Macau Business Daily, Nov 28, 2014

MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 677 Friday November 28, 2014 Year III

No rush to connect

S

hanghai-Hong Kong Stock Connect. It was launched with great fanfare on November 17. And should open the door for Macau investors, via HK, to buy equities in Mainland China. But interest has been lacklustre at best. Reaction has been so muted here that banks have put it on the back-burner.

“The Shanghai Stock Exchange is very subject to the influence of Central Government policies,” one banker told Business Daily. “People in Macau don’t understand and trust the Shanghai Exchange and so we do not expect retail investors to invest in it” PAGE

2 JLL estimates 30,000 more hotel rooms in 3 years

Lines drawn

PAGE 3

MTEL has boldly staked its claim. The telecommunications service provider will offer fixed-line tariff 10 to 20 per cent cheaper than current market rate.

The CTM CEO said it’s serving its clients with “the best rates”. MTEL competition “is positive” for the company, he added. But the market will decide

PAGE 4

EU to deepen ties with Macau PAGE 6

Gaming industry driving labour force PAGE 3

Brought to you by

HSI - Movers November 27

Name

%Day

Thai tourist numbers topple

China Resources Powe

2.26

Cathay Pacific Airwa

1.25

China Overseas Land

0.88

Bank of Communicatio

0.83

China Life Insurance

0.75

Now, it’s reciprocated. Macau residents may increasingly be opting not to travel to the Land of Smiles. But an increasing number of Thai nationals are bypassing Macau. Package tours in particular are affected. A third less Thais visited this October

Power Assets Holding

-1.41

Hong Kong & China Ga.

-1.49

Bank of East Asia Lt

-1.82

COSCO Pacific Ltd

-2.21

Kunlun Energy Co Ltd

-2.48

Source: Bloomberg

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www.macaubusinessdaily.com

I SSN 2226-8294

Brand new yuan Chinese authorities are moving forward rapidly. To equip RMB with all the features of a legitimate international currency. Since yesterday, foreign companies can trade their freed up funds while PBOC moves on further reforms

Pages 10 and 11

Spreading it around

Brought to you by

More choices than ever. For an increasingly well-heeled populace.

Chinese investment by Macau residents in securities issued by unrelated non-residents has hit a record-breaking MOP416.9 billion. An increase of 34.6 per cent over a year ago. Chinese securities occupy nearly half of the total. While residents’ interest in investing in US and Australian securities has also surged

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2 | Business Daily

November 28, 2014

Macau

Macau investors adopt ‘wait and see’ approach towards link Shanghai-Hong Kong Stock Connect has opened the door for Macau investors, through Hong Kong, to buy equities in Mainland China. Interest in such stocks, however, has been lacklustre due to caution and a ‘wait and see’ approach João Santos Filipe *

jsfilipe@macaubusinessdaily.com

T

he Shanghai-Hong Kong Stock Connect commenced operations on November 17 but for retail and institutional investors in Macau there was no rush to buy equities in Mainland China. As has happened in the neighbouring Special Administrative Region, investors have been cautious about investing in the Shanghai Stock Exchange.

A spokesperson of the Macau Branch of Industrial and Commercial Bank of China (ICBC) told Business Daily that demand for stocks of companies listed in Shanghai has been lower than it expected but that clients have been used it.

The same source also said that during the first day of the connection – when the entire daily quota available for Hong Kong investors to spend on Shanghai was used – there was no such rush to acquire equities in Macau.

“Macau clients are more conservative than clients in Hong Kong. We believe they will take a ‘wait and see’ attitude before making the decision to invest in ‘A’ shares”, the same source explained. ‘A Shares’ denotes shares for Mainland Chinabased companies that trade on Chinese stock exchanges.

In fact, the initial muted interest by Macau investors in China’s ‘Through Train’ has led the Macau Branch of China Construction Bank not to open this service to its clients.

“We are not offering this service to our clients because in August we conducted a survey to ask about their interest in the Stock Exchange Connect and it turned out that they were not that interested”, Cathy Pan, Vice President of the Macau Branch of China Construction Bank told Business Daily.

“The Shanghai Stock Exchange market is very subjected to the influence of the Central Government’s

policies. People in Macau don’t understand and trust the Shanghai Exchange and so we do not expect retail investors to invest in it”, she said. “Retail investors from Macau are not very interested in the Connect because the stock market in the Mainland is not as transparent and well-built as the Hong Kong Stock Exchange market”, she added.

China Construction Bank does not exclude the possibility of opening this service to Macau clients in the future, however, if there is a significant demand for it. “We will observe market conditions and see if we will participate in the plan later on”, Pan said.

Trust issues The attitude of Hong Kong investors has been similar to the one in Macau. Shareholders are still waiting to analyse how the connection turns out.

“Although the connection was announced more than six months ago, the rules of the Shanghai Stock Exchange are very different from those of Hong Kong. Also, they are quite hard to understand for retail investors, which make them more cautious about investing”, senior research analyst at Harris Fraser Group Andy Wong explained to Business Daily.

However, this attitude is likely to change as time goes by and retail investors are more and more used to the facility. The availability of more information on the connection will also increase the confidence of investors.

“As the trust of retail investors in Macau increases in relation to the Shanghai Stock Exchange and as they get use to its rules, which will take some time, they will be more willing to invest”, Mr. Wong said.

Day

Northbound Trading Link (Hong Kong investment)

Southbound Trading Ling (Shanghai Investment)

17-Nov

100%

10%

18-Nov

37%

8%

19-Nov

20%

2.40%

20-Nov

17%

2%

21-Nov

18%

1.80%

24-Nov

53.50%

1.30%

25-Nov

21.90%

1.50%

26-Nov

25.30%

2%

27-Nov

23%

1.70%

The Shanghai-Hong Kong Stock Connect is a programme that provides investors with the opportunity for Hong Kong and Mainland Chinese investors to access each other’s equity markets.

The programme has created a Northbound Trading Link for Hong Kong investors and Southbound Trading Link for Mainland Chinese investors. However both links have a daily quota. For Northbound Trading the quota is RMB13 billion (MOP16.9 billion); the Southbound Trading quota is RMB10.5 billion (MOP13.7 billion).

During the first nine trading days the quota was only entirely used in the first day of connection on the Hong Kong side. As for Shanghai investors, they have never used more than 10 percent of the daily quota. The low volume of transactions, however, is not fully unexpected.

“We weren’t expecting a very high volume from Hong Kong investors because the purpose for the

Hong Kong side is to let international investors access ‘A-shares’. But at the moment there is still some uncertainty and the market in Shanghai is not fully opened to other markets, which is something that needs to change in order to attract more investment”, Andy Wong said.

“We would rather have investors be cautious and not rush into buying stocks in Shanghai than the opposite.

If there was a rush at the beginning, the investment may be conducted in an illogical way”, he said.

In relation to the little usage by Shanghai investors, for Andy Wong a cultural factor is playing a role.

“There is a different culture between Mainland China investors and Hong Kong, which has been impacting transactions. Also, Mainland Chinese investors are mainly retail investors that are more interested in smallcaps stocks, which made them not so interested in the Hong Kong Stock Exchange”, he explained. *With Stephanie Lai

Business Daily | 3

November 28, 2014

Macau JLL predicts 30,000 more hotel rooms in 3 years The managing director in Macau for property services company Jones Lang LaSalle, Gregory Ku Ka Ho, predicts that the number of hotel rooms in Macau and Hengqin will increase by 30,000 between next year and 2017, making the total number of hotel rooms in these regions some 57,000. According to Macao Daily, he believes that the increased number of hotel rooms can be consumed with an increase in visitors to Macau. In addition, he claims that 11 office buildings and 17 shopping malls will be completed in Hengqin in the next three years, anticipating that these projects will be successful after 10 years.

Gaming industry driving labour force expansion

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ore people are entering the gaming industry.

The sector saw the biggest growth in the number of employees between August and October of the year, up by 3.8 per cent, compared to the previous period, the latest figures released yesterday by the Statistics and Census Service (DSEC) reveal.

The survey indicates that the total labour force reached 401,300 while total employment was 394,400 up 2,300 - during the three months. The participation rate of the labour force, meanwhile, increased slightly by 0.2 percentage points to 74.2 per cent.

In fact, the unemployment rate of the city has remained

unchanged again at 1.7 per cent in the period, with the underemployment rate 0.3 per cent.

Meanwhile, the gaming industry continues to occupy a big part of the city’s labour force, with the total number of employed workers in the industry reaching 84,600, an increase of 3,100 from the 81,500 of the previous period.

Restaurants and similar activities also engaged more of the labour force. According to the survey, there were a total of 28,500 workers in the industry between August and October, an increase of 2.8 per cent compared to the previous period. Moreover, the labour force in the retail trade also increased, by 0.9

per cent.

Construction plus hotel and similar activities saw a depletion in their labour force in these three months, which decreased by 0.5 percent and 1.8 percent, respectively,

compared to the previous period.

Of the employed population, 24.1 per cent are in recreational, cultural, gaming & other service industries. Some 14.2 per

cent are in hotels, restaurants & similar activities, while the construction industry occupies some 14.1 per cent of the population.

In addition, the wholesale & retail trade attracted 11.4 per cent of the total employment population while some 7.7 per cent of the population works in real estate & business activities.

Only some 6.6 per cent toil in public administration and social security. Domestic work, on the other hand, attracted 5.6 percent of the labour force. Other industries accounted for the remaining 16.3 percent of the total employed population from August to October.

K.L.

4 | Business Daily

November 28, 2014

Macau Brought to you by

CTM: Not cancelling unlimited data plans The chief executive of Companhia de Telecomunicacoes de Macau (CTM), Vandy Poon Fuk Hei, said yesterday that the company is not planning to cancel unlimited data usage plans for its customers. According to local media TDM radio, the chief executive claimed that the Bureau of Telecommunications Regulation (DSRT) was allowing telecommunications companies to set an upper limit for data fares meaning that every customer could enjoy unlimited data. Meanwhile, new rival MTEL Telecommunication Company Ltd may also offer Internet services in the future.

Mr. Poon said the decrease in Internet fees will depend on the adjustment of the market.

HOSPITALITY Labour absorbers Most hotel and restaurant jobs are labourintensive and a significant share of them require little qualification. Consequently, the two sectors absorb a significant share of the least qualified members of the labour force. Direct employment in the two sectors has been growing continuously.

Their combined effectives exceeded 74,800 workers in the third quarter of this year, a figure corresponding to a total growth of 49 percent in the last five years. This rate was more than double the overall labour force growth rate, which stood in the same period at just over 22 percent. If we take each sector workers separately, the growth rate for the restaurant sector was even higher, reaching 57 percent in the same period. That is equivalent to an annual average growth in excess of 10 percent. If sustained for another couple of years, it would translate into a more than doubling of the sector’s labour force in less than 7 years. However, the plots below seem to suggest that growth is levelling off and another noticeable increase is unlikely until the new casinos and related facilities in Cotai start operating.

MTEL’s leased line tariff 10-20 pct cheaper than current charges The telecom regulator here said it has already approved the leased line tariff of the new fixed-line telecom operator MTEL, which is rolling out its service soon Stephanie Lai

sw.lai@macaubusinessdaily.com

T The figures also suggest that there is a relatively significant number of unfilled vacancies. In the last three years, their number oscillated around the 7 percent mark, after peaking at more than 12.5 percent registered in 2011. That vacancy peak was associated with the opening of the last batch of big hotel and restaurant facilities in Cotai. After a while, their number subsided naturally. In the last quarter, the two sectors - hotels and restaurants reported about 2,700 and 3,100 vacancies, respectively. The absolute Q3 figure for the two sectors combined stands 25 percent above the corresponding value for last year.

5,824

vacancies in hotels and restaurants, Q3

he leased line tariff that fixedline telecommunications service provider MTEL Telecommunication Company Ltd will be offering will be 10 to 20 per cent cheaper than the current tariff, the top official of the city’s telecom regulator revealed yesterday on the sidelines of the 2014 Leaders Conference of the International Association of Portuguese-speaking Communications (AICEP).

The locally-incorporated MTEL, which received its fixed-line licence in June last year, told media on Wednesday that users here could subscribe to the company’s local and international leased line services by or before December 3. In 2012, MTEL was the only bidder for the opening up of the landline telecommunications market, although the government was expecting to introduce two new players to the market.

“The company [MTEL] has fulfilled the terms of the licence where it has already covered 30 per cent of network coverage [of local residential buildings], and are doing some network

testing these days,” the deputy director of Bureau of Telecommunications Regulation, Hoi Chi Leong, told media yesterday.

“If all of these testings prove okay, and with the approved [leased line] tariff, MTEL is ready to provide service, which will mainly be for commercial users,” the official said.

In MTEL’s bid to run the fixed-line telecom service here two years ago, the company pledged to roll out a leased line service tariff that equalled 70 per cent or less of Companhia de Telecomunicações de Macau SARL’s (CTM) charges as CTM at that time was the sole fixed-line telecom operator, controlling the city’s leased line cost.

“The leased line service tariff has of course undergone some adjustments [since the bid for the fixed-line telecom service],” Mr Hoi said. “MTEL’s offer for their leased line services, whose tariff we have approved, is basically some 10 to 20 per cent cheaper than the current leased line tariff in the market, depending on the type of package and speed of that service.”

Apart from the approximately

30 per cent of network coverage of local households throughout Macau as required by the government, MTEL told Business Daily that its infrastructure works have actually exceeded government requirements as its network could reach some of the major office buildings in the Nam Van distict and ZAPE district on the Macau Peninsula.

MTEL is now waiting for the issuance of an Internet service provider’s licence, which Mr. Hoi mentioned yesterday could be expected within this year.

Vandy Poon, chief executive officer of CTM, also attended the conference yesterday but did not directly respond whether the company would make any further adjustments to its existing leased line tariff in response to the MTEL announcement.

“The most important thing is that we’ll have clients that continue to use our service, for which we are serving them with the best rates,” Mr. Poon remarked. “I think the pressure [from MTEL’s entry into the telecom market] is a positive one for us.”

Business Daily | 5

November 28, 2014

Macau

Fewer Thai nationals visiting Macau Sara Farr

sarafarr@macaubusinessdaily.com

N

ot only are more Macau residents opting not to travel to the Land of Smiles, an increasing number of Thai nationals are choosing not to visit Macau, especially on package tours.

The latest information from the Statistics and Census Service (DSEC) reveals that the number of Thai nationals visiting the territory dropped by 34 per cent in October over that of a year ago to 11,300. That is the biggest drop on record for official figures of last month. Second to Thailand is Hong Kong, whose residents and nationals are opting not to visit their neighbouring SAR on package tour arrangements. The total number of visitors from Hong Kong visiting Macau on package tours totalled 30,700, a 10 percent drop compared to that of October 2013.

Meanwhile, the number of mainland Chinese visiting Macau on package tours increased considerably - by

74.5 percent to 919,000 in the month of October alone over that of a year ago. In the first 10 months of the year, the number of mainland Chinese travelling to Macau under such arrangements totalled just over 8 million.

Overall, the number of visitors arriving in Macau on package tours increased 56.2 per cent to 1.1 million last month. And between January and the end of October, that number reached just over 9.99 million.

Concurrently, the number of Macau residents travelling outbound has increased by 13.1 per cent year-on-year to

139,600 in October. Of these, official figures show that those travelling on package tours accounted for 39 per cent of the total.

The primary destination chosen by outbound travellers remained mainland China, accounting for 85,100 of all outbound travel, and representing a 22.5 per cent increase over that of a year ago. Taiwan came in second, and saw the number of Macau residents travelling there increase by 60.2 per cent to 19,000, followed by South Korea which saw an increase of 18.8 per cent and Malaysia, which saw a 13.4 percent increase in the number of Macau nationals and residents travelling outbound.

Similar to that from a month earlier, the number of outbound travellers opting to visit Thailand dropped 36.9 percent in October to 4,000, while those to Hong Kong dropped 22.6 percent to 17,900 compared with the same month a year ago.

Macau market maximises Moiselle revenue The clothing retailer posted a gross profit of HK$168 million for the six months ended September 30

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oiselle International Holdings Ltd announced gross profits of HK$167.97 million for the six months ended September 30, up from the HK$157.4 million registered in the same period a year earlier.

The Macau segment, which falls under ‘outside Hong Kong’, reported revenues from external customers of HK$96.3 million, up from last year’s same period HK$94.5 million.

Overall company revenue increased to HK$205.1 million from HK$193.2 million for the six months in question.

The clothing retail company said in the filing with the Hong Kong Stock Exchange when releasing its unaudited interim report that Macau had contributed towards its strong performance.

‘The continued significant improvement in performance

of Taiwan and Macau districts provided a strong base for the increase in revenue of the outside Hong Kong region,’ the filing reads.

Overall, the company reported a turnover of HK$205.1 million between the months of April and the end of September. That is a 6 per cent increase compared to that of the same period a year earlier.

The group has four stores in Macau: two retailing the Moiselle brand, one for casual brand Mademoiselle and another for Italian accessory label Coccinelle. In addition, during its interim period, the clothing retailer also opened its first ‘M Concept’ store in Macau. Outside Hong Kong, the group also has stores in mainland China, Taiwan and Singapore.

S.F.

6 | Business Daily

November 28, 2014

Macau

EU to deepen ties with SARs Economy is at the top of the agenda for Europe and Asia, said Vincent Piket, head of the European Union Office in Macau and HK

K

Joanne Kuai

joannekuai@macaubusinessdaily.com

T

he eighth parliamentary election of the European Union (EU) was held in May this year. The head of the European Union Office to Hong Kong and Macau, Vincent Piket, was in town introducing the upcoming work programme.

“The key thing will remain the re-boosting of economic growth. In the EU, that’s our key task. We have the stability in our financial sector.

Our currency is healthy. The large majority of our banks are healthy.

And those who still have some capital adequacy problems are required to work on that in the coming two years,” said Mr. Piket.

The 18-nation euro zone is struggling to shake off the aftermath of its debt crisis, aggravated by the economic impact of a standoff with Russia over Ukraine. Mr. Piket highlighted the challenges in order to bring back business to its normal status.

“At the end of the day, it comes down really to the economy, the jobs for the people, the investment opportunities for the investors, the access to money, particularly for small and medium-sized enterprises. That

Kingston Financial posts 70pct increase in profit

is the focus of the work programme.”

Mr. Piket was speaking at a luncheon with members of the Macau European Chamber of Commerce yesterday. He said the other topics highlighted on the agenda for the EU also include security challenges and internal political issues.

Closer ties Dutch diplomat Vincent Piket took up his duties as head of the Office of the European Union to Hong Kong and Macau in 2012. Previously, he had served as the European Union Ambassador to Malaysia for four years.

Prior to his position in Malaysia, Mr. Piket was head of the European Commission’s unit for regional cooperation programmes for Asia and Central Asia from 2005 to 2008.

He has long pledged to boost ties with the two Special Administrative Regions.

“The European Union and Hong Kong and Macau SARs are enjoying a strong relationship,” said Piket.

“We’re linked by long-standing historical ties and shared values, and there are thriving trade and

investment flows as well as vibrant people-to-people exchanges.”

Mr. Piket also pointed out that in 2013 the total trade in goods between Macau and the EU reached 656.5 million euros (MOP6.5 billion) which was a growth of some 24 per cent, and he is expecting more growth this year.

According to the latest data from Macau’s Statistics and Census Bureau, in the first nine months of this year, the value of Macau’s exported goods to the EU increased 5 percent compared to the same period last year. In the first three quarters, Macau also saw the value of imports from the EU increase 24 percent year-on-year.

“For Hong Kong, there’s also growth but much more modest. For China, we expect the same. On the whole, we’re doing very well in our trade,” he said. “Together with the EU member states I hope to contribute to the further growth of these relations.”

The head of the EU office to Hong Kong and Macau also said he is pleased to see the Macau Government embracing the international trend of automatic information exchange, which will see the bank information of EU citizens in Macau immediately transferred back to Europe. Mr. Piket said they are more than willing to lend a helping hand as well.

“That’s a major step forward.

Hong Kong has taken the same step.

It will definitely mean that Macau and EU can cooperate closely on putting the legislation in place,” said Piket. “Macau has to be taught how to amend tax ordinance. We are ready to share whatever know-how we have for our amendment of our tax laws to make the job for the Macau administration easier.”

ingston Financial Group Ltd has announced a profit increase of around 70 per cent to HK$579.1 million for the six months ended September 30.

In a filing with the Hong Kong Stock Exchange of its unaudited interim results, the company said the increase in profit attributable to its owners was ‘mainly due to [the] increase in income from securities brokerage, underwriting and placements, margin and IPO financing businesses as compared to HK$341.1 million for the corresponding period of last year.’

Turnover for these six months also increased by 41 per cent to HK$1.17 billion over HK$830.4 million recorded last year.

In Macau, the group provides gaming and hospitality services. It runs Casa Real Hotel and Grandview Hotel – properties operating gaming under a licence from Sociedade de Jogos de Macau SA. Here, Kingston Financial’s revenues for its hotel operations – including room rental, food and beverage sales – increased by 24 per cent to HK$133.5 million over that of the same period last year.

At the end of September, the company had a total of 58 gaming tables in two mass market halls plus another 13 gaming tables in two self-managed VIP rooms and 224 slot machines and 140 live baccarat machines in the two electronic gaming halls. ‘The live baccarat machines at Casa Real brought additional crowd to the property, achieving synergy with the slot machine business as well,’ the filing reads.

When looking at the future of its Macau business in the second half of the year, Kingston Financial said in the filing that its performance ‘will remain susceptible to the overall economic performance of mainland China, the level of visitation to Macau, as well as the competitive situation among the casino operators.’

S.F.

AL asks govt to explain budget adjustment

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egislator Chan Chak Mo said the Public Finance Affairs Monitoring Committee of the Legislative Assembly would invite several government departments to explain the budget from the year 2013 to 2015.

The Second Standing Committee of the Legislative Assembly had a meeting yesterday morning analyzing and discussing the government’s budget for the upcoming year. After a closeddoor meeting with some government officials, the president of the committee, Chan Chak Mo, told reporters that the biggest increases in the budget are planned for the Cultural Affairs Bureau, the Macau Trade and Investment Promotion Institute and the Science and Technology Development Fund.

Legislators are demanding appropriate justification.

“They have to have some fine explanations, such as if they are having a difficulty in hiring people, or they want to renovate some new cultural tourist spots and have to launch public consultations and received objections during consultations. There have to be

sufficient reasons. The budget is based on the number from last year. It can be increased, but the contents need to be clearer,” said Mr. Chan.

Mr. Chan said that based on the data provided by the government, in 2013 the Cultural Affairs Bureau spent MOP235 million but the budget for 2015 has increased to MOP427 million. The budget for the Science and Technology Development Fund in 2014 is MOP427 million but up to August this year the rate of budget execution was only 8 percent, which stands around MOP30 million. Mr. Chan called it the “most ridiculous one”.

The Land, Public Works and Transport Bureau that presented at the meeting had MOP454 million for their 2014 budget. But the rate of budget execution up to August was less 40 percent. The government explained that some projects are only to be paid by the end of the year, and expect the implementation rate of the budget to reach 70 percent by then.

Chan Chak Mo said the committee would finish their position paper by 10 December at the latest.

Business Daily | 7

November 28, 2014

Macau

Securities invested in

by Macau residents at record high Chinese securities occupy nearly half of the total. Meanwhile, residents’ interest in investing in US and Australian securities has also surged Kam Leong

kamleong@macaubusinessdaily.com

I

nvestment by Macau residents in securities issued by unrelated non-residents reached a recordbreaking MOP416.9 billion at current market value as at 30 June 2014, a jump of 34.6 per cent year-onyear, according to the coordinated portfolio investment survey conducted

by Monetary Authority of Macau (AMCM) and the Statistics and Census Service (DSEC).

The survey finds that the total market value of investments by Macau residents, compared with 31 December 2013, had also increased by 6.6 percent. These investments include by individuals, the government and other legal entities but exclude Macau’s foreign exchange reserves.

The survey shows that residents’ investments in long-term debt securities and short-term debt securities had both registered growth as at June 30 of this year. Shortterm debt securities surged 40.4 per cent, reaching a total of MOP21.6 billion, compared with the end of 2013, while investment in long-term debt securities, valued at MOP230.6

billion, had also jumped by 13 per cent.

Investment in equity securities, of which mutual funds and investment trust units amounted to MOP36.9 million, however, posted a decline of 4.1 per cent compared with the half-year.

Half in Chinese securities Securities issued by Mainland Chinese entities, including securities listed on non-Mainland exchanges, continued to dominate local residents’ portfolio investment outside Macau.

According to the survey, investment in Chinese securities accounted for 47.5 per cent of the portfolio investment outside the city, reaching MOP198.1 billion, which jumped 52.8 per cent year-on-year, or 10.8 per cent up from the end of 2013.

The investment in Chinese securities consists of MOP24.1 billion in equity securities, MOP161.1 billion in long-term debt securities and MOP12.8 billion in short-term debt securities, constituting 14.7 per cent,

69.8per cent and 59.3 per cent of the respective total.

However, investment in securities issued by Hong Kong entities had declined by 10.6 per cent compared with the end of last year, reaching only MOP104 billion. The instruments that Macau residents invested in in Hong Kong securities were primarily equity securities and long-term debt securities, amounting to MOP81.7 billion and MOP13.7 billion, respectively. Meanwhile, the drop in the market value also resulted in the share of investment in Hong Kong securities falling from 29.8 per cent at the end of 2013 to 25 per cent on June 30.

In fact, in terms of geographical distribution, the Asian region made up the largest share of Macao residents’ external portfolio investment at 75.7 per cent. The rest was mainly placed in Europe, the North Atlantic and Caribbean, North America, and Oceania, accounting for 8.8 per cent, 8.6 per cent, 4.1 per cent and 2.4 per cent of the total, respectively.

Outside Asia, Australian securities

attracted new interest from local residents as the survey shows that residents’ investment in long-term debt securities issued by Australian entities had soared by 208.8 per cent in half a year to a market value of MOP9.4 billion. This was also the chief factor lifting the share of portfolio investment in Oceania from 1 percent six months ago to 2.4 percent.

In addition, the market value of Macau residents’ investment in US securities also surged 66.4 percent compared to six months ago, amounting to MOP14.7 billion.

The market value of investment in long-term US debt securities grew by 17.0% in six months to MOP7.4 billion, representing the fourth largest share in the respective category.

On the other hand, the market value of European securities in Macau residents’ investment increased 8 percent to MOP36.7 billion from the end of 2013. That of securities in North Atlantic and Caribbean, however, increased by 16.9 percent at MOP35.9 billion.

8 | Business Daily

November 28, 2014

Gaming

Standard Chartered: Junket model virtually broken

M

acau’s VIP and junket models are in ‘near broken’ state, a report from the British bank Standard Chartered said on Wednesday. According to the same report, there is no short-term or longterm solution to help reverse this trend.

The main problem for junkets is heavy tightness in funding and liquidity that has prevented them from obtaining capital. This has led to weaker rolling volumes and margin pressures. In order to cope with the lack of liquidity, some operators have decided to sell

properties in Macau.

Also, the fact that more and more VIP gamblers are avoiding Macau in order not to appear on the radar of Beijing’s anti-graft policies is causing trouble for gaming promoters.

Standard Chartered has cut earnings before interest, taxes,

Genting outlook boosts bets against the house

A

nalysts are the least optimistic about Genting Singapore Plc in a year as slumping casino revenue from high-rollers curbs earnings prospects for the secondworst performing stock on the city’s benchmark gauge.

The difference between Genting’s share price and analysts’ predictions for where it will be in 12 months narrowed Wednesday to the least since December 2013, according to data compiled by Bloomberg. Twelve-month average price targets dropped to S$1.24 from S$1.55 a year ago, compared with a closing price of S$1.155 Wednesday.

While more than half of analysts still have buy ratings, at least nine of the 21 covering the stock cut forecasts after the casino operator this month reported a 50 per cent plunge in quarterly profit.

A 12 per cent rally in the stock since the start of a share buyback on November 13 will be short-lived, according to CLSA Asia Pacific Markets.

Genting is still down 23 per cent this year as casino receipts tumbled on a slump in Chinese visitors, the biggest source of revenue. The shares trade at 23.1 times estimated earnings as of yesterdays, compared with Macau gaming companies such as Sands China Ltd. at 18.1 times and Galaxy Entertainment Group Ltd. at 19.5.

“It’s good that Genting is returning cash to shareholders but the scale of the buyback is too small to have a meaningful impact,” Richard Huang, an analyst at CLSA in Hong Kong, said by phone on November 20. “Genting’s valuation isn’t that attractive compared to the Macau casinos. The company won’t have very exciting growth for the next few years because casino revenue in Singapore isn’t growing and the new casino projects in South Korea and Japan haven’t started.”

When announcing quarterly re-

sults on November 11, Genting said it and partner Landing International Development Ltd. are waiting for government approval to start building their proposed US$2.2 billion casino resort on South Korea’s Jeju Island. The company is also waiting for Japan’s decision on whether to allow casinos. Prime Minister Shinzo Abe dissolved parliament last week as he prepares for elections.

The downside for Genting appears limited as the share buyback provides support for the stock in the short term, according to Macquarie Funds Management.

Genting was authorized by shareholders to repurchase as much as 1.22 billion shares, or 10 per cent of its outstanding stock, in April. The company only started the program on November 13, a day after the shares sank to a four-year low. From then through yesterday, the company spent S$63.8 million (US$49 million) buying back 58.6 million shares, the latest regulatory filings show.

Lee Sin Yee, spokeswoman for unit Resorts World Sentosa, declined to comment on the timing of the purchases, which were made at between S$1.015 and S$1.15 apiece.

‘House wins’ “The buyback does provide a perceived backstop for the stock,” Sam Le Cornu, senior portfolio manager at Macquarie Funds, said by phone on November 20. “That’s a sign of confidence on the part of management.

They think the share price is too cheap.

In the long term, the house will always win.”

Genting’s third-quarter net income dropped to S$97.4 million from S$193 million a year earlier. Though it may be too early to conclude that earnings

have bottomed out in the third quarter, growth will be stable in the coming quarters, supported by increasing mass-gaming market revenue and the opening of Genting’s new hotel in the western Singapore town of Jurong, according to Maybank Kim Eng Holdings Ltd. The 550-room hotel will open in the second quarter of 2015, according to Genting. The company’s 1,500 hotel rooms run by unit Resorts World Sentosa, which also operates the convention centre and the Universal Studios theme park, were 95 percent filled in the third quarter, it said.

Gaming outlook “We’re going to see very steady earnings growth going forward,” Samuel Yin, an analyst at Maybank Kim Eng in Kuala Lumpur, said by phone on November 20. “The mass gaming market is still growing.”

The continuing weakness in the VIP gaming segment, which is being dragged by the slowing economic growth in China and the government’s anti-corruption campaign, will offset improvements in the mass gaming market, according to CLSA’s Huang.

Visitors to Singapore declined 3.3 percent to 10.3 million in the eight months through August from a year earlier as arrivals from China plunged 29 per cent, according to data from the Singapore Tourism Board.

“I will take a more wait-andsee approach on Genting,” Alan Richardson, an investment manager at Samsung Asset Management Co. in Hong Kong, said by phone on November 21. “For the foreseeable future, the profitability of the business will still deteriorate. It could take a while before fundamentals actually start to turn.”

depreciation and amortization (EBITDA) estimates for Macau operators by an average of 21 percent for 2015 and 26 percent for 2016.

Gross gambling revenue forecasts were also reduced to a decrease of 2 percent for 2015.

Business Daily | 9

November 28, 2014

Gaming

Chinese VIPs flee Vegas tables amid anti-corruption drive

B

accarat winnings on the Las Vegas Strip fell 36 per cent to US$97 million in October, echoing declines in Macau where an anti-corruption drive in China has crimped high-end play.

Total casino revenue on the Strip fell 5.6 per cent to US$520 million last month with baccarat accounting for the largest share of the decline, according to data released Wednesday by the Nevada Gaming Control Board.

The numbers suggest the drop in spending by highend Chinese card players that began in June in Macau has spilled over to the U.S., said Brent Pirosch, an analyst with CBRE in Las Vegas. Other markets, such as Singapore, have also seen declines in baccarat play, as probes by the Chinese government and a weak mainland economy impact business. Baccarat, a card game where players compete against a designated banker, is the most-popular casino game in the Chinese enclave of Macau.

“It’s a global VIP problem,” Pirosch said in a telephone interview. “It’s such a small, finite group,” he said of the Las Vegas baccarat market.

“It really only takes a few

guys not playing, less than 100 folks, really driving that high-end play.”

Baccarat slump The results in the largest U.S. gambling market mark the third month of decline for a game that has become a big revenue generator for MGM Resorts International, Las Vegas Sands Corp. and Caesars Entertainment Corp.

Baccarat revenue on the Strip has tripled since 2004 to US$1.6 billion last year, according to data from the University of Nevada’s Center for Gaming Research in Las Vegas.

Wynn Resorts Ltd., which gets about 70 per cent of its revenue from Macau, fell 0.5 per cent to US$177.06 as of the close of trading in New York Wednesday. Wynn Macau Ltd. slumped 0.2 per cent at 10:09 a.m. in Hong Kong. Among other Macau casino operators, Melco Crown Entertainment Ltd. fell 0.1 per cent to HK$66.9, SJM Holdings Ltd. dropped 0.9 per cent, Sands China Ltd. rose 0.8 per cent and Galaxy Entertainment Group Ltd. gained 0.7 per cent.

More than half of Wynn

Resorts’ table-games business in Las Vegas comes from Asian customers, the company’s president, Matt Maddox, said in testimony before Massachusetts gaming regulators last year.

The lower Las Vegas baccarat revenue is a combination of gamblers betting fewer dollars and the casinos winning less money from customers, Brian Miller, an analyst with

Bloomberg Intelligence, said.

The house kept 10 per cent of the baccarat money bet in October, compared to 13 per cent in the same period last year.

Bloomberg

10 | Business Daily

November 28, 2014

Greater China C.bank reduces yuan intervention China’s central bank has greatly reduced its intervention in the yuan currency market, Vice Governor Hu Xiaolian said yesterday as she reiterated the government’s pledge to further free up the Chinese financial market. China will build a deposit insurance system, further liberalise the currency and interest rate markets, and quicken the convertibility of the yuan in the capital account, Hu said.

Industrial profits down China’s industrial profits in October dropped 2.1 percent from a year earlier, reversing a 0.4 percent annual gain in September, data showed yesterday.

Profits rose 6.7 percent between January and October compared to the same period last year, the National Bureau of Statistics said. China’s annual economic growth slowed to 7.3 percent in the third quarter, the weakest pace since the depths of the global financial crisis, and down from 7.5 percent in the previous quarter.

PBOC will not conduct repos

Funds grow after “trapped cash” freed up This allows global companies to move yuan in and out of China achieving two goals: a renewed push to redenominate China’s trade with the world in renminbi and encouraging treasurers to buy more yuan-investment products

R

apid reforms by Beijing allowing foreign companies to move funds from their China operations across borders relatively freely is boosting treasurers’ confidence in using the yuan as the preferred currency for doing business.

That increased confidence has also helped China’s fledgling money market funds industry as companies look to invest their cash in investment vehicles after years of parking funds in bank deposits which offered them next to nothing in terms of yield.

For years, treasurers operating in China had to face the issue of “trapped cash”: the inability to freely remit their funds to their regional treasury centres outside the mainland as the yuan was not freely convertible.

That has changed in less than

HK banks cut yuan deposit rates as link disappoints China’s central bank will not conduct open market operations yesterday for the first time in four months, traders said, meaning it will inject 35 billion yuan (US$5.70 billion) on a net basis into the interbank money markets this week.

The People’s Bank of China (PBOC) injected 10 billion yuan last week.

Wal-Mart dismisses Chinese executives Wal-Mart Stores said it had dismissed several executives in China as part of an effort to lower costs in the country, where it has been grappling with slower sales and tough price competition. Wal-Mart spokeswoman Brooke Buchanan said several executives were let go to help “create a more efficient structure that positions our business competitively for the future.” Buchanan did not disclose further details, such as the number of people dismissed or their ranks. Bloomberg reported earlier that about 30 senior executives, including directors and vice presidents from WalMart China and Sam’s Club China, had been dismissed.

Monetary policy direction unchanged There is no need for China to change monetary policy direction as policymakers are confident on the economic growth outlook, Central Bank Vice Governor Hu Xiaolian said yesterday.

China is facing a crucial problem that cooling inflation is lifting real interest rates, Hu said. Hu also said that a 7.4 percent economic growth rate for China is reasonable. Annual economic growth slowed to 7.3 percent in the third quarter, the weakest pace since the depths of the global financial crisis, and down from 7.5 percent in the previous quarter.

One-year yuan deposit rates rose to as high as 3.4 percent before some banks began to lower them this week Michelle Chen

S

ome Hong Kong banks have started to cut yuan deposit rates in the wake of the launch of a long-awaited “stock connect” scheme that attracted only muted interest and less-than-expected demand for the Chinese currency.

The cut in deposit rates followed mainland China’s first official interest rate cut in more than two years in as authorities attempted to energise an economy that is on track for its slackest annual growth in 24 years.

Banks in Hong Kong vied with each other to offer high interest rates this year to draw in new yuan funds as investment channels were significantly broadened while the sharp fall in the “redback” sapped investor appetite for yuan assets.

The competition intensified as banks bet on robust demand for the currency for use in the ShanghaiHong Kong stock connect scheme, a landmark link that gives foreign and Chinese retail investors unprecedented access to the two exchanges.

One-year yuan deposit rates rose to as high as 3.4 percent before some banks began to lower them this week.

China Construction Bank (Asia) set its new rate for one-year deposit 15 bps lower at 3.25 percent and Shanghai Commercial Bank offered 2.95 percent.

Despite the cut, deposit rates in the offshore yuan market are still more attractive than the benchmark rate in the onshore market, which was trimmed by 25 basis points (bps) to 2.75 percent on Friday.

Some banks actively stored yuan funds in the past few months, but now they found demand for the currency was not as strong as expected Banny Lam, Agricultural Bank of China International, co-head of research

“Some banks actively stored yuan funds in the past few months, but now they found demand for the currency was not as strong as expected,” said Banny Lam, co-head of research at Agricultural Bank of China International in Hong Kong.

“Yuan deposit rates offered by Hong Kong banks are likely to fall further in the coming months, following the rate cut in mainland China,” Lam said.

Profit-taking and concerns over the rules blighted trading via the Shanghai-Hong Kong stock connect, which saw the use of daily “northbound” quota shrinking last week.

Adding to the headwinds for foreign investors obtaining yuan to enter the Chinese market is that the H-share premium over its A-share counterparts has completely disappeared on an aggregate level and now shows a discount instead.

So far, only 12 percent of the 300 billion yuan (US$49 billion) northbound quota and 1.4 percent of the 250 billion yuan southbound quota has been used, according to Reuters data, much less than the market had expected.

Tepid demand for the yuan also saw USD/CNH cross currency swap (CCS), a rate that reflects cost of borrowing the yuan currency in the offshore market, moving away from more than one-year highs.

The three-month CCS rate, for example, fell to 3.3 percent on Thursday from a nearly 17-month high of 3.7 percent hit on Nov 10.

Reuters

Business Daily | 11

November 28, 2014

Greater China

There are lots of benefits to using the renminbi in our inter-company invoicing in China as it creates a natural hedge and we save on transaction costs Robert Yenko, Intel, regional treasurer

three years with Beijing now allowing multinationals to transfer yuan out of China without seeking regulatory approval, a big departure from the past when authorities used to scrutinize every cross-border transaction.

Indeed, Beijing has gotten more confident about the success of these moves and earlier this month allowed foreign firms nationwide to move money from offshore centres back into China.

“It is a key goal of the Chinese reform agenda and one area which

is moving most quickly,” said Brett Krause, president of JP Morgan Chase Bank (China) Company Limited.

“It is a reflection of China’s strong confidence in their currency and the importance placed on global trade.”

Allowing greater freedom for global companies to move yuan in and out of China achieves two goals: a renewed push to redenominate China’s trade with the world in renminbi, currently at a fifth of its total trade; and encouraging treasurers to buy more yuan-investment products.

“There are lots of benefits to using the renminbi in our intercompany invoicing in China as it creates a natural hedge and we save on transaction costs,” said Robert Yenko, Singapore-based regional treasurer at giant chip-maker Intel.

That is prompting them to flock to Chinese money market funds as an option to park their working capital.

Such investments offer at least 2-3 percentage points more in returns than bank deposits, plus tax breaks and easier settlement rules.

Assets under management in more than 100 such funds in China have soared to nearly 900 billion yuan (US$147 billion) at January 2014 from less than 200 billion yuan three years ago, according to data compiled by ratings agency Moody’s Investors Services.

Reuters

RMB accounts for 11.2 pct of Chinese international payments Over the last 18 months, there was a significant increase in RMB usage for payments with China’s mainland and Hong Kong

C

urrency, the renminbi (RMB), was used for 11.2 percent of total payments value between China and the rest of the world last month, up from 6.2 percent 18 months ago, Belgium-based global payment services company SWIFT said.

SWIFT’s latest RMB tracker showed that 15 more countries are now using the RMB for more than 10 percent of their payment value with China’s mainland and Hong Kong compared to April 2013.

In total, 50 countries out of the 161 that exchanged payments with China’s mainland and Hong Kong last month have crossed the 10 percent threshold, SWIFT data shows.

The 10 percent milestone, also known as “crossing the RMB River”, is a threshold set by SWIFT to measure the weight of RMB payments value with Hong Kong and China’s mainland compared to other currencies. It is an indication of countries that cross the river and their level of adoption of the RMB. Since April 2013, Germany increased its RMB usage with China’s mainland and Hong Kong by 151 percent. RMB payments by Canada (up 346 percent) and Malaysia (up 48 percent) are expected to grow even further following the latest announcements of a currency swap agreement and a memorandum of understanding (MoU) with the Chinese central bank, SWIFT data showed.

Compared to April 2013, the Chinese currency has crossed the river threshold with a growth of 181 percent, reaching 11.2 percent of total payments in value exchanged with China’s mainland and Hong Kong, it said.

Over the last 18 months, there was a significant increase in RMB usage for payments with China’s mainland and Hong Kong, said head of SWIFT business intelligence Astrid Thorsen.

Most of this growth is from early adopters and main RMB clearing centers, such as Singapore and the United Kingdom, but increasingly, new countries such as Germany, Australia, Malaysia, Indonesia and Sweden are contributing to the RMB’s growth, he said.

Overall, the RMB kept its position as the seventh-ranked payments currency in the world last month, despite a decreased market share from 1.72 percent to 1.59 percent, SWIFT said.

In October, the value of RMB global payments value decreased by 7.2 percent which is below the average growth of 0.4 percent for all currencies, SWIFT data showed.

The SWIFT RMB Tracker, launched in September 2011, provides monthly reporting on key statistics to understand the progress made by the RMB toward becoming an international currency.

Xinhua

12 | Business Daily

November 28, 2014

Asia Danone weighing up Yakult stake France’s Danone is weighing a sale of its 20 percent stake in Japan’s Yakult Honsha, Bloomberg reported - a move that could help the world’s largest yogurt maker raise cash for acquisitions.

Danone has had internal discussions about a possible sale but deliberations are at an early stage and no final decision has been made, the report said, citing people familiar with the matter. Officials for Danone were not immediately available to comment on the report.

S. Korea current account steps up South Korea’s current account surplus rose to a seasonally adjusted US$7.32 billion in October from a revised US$4.99 billion surplus in September as imports fell, central bank data showed yesterday.

Although it rebounded from a 10-month low posted in September, October’s surplus was smaller than a US$7.51 billion surplus posted in August. Exports fell 1.4 percent from September to US$49.40 billion on a seasonally adjusted basis, while imports dropped 5.0 percent to US$41.90 billion, which was the smallest amount for imports since February 2011, the data showed.

India advised against challenging Vodafone

Indonesia said to plan fixed A shift to a fixed subsidy would insulate the government budget Herdaru Purnomo

I

ndonesia’s finance ministry plans to propose a fixed gasoline subsidy of 1,000 rupiah (US$0.08) to 2,000 rupiah a litre, said a government official who asked not to be identified because the discussions are private.

The ministry will submit the proposal to President Joko Widodo soon, according to the official, who has seen the plans. The fixed-subsidy system may be implemented in 2016, unless Widodo wants to do it earlier, the official said.

Widodo raised fuel prices last week to reduce state energy subsidies, acting on an election pledge to free funds for development spending and boosting optimism he’s taking steps to overhaul Southeast Asia’s largest economy.

“Government wants to implement a fixed-subsidies regime,” Finance Minister Bambang Brodjonegoro said at a forum in Jakarta yesterday, without specifying the levels being considered or the time frame. That would make the fuel subsidy budget more predictable and dependent only on consumption, without being affected by the volatility of oil