriculture industries, economy and environment.

Among them are a human disease pandemic, invasion of a devastating wheat disease and European honey bee colonies being wiped out.

EU to fund Myanmar’s development The European Union (EU) has pledged to provide 250 million euro (US$332.5 million) to Myanmar annually under a three-year strategic cooperation program (2014-16), official sources said yesterday quoting EU Ambassador to Myanmar Roland Kobia. The financial support will be rendered in view of Myanmar’s remarkable progress achieved in its reform process, Kobia said, adding that the strategic cooperation will boost six major plans. According to Myanmar Minister at the President’s Office U Soe Thein the money will be mainly used for peace making efforts, parliamentary affairs, rule of law, 2015 general election, judiciary affairs and census-taking projects.

Aussie female managers underrepresented About a third of Australian companies have no women in key management positions, a new survey released yesterday revealed. The federal government report, Australia’s Gender Equality Scorecard, surveyed more 11,000 companies to discover that women were significantly under represented in management. Workplace Gender Equality Agency public affairs executive manager, Yolanda Beattie, said that only 25 percent of top management positions were filled by women. “Where women earn at a base salary, 20 percent less than men - these are full time workers - on an average basis,” she said in a statement.

S

ingapore’s economy grew more than initially estimated in the third quarter as manufacturing output was revised higher, although the growth outlook remained modest in the face of uneven global recovery.

The city-state’s economy is expected to grow 2.0-4.0 percent next year after expanding around 3.0 percent in 2014, the Ministry of Trade and Industry said in a statement.

Ow Foong Pheng, permanent secretary for Ministry of Trade and Industry, said growth is likely to ease in the fourth quarter on a year-onyear basis, in line with a projected slowdown in the global economy.

Externally-oriented sectors such as the manufacturing and transport and storage sectors are likely to slow, while weakness in private sector building will continue to weigh on growth in the construction sector,

she told reporters.

Year-on-year growth is likely to ease to 2.2 percent in the fourth quarter, a second official said, adding that growth in quarter-on-quarter terms was likely to be around 4 percent.

The economy grew at an annualised rate of 3.1 percent in the three months to September compared with the previous quarter. The government’s prior estimate was growth of 1.2 percent, while analysts had forecast an expansion of 1.3 percent.

That growth marked an improvement from a revised 0.3 percent contraction in the second quarter, when manufacturing activity fell sharply from the previous three months, stoking concern that government policies to curb the influx of foreign labour were hitting growth.

The economy grew 2.8 percent in the third quarter from a year earlier,

faster than the 2.3 percent expansion of the previous three months. The government’s prior estimate was 2.4 percent.

The manufacturing sector rose an annualised 2.8 percent in JulySeptember period compared to the second quarter when the sector suffered a 14.9 percent contraction.

The government’s push to reduce a politically unpopular reliance on overseas workers has led to a tight labour market, driving up wage pressures and raising business-related costs.

Uneven global recovery has also tempered growth.

“We have Singapore starting to latch on to this growth acceleration in the U.S. but at the same time there are headwinds in the EU and China,” said Wai Ho Leong, senior regional economist at Barclays in Singapore.

Reuters

Philippines economic growth slowing Growth in the second quarter was 6.4 percent

T

he Philippine economy is expected to have slowed in the third quarter from the previous three months due to a pull back in government spending and weak farm output, suggesting the central bank will extend a pause in its tightening cycle.

Gross domestic product is seen rising a seasonally adjusted 1.4 percent in the July-September period from the previous quarter, a Reuters poll showed yesterday, slowing from 1.9 percent in the second quarter and matching the pace in the first three months of the year.

Officials have become more wary of accusations of recklessness, and are subjecting spending decisions to greater scrutiny after the Supreme Court in July declared aspects of an economic stimulus fund illegal, putting big infrastructure projects at risk.

KEY POINTS Q3 GDP seen 1.4 pct q/q, may keep cenbank on hold for a while Q3 GDP seen 6.6 pct y/y vs 6.4 pct in Q2 Full-year 2014 seen at 6.4 pct, below govt target Data due on Thursday, Nov. 27 at 0200 GMT

But on an annual basis, the economy is forecast to have expanded at a slightly faster clip of 6.6 percent, thanks to strong domestic demand and exports.

Growth in the second quarter was 6.4 percent, the fastest in Asia after China and on par with Malaysia.

For the full-year, the poll predicted growth of 6.4 percent, below the government’s 6.5-7.5 percent growth target.

The central bank is widely expected to leave the key policy rate steady at 4.0 for the second consecutive meeting on December 11 on slowing inflation, after hiking rates by 25 basis points in each of July and September. While markets are divided over when policymakers will resume the tightening cycle, some see the bank on hold until the second half of next year.

Reuters

12 | Business Daily

November 26, 2014

Asia Task force to deal with air bag recalls Japan’s transport ministry last week set up a special task force to deal with air bag-related recalls and has urged automakers to speed up replacements of potentially defective Takata-made air bag inflators, Transport Minister Akihiro Ohta said yesterday. The transport ministry said about 1.37 million vehicles had been brought in to domestic dealers as of the end of September, out of the 2.37 million vehicles subject to recalls related to Takata Corp in Japan. Around 16 million cars with Takata air bags have been recalled worldwide so far.

Samsung wins Vietnam project South Korea’s Samsung Electronics Co Ltd has secured a licence to invest US$3 billion to expand its production in northern Vietnam, the Vietnamese government said. The licence was awarded on November 17 in Thai Nguyen province, where Samsung Electronics has been operating a US$2 billion smartphone plant, the government said in a statement issued late on Monday, without giving further details of the project. Samsung Electronics has said it plans to invest up to US$3 billion for its handset business in Vietnam as part of its strategy to cut costs and better compete with Chinese rivals.

S.M. Entertainment denies Alibaba rumours South Korea’s S.M. Entertainment Co yesterday denied a media report saying Alibaba Group Holding is considering an investment in the leading K-Pop agency through a stake buy. Korea Economic Daily reported earlier yesterday that Alibaba was conducting due diligence on S.M., and the two parties were discussing an investment by Alibaba that would make it S.M. Entertainment’s secondlargest shareholder. The daily did not cite a source. S.M. Entertainment said in a statement that the report was “not true” and that it was in discussions with many parties about possible partnerships or other methods of cooperation related to its China business.

GIC to invest in Indonesia Singapore’s sovereign wealth fund GIC and Indonesia’s Rajawali Group have agreed to jointly invest up to US$500 million in equity in property projects in Indonesia, the two companies said in a statement yesterday. The joint venture will look at sectors including office, retail, residential and mixeduse projects mainly in the central business district of Indonesian capital Jakarta, the statement said. Privatelyowned Rajawali is one of Indonesia’s largest investment companies.

BOJ Kuroda signals readiness to ease more While business executives present at the meeting generally welcomed the BOJ’s stimulus, some warned that recent yen declines were too rapid and were hurting smaller companies Leika Kihara and Stanley White

B

ank of Japan Governor Haruhiko Kuroda yesterday stressed the bank’s readiness to expand stimulus further to meet its price goal, standing firm in the face of criticism that last month’s monetary easing has accelerated unwelcome falls in the currency.

But not all in the BOJ’s ninemember board share Kuroda’s optimism that further stimulus outweigh the costs, minutes of last month’s meeting showed, suggesting that the central bank chief may struggle to push through more easing.

Some BOJ policymakers opposed last month’s easing, warning that doing so would hurt the BOJ’s credibility if its bond-buying is seen as tantamount to debt monetisation, according to minutes of the BOJ’s October 31 meeting released yesterday Kuroda defended the October 31 easing as a necessary step to ensure the Japanese public shakes off its “deflationary mind-set,” and encourage companies to start investing and hiring more on expectations that prices will rise ahead.

“To achieve the price stability target, the BOJ has been taking ‘action’ and will continue to do so,” he told business leaders in Nagoya,

a central Japan city home to auto giant Toyota Motor Corp.

While business executives present at the meeting generally welcomed the BOJ’s stimulus, some warned that recent yen declines were too rapid and were hurting smaller companies.

Kuroda declined to discuss how recent yen falls affected the overall economy, only saying that while a weak yen benefits exports, it hurts

KEY POINTS Oct. 31 easing aimed at eradicating deflation mindset-Kuroda BOJ will continue to act if needed-Kuroda Adds weak yen benefits exports, hurts households Some warned of debt monetisation risk at Oct. 31 meeting

households and non-manufacturers by raising the cost of imports.

“We will carefully watch market moves, including currency moves, and their effect on the economy.”

The yen has come under renewed pressure since the BOJ stunned markets by expanding its quantitative and qualitative easing (QQE) programme last month in a pre-emptive move against risks of a slowdown in inflation.

Last month’s monetary easing was decided by a tight 5-4 vote after intense debate over why the BOJ ought to expand stimulus when it was clinging to the view the economy was recovering moderately.

Advocates of easing said the BOJ must act to prevent recent oil price falls from hurting inflation expectations, and in doing so ought to expand asset purchases at “as massive as scale as possible” to boost sentiment, the minutes showed.

But those opposed to acting now warned that further easing would accelerate unwelcome yen falls and could not be counted on much in lifting business sentiment, given interest rates were already very low, according to the minutes.

Reuters

Sony aims for big jump in devices revenue Sony didn’t give earnings targets for its smartphone business, the division which has weighed most heavily on results

J

apan’s loss-making Sony Corp said it’s targeting a near 70 percent jump in revenue for its electronic devices division over the next three years, even as it warned further restructuring is in store for its TV and smartphone units.

The ambitious plan to hoist revenue at the division housing its growing image sensor business, to between 1.3 trillion yen and 1.5 trillion yen (US$11 billion to US$12.7 billion), was unveiled at a Sony investors’ conference yesterday. Sony sees revenue of 890 billion yen at the unit this business year.

All of Sony’s consumer electronics divisions combined account for roughly 70 percent of sales. But mainstream businesses like TVs and smartphones have struggled to keep up with nimbler rivals like Apple Inc.

and Samsung Electronics Co Ltd. Sony didn’t give earnings targets for its smartphone business, the division which has weighed most heavily on results, but said it will issue guidance by the end of March 2015. The company said it would be cutting its smartphone product portfolio and revising sales and marketing strategy by region as it seeks to turn the division around.

On TVs, where Sony has struggled for years, the firm said it would aim to create a profitable business structure even if sales were to slide between 20 percent and 30 percent over the next three years. It said it may cut the size of its product portfolio by 30 percent.

It forecast game division sales of between 1.4 trillion yen and 1.6 trillion yen in three years time

compared with a prediction of 1.29 trillion yen for the current business year.

It also said plans to improve its operating profit margin for the games division to between 5 percent and 6 percent from around 2.7 percent.

Last month, Sony posted a smaller-than-expected secondquarter operating loss on robust sales of image sensors. The result was hailed by its finance chief as proof that restructuring is paying off, but a poor showing from its own Xperia phones weighed heavily on the results.

In a similar event last week for its entertainment units, the conglomerate said it was aiming to lift its movie and TV programming revenues by a third over the next three years.

Reuters

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Business Daily | 13

November 26, 2014

Asia

Indonesia’s palm revolution runs off track for smallholders Palm giants have integrated their businesses to include plantations and refineries, leaving smaller producers battling to sell their crops when the market is oversupplied Michael Taylor

A

prolonged fall in the price of palm oil is hitting Indonesia’s legions of smallholder farmers, forcing cutbacks that will reduce output in coming years and raising the prospect of a bout of sell-outs to major producers.

Smallholder farmers account for about 40 percent of output from Indonesia’s vast plantations that cover an area the size of South Korea. A drop in smallholder output could shave total production by around 5 percent from next year, say analysts.

Up to 1 million smallholders in the world’s top palm oil producer have enjoyed a near uninterrupted decade of boom years, fuelling a rural consumer binge on new motorbikes and mobile phones.

But with prices near five-year lows some cash-strapped farmers are being forced to cut back on fertilizers, pesticides and replanting. They are calling on the government to give a sector vilified by green groups for forest destruction the type of price floor support enjoyed by rice and sugar.

“Farmers can’t increase

around 10 million hectares under a government-backed ‘palm revolution’.

Output in 2014 is expected to rise 7 percent to 30.5 million tonnes.

Used in everything from food to soap, palm oil is Indonesia’s secondlargest non-oil export, but prices have tumbled on record supplies of competing soy crops, weak crude oil prices and disappointing uptake of biodiesel in Indonesia.

Left behind

productivity because they don’t have money,” said Mansuetus Darto, secretariat at the Indonesian Oil Palm Smallholders Union, which has 40,000 members in Sumatra and Kalimantan. “Bottom-line is - they have become poor.”

Indonesia’s palm output has jumped 140 percent over the past decade, with plantations doubling to

But independent farmers say changes to the industry have made them more vulnerable to price falls than major players like PT Sinar Mas Agro Resources and Technology, Astra Agro Lestari and Wilmar International Ltd. “Many Indonesian planters are struggling to make ends meet as prices have already been disappointing in the past few years,” said a planter who declined to be named, pointing also to higher borrowing and logistics costs for smallholders.

In some areas on the island of

Sumatra, farmers are being forced to cut the use of fertilizers and pesticides, said Carlo Nainggolan of Sawit Watch, a group which aims to protect people from exploitation by large palm firms.

“Cutting fertilizers is usually the first thing people do,” said Alvin Tai, regional head of plantations at RHB Research Institute. “It’s easy and it doesn’t immediately affect yield.”

However, any reduction in fertilizer usage will hinder palm yields mid 2015, pushing smallholders backwards as big firms boost yields and acreage.

Selling up?

The last time prices were near current levels was in 2008, when an eight-month plunge led to a spike in farmer suicides. Many debt-ridden smallholders were unable to pay workers and either left palm fruit rotting on the trees or sold their land.

Smallholders would again look at selling their plantations, said RHB’s Tai, but the pool of likely buyers would be smaller due to uncertainties around foreign ownership and possible limits on expansion.

Smallholders want the government to support the industry with import curbs and price floors, but the monthold government of President Joko Widodo is struggling with other priorities such as cutting fuel subsidies and reducing red-tape.

“The days of easy profits with 35 percent margins for oil palm plantation companies are over,” said Howard Sargeant, director of plantations at PT Samuel International. “Many will have to become more cost efficient or go out of business.”

Reuters

India’s Congress could back Modi’s insurance reform plan A previous Congress government had itself sought to open up the insurance sector to inject more funds Sanjeev Miglani

I

ndia’s main opposition Congress party signalled on Monday it could support government legislation to liberalise the insurance industry, a long-delayed reform expected to help improve investor confidence.

Prime Minister Narendra Modi proposed in August to lift the cap on foreign investment in insurance ventures from 26 percent to 49 percent, but the opposition blocked the move in the upper house of parliament, where he lacks a majority.

On Monday, Congress appeared to soften its stand on insurance reform and a constitutional amendment for a national goods and services tax that the government plans to seek in a parliamentary session that began earlier in the day.

“Both the bills are our babies, we will see the nitty gritty. If our concerns are met, we have no reason to oppose them,” Congress spokesman Abhishek Manu Singhvi told reporters.

A previous Congress government had itself sought to open up the insurance sector to inject more funds into the world’s 10th largest market, where fewer than 4 percent of Indians have coverage.

But it failed to push through any reform because of a lack of support in parliament, including from Modi’s

Indian Prime Minister Narendra Modi (2-R) addresses the media on the inaugural day of the Winter Session of the Indian Parliament in New Delhi

Bharatiya Janata Party (BJP) then in opposition.

Modi won a strong mandate in the election to the lower house of parliament this May. But his BJP holds less than a fifth of seats in the 245-member upper house and he

needs the support of the Congress party to get his reform agenda through.

The government also wants to introduce a uniform goods and services tax, a reform measure aimed at ending the practice of paying different taxes in each of India’s 29 states.

But the government will likely face strong resistance to any moves to weaken the land acquisition law that the Congress government brought to ensure adequate compensation to landowners, a party leader said.

Reuters

14 | Business Daily

November 26, 2014

International Consumption helps Germany avoid recession A sharp rise in private consumption more than compensated for stubborn weakness in investment, helping the German economy post modest growth in the third quarter and avoid recession, data showed yesterday. Germany’s Federal Statistics Office confirmed an earlier flash estimate showing a 0.1 percent rise in seasonally-adjusted gross domestic product (GDP) on the quarter between July and September. Private consumption rose 0.7 percent quarter on quarter, the biggest increase in three years, and exports climbed at a faster pace than imports, helping trade make a positive 0.2 percentage point contribution in the third quarter.

Kingfisher profit down Kingfisher, Europe’s No. 1 home improvement retailer, posted an 11.8 percent decline in third quarter profit, hurt by a weak French market and foreign currency movements. The firm, which trades as B&Q and Screwfix in Britain and Castorama and Brico Depot in France, said yesterday it remained cautious on the outlook, especially in France, and would continue to keep a tight control on costs. Kingfisher made a retail profit of 225 million pounds (US$353 million) in the 13 weeks to November 1. Total sales fell 3.6 percent to 2.82 billion pounds.

Peru crackdown on illegal gold widens A crackdown on illegal gold mining in Peru has spawned new smuggling routes through its porous border with Bolivia with some gangs using human mules, armoured cars and light aircraft to evade capture. The gold is ghosted across jungles, rainforest and Lake Titicaca on the mountainous border, and is then sold to dealers who process the precious metal for export out of Bolivia’s capital La Paz, Peruvian officials say. Bolivia, a relatively small gold producer which has commissioned no new large mines in 2014, officially exported 24 tonnes of gold between January and August.

S&P unlikely to cut Russia’s rating Rating agency Standard & Poor’s is unlikely to change Russia’s rating even if the country falls into recession, the agency’s senior director for sovereign ratings, Christian Esters, said yesterday.

“External and fiscal buffers are strong enough to support the rating even if the economy goes into recession,” he said at a conference in Moscow.

At the same conference, S&P economist Tatiana Lysenko said the agency expected Russia to enter a technical recession in the fourth quarter. The economy contracted quarter-on-quarter by 0.5 percent in the third quarter, with a further contraction expected in the fourth quarter, she said.

Albania mulls energy sector legalization Albanian power losses in October decreased to 34.7 per cent while invoicing raised by 10 per cent, indicating Albania was on the progress towards legalization of energy sector, Albanian Minister of Energy and Industry said on Monday, according to Albanian Telegraphic Agency.

Speaking at the parliamentary committee of Economy and Finance, Damian Gjiknuri expressed his confidence that the level of power losses will continue to decrease in the following months.

Caesars to turn unit into a real estate firm Holders of the Las Vegas-based company’s term loans agreed to a reorganization plan that already had the support of some bondholders Laura J. Keller

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aesars Entertainment Corp., the most indebted U.S. casino operator, reached agreement with its most-senior lenders on the principles of a restructuring plan that would turn its largest unit into a real estate firm, according to two people with knowledge of the negotiations.

Holders of the Las Vegas-based company’s term loans agreed to a reorganization plan that already had the support of some bondholders after Caesars increased the cash lenders would receive, the people, who asked not to be named because the talks are private, said yesterday.

The proposal would put Caesars’ largest unit, Caesars Entertainment Operating Co., into bankruptcy as soon as January 14 and allow it to emerge as a real estate investment trust, four people with knowledge of the discussions said.

Caesars, which has lost money every year since 2009, has been

negotiating with senior creditors for at least two months to restructure the operating subsidiary’s US$18.4 billion of debt. The casino company was taken private for US$30.7 billion in 2008 by Leon Black’s Apollo Global Management LLC and TPG Capital in one of the biggest leveraged buyouts in history.

Gary Thompson, a spokesman for Caesars, declined to comment.

Wrangling support The company revealed the proposal to turn the unit into a REIT on November 19 after one of the lenders exited the talks. That plan called for giving back holders of the term loans 100 cents on the dollar and first-lien bondholders 93.8 cents, the company said in a filing.

Second-lien investors would receive a minimal amount of equity under the plan, the company said.

If they agree to the restructuring plan, they would get an additional amount “to be determined.”

Caesars is trying to wrangle the support of dozens of creditors holding the operating unit’s debt, saying in a Nov. 14 filing that the division would run out of cash by the fourth quarter of 2015 if it can’t restructure obligations through negotiations. The company has received four notices of default from creditors who say the company broke an agreement when it transferred assets to an affiliate. The fourth came yesterday from a group of first-lien bondholders.

The casino company reached an agreement earlier on the broad outline of a bankruptcy plan with first-lien bondholders including Paul Singer’s Elliott Management Corp. and Pacific Investment Management Co., people with knowledge of the discussions said November 11.

Bloomberg News

ECB’s Noyer: balance sheet statements anticipated There are growing concerns the central bank’s balance sheet will not expand as it expects unless it starts buying euro-zone government bonds Stanley White

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uropean Central Bank Governing Council member Christian Noyer said yesterday the central bank’s statements on the size of its balance sheet are not a firm commitment but an expectation of how large the balance sheet will grow.

Noyer, who is also governor of the Bank of France, said these statements were still a powerful signal that there would be no qualitative limits to further policy easing if needed.

He also reiterated the ECB’s commitment to take more steps if needed to respond to low inflation, but there are growing concerns the central bank’s balance sheet will not expand as it expects unless it starts buying euro-zone government bonds.

“The statement by the Governing Council is not formulated as a firm commitment but as an expectation,” Noyer said.

“Nevertheless, it is very significant.

Communication on the size gives a very concrete signal and content about future policy intentions.”

ECB President Mario Draghi has set a target of returning the ECB’s balance sheet to its level of March 2012 - around 3 trillion euros (US$3.7

trillion), compared with the current 2 trillion.

The whole policymaking Governing Council has thrown its support behind this plan, but initially some policymakers were worried Draghi committed the ECB to balance sheet expansion without building enough consensus.

The ECB has been doling out cheap loans to banks, known as LTROs. The ECB has also started buying covered bonds and asset-backed securities, but many analysts doubt these schemes can push the balance sheet up by a trillion euros.

Buying government bonds would take the ECB into the realm of quantitative easing used by the Bank of Japan and the U.S. Federal Reserve, but the policy is very contentious in Europe.

Some policymakers say it is possible for the ECB to buy government debt, but other policymakers and politicians from Germany say this move is beyond the ECB’s legal mandate.

The ECB remains committed to using additional unconventional measures that fall within its mandate, Noyer said yesterday.

KEY POINTS ECB sends mixed signals about commitment to balance sheet Some analysts say QE needed to expand ECB balance sheet ECB fighting low inflation in euro-zone

Noyer also said the ECB has not bought government debt up until now because it would give the impression the ECB is choosing which euro-zone countries should have lower yields.

The euro zone economy is mired in low growth and weak inflation, and the ECB in recent months stepped up its efforts to boost the recovery by flooding the market with billion of euros to unblock lending channels to households and companies.

Reuters

Business Daily | 15

November 26, 2014

Opinion Business

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Leading reports from Asia’s best business newspapers

VIETNAM NEWS Viet Nam’s consumer price index (CPI) fell in November 2014 by 0.27 per cent monthon-month largely because of decreasing transport costs, the General Statistics Office (GSO) revealed. This is the second time the country’s CPI has decreased since last March, when prices fell by 0.44 per cent from February. The CPI increased in November by 2.6 per cent year-on-year, which was lower than the 3.23-per cent year-on-year increase last October but still the lowest CPI in the past 10 years, the GSO noted.

BANGKOK POST The Finance Ministry has agreed in principle to extend tax incentives for investment in long-term equity funds (LTFs), which were scheduled to expire at the end of 2016, with a requirement of a longer investment period and potentially cutting the tax privileges. The current five-year holding period for LTF investment is likely to be extended to 10 years in the new version, said Kritsada Jinavijarana, director-general of the Fiscal Policy Office.

The Finance Ministry’s latest move clarifies potential changes in investment tax incentives, designed to encourage taxpayers to save.

THE KOREA HERALD South Korea ranked No. 2 in development of its information and communications technologies (ICT), a U.N. agency said yesterday, giving up its first place to Denmark. The International Telecommunications Union (ITU) said Asia’s fourthlargest economy ranked second among 166 countries surveyed. It marked the first time for South Korea to miss the top spot since 2010.

Sweden came in at third, followed by Iceland, Britain, Norway, the Netherlands and Finland. Hong Kong and Luxembourg also made the top 10 list.

PHILSTAR Excise tax collections from the sale of tobacco and alcohol products continued to outpace the government’s target in the first nine months of the year, according to the latest data released by the Bureau of Internal Revenue.

The BIR collected P78.3 billion in excise taxes from January to September this year, exceeding its goal for the period by 21.4 percent or P13.8 billion. Last year, excise tax collections surged 81.2 percent to P100.9 billion with the incremental revenue under the sin tax reform amounting to P51.1 billion.

Germany’s four neins Marcel Fratzscher

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Former head of International Policy Analysis at the European Central Bank

ermany’s stance toward Europe has become one of rejection and disengagement. Its policymakers deny the eurozone’s crisis-ridden countries a more active fiscal policy; refuse to support a European investment agenda to generate demand and growth; have declared a fiscal surplus, rather than faster potential growth, as their primary domestic goal; and have begun turning against the European Central Bank (ECB) in the struggle against deflation and a credit crunch.

On all four counts, Germany is wrong.

To be sure, Germany is justified in rejecting narrow-minded calls by France and Italy for unconditional fiscal expansion.

After all, fiscal stimulus can work only if it supports private investment and is accompanied by much more ambitious structural reforms – the kind of reforms that France and Italy are currently resisting.

But Germany has all of the leverage it needs to implement the stability-oriented reforms that it wants for Europe. For starters, Germany, together with the European Commission, can compel France to pursue deeper reforms in exchange for more time to consolidate its deficit.

Germany cannot, however, indulge its obsession with supply-side reforms without also pursuing growth-enhancing policies. As Germany knows from its own experience in the early 2000s, the benefits of supply-side reforms – namely, improved competitiveness and higher long-term growth rates – take a long time to emerge.

Time is a luxury that Europe does not have. With every month that the economy loses productive capacity, the likelihood of stagnation and deflation rises.

The key to ending the European crisis is a stimulus plan that addresses deficiencies on both the supply and demand sides. That is why Germany’s refusal to help find a way to finance the proposed European investment agenda – which, for a limited time, would fund productive private investment – is a mistake.

Equally problematic is Germany’s focus on maintaining a fiscal surplus. With projections for German GDP growth this year and next revised downward by more than 0.6 percentage points in the last few months, the government could be forced to initiate a pro-cyclical fiscal policy to achieve its goal, inducing even lower growth at home and throughout the eurozone.

Given that the German economy’s output gap remains negative, the government should be implementing expansionary fiscal policy that targets the country’s infrastructure weaknesses. In this sense, Finance Minister Wolfgang Schäuble’s plan to spend an additional €10 billion (US$12.5 billion) on public investment in 2016-2018 is a step in the right direction.

But, at just 0.1% of Germany’s annual GDP, Schäuble’s scheme looks more like an attempt to quiet criticism from the rest of Europe than a genuine policy shift.

Germany’s fourth policy mistake is its apparent withdrawal of support for the ECB. Over

Time is a luxury that Europe does not have. With every month that the economy loses productive capacity, the likelihood of stagnation and deflation rises

the last seven years, the ECB’s actions have helped Germany’s economy and taxpayers as much as those of its neighbours. Moreover, the claim that the ECB’s purchases of asset-backed securities amount to “toxic loans” that transfer risk to German taxpayers is unfounded; after all, there have been almost no defaults since 2008.

Germany’s leaders need to recognize this – and to defend the ECB publicly from baseless fear mongering.

Failure to do so may reflect

an effort to forestall the rise of the far-right anti-European political forces, particularly the Alternative for Germany. But this strategy merely plays into the party’s hands.

If Germany refuses to take a more reasoned approach, it risks undermining the ECB’s credibility, thereby reducing the effectiveness of its measures. If that happens, the ECB may well be compelled to initiate large-scale purchases of eurozone government bonds through its so-called “outright monetary transactions” scheme – a plan that many German policymakers and economists staunchly oppose.

The German government can use its considerable leverage to compel France and Italy to pursue the structural reforms that both countries need, while allowing a growth-friendly demand stimulus to lift the threat of deflation hanging over the eurozone. And it has the authority to bolster the ECB’s credibility and thus its efforts to ensure future price stability and prevent financial contagion.

Europe needs a grand bargain, involving close coordination on structural reforms and fiscal and monetary policy.

Germany’s relative economic and political stability, far from enabling it to disengage from such efforts, makes it among the most important protagonists in their development and implementation. The question is whether Germany’s leaders will recognize this before Europe’s economy falls into an even deeper slump.

Project Syndicate

16 | Business Daily

November 26, 2014

Closing 500-yuan fine for smoking indoors

New drivers could take tests without lessons

Smokers who light up at indoor public areas could be fined as much as 500 yuan (US$81) and operators who don’t stop them may have licenses revoked under a proposed law as China considers stricter tobacco control. Operators would be required to set up designated areas for smokers, with few exceptions such as women and children’s hospitals where smoking is totally banned, according to the document drafted by the health ministry and posted on the website of the law-making State Council today.

China may stop requiring motorists enrol in driver’s education classes before they can take a license test, as the government seeks to make the qualification process more transparent. The government is looking to streamline the licensing process and may grant “the long-awaited wish for independent learning and testing,” the public security ministry said in statements on its website and microblog yesterday, without giving more details. Making it easier to get a driver’s license may further spur car sales in China, already the world’s largest auto market.

Gap in China-Hong Kong trade numbers narrows The difference between the two sets of data narrowed by more than a quarter

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he discrepancy between what China exported to Hong Kong and the former British colony imported from the mainland narrowed in October but shows speculative money disguised as trade remains rampant.

The shortfall between the two shrank from September, the year’s peak, but remains well above the average gap for this year, data shows.

Hong Kong’s annual imports from China in October rose 4.4 percent to HK$179 billion (US$23.08 billion), according to government data yesterday.

This was against Chinese exports of US$32.74 billion to Hong Kong, a 24 percent rise from a year earlier and a 34 percent jump from September, official data showed earlier this month.

The difference between the two sets of data narrowed by more than a quarter to US$9.67 billion from US$13.5 billion in September, its biggest gap so far this year.

That is well above the average for the first nine months of US$7.4 billion, according to Thomson Reuters calculations

As long as the interest rate difference between China and overseas markets exists, hot money will continue to flow into China to buy wealth management products or just save it in banks Raymond Yeung, analyst at ANZ in Hong Kong

indicating fake-invoicing remains rampant.

Raymond Yeung, an analyst at ANZ in Hong Kong said arbitrage flows and fake trade “lost some momentum.”

Hong Kong docks

“However, as long as the interest rate difference between China and overseas markets exists, hot money will continue to flow into China to buy wealth management products or just save it in banks,” he said.

While Beijing keeps strict capital controls on the movement of yuan across its borders, trade restrictions have been virtually dismantled in recent months with companies free to move the currency, if backed by trade.

That increased leeway for companies to move the

renminbi across borders has kept apace with China’s drive to promote its currency in global trade and settlement since 2009.

Interestingly, that has also coincided with the growth of fake trade flows across borders as speculators look to take advantage of an appreciating currency and relatively higher yields in the onshore market.

Analysts said some difference between China and Hong Kong trade figures is inevitable as regulators use different baskets and systems

Indonesia raises 2015 GDP target

China to offer aid for India’s high-speed rail

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to measure the volume of trade, but the widening gap in recent months has raised concerns that speculative capital flows are being masked as routine trade.

The Chinese yuan has gained nearly 2 percent since May in the face of a resurgent dollar, which has gained more than 10 percent against a basket of its tradeweighted currencies, fanning the growth of such speculative flows.

Even with a surprise rate cut on the mainland last week, Chinese interest rates are among the highest in the emerging market complex while the launch of a landmark scheme connecting both the equity markets in Hong Kong and Shanghai have boosted equity markets on both sides of the border, further attracting such flows.

China’s jewellery and precious metal exports rose to 187 percent from a year earlier in October, but the pace of increase moderated from the previous month as authorities stepped up their investigations into fake trade practices, analysts said.

Reuters

Tencent partners with HBO for TV show streaming

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hina will conduct and pay for a feasibility study in India for a high-speed rail line to link Delhi with the southeast city of Chennai, a spokesman for India’s Ministry of Railways said yesterday, as the country moves to modernise its creaking rail infrastructure.

China has been aggressively campaigning to export its high-speed rail technology, including to governments in Malaysia, Thailand and Myanmar, after building the world’s longest domestic network in less than a decade. To date, it has won contracts to build rail lines in Saudi Arabia and Turkey.

The ministry spokesman gave no cost estimates for the proposed 1,750 kilometre line but a study for a high-speed 500-kilometre line between Mumbai and Ahmedabad being conducted by the Japan International Cooperation Agency estimated that project would cost 600 billion rupees (US$9.70 billion).

A group of five Indian officials in China since Monday will sign an agreement with Chinese officials this week on the feasibility study, the spokesman said.

ndonesia will see a faster economic growth of 5.8 percent next year from an initial forecast of between 5.2 and 5.3 percent following the government hiked fuel price, a minister said on Tuesday.

The Southeast Asia’s largest economy would build more infrastructure facilities to spur growth after President Joko Widodo freed up state budget by more than 100 trillion rupiah ( some 82.2 billion U.S. dollars) and 16 trillion rupiah (about 1.3 billion U.S. dollars) respectively following a nearly 31-percent oil price hike, and a slash of official travel and meeting funds this month.

“The funds would be used for the constructions of infrastructure and other productive sectors,” Finance Minister Bambang Brodjonegoro said.

“Hence the economic growth next year could expand to 5.8 percent.”

In addition to the fuel price policy, the government has set up a task force to investigate the possible leakages on oil distribution, sales and purchase.

hinese Internet firm Tencent Holdings Ltd is partnering with Time Warner Inc’s HBO network to stream its TV shows, which are known for their provocative content and may draw scrutiny from the country’s authorities.

Tencent will be the exclusive online provider of HBO series such as “Game of Thrones” - which features gore, nudity, and incest - “True Detective” and “Boardwalk Empire”, China’s top social network and gaming firm, said yesterday.

“This partnership enables us to distribute some of the most ground-breaking programming in the world through our robust technology platform, to the benefit of Chinese Internet users,” Martin Lau, president of Tencent, said in a statement.

But even as China’s Internet TV firms have pumped more than US$1 billion into foreign content in less than two years in a bid to attract more viewers, government regulators have stepped up their oversight of the previously freewheeling industry.

Tencent declined to say how much it spent on HBO’s content, nor did it give a date for release.

Reuters

Xinhua

Reuters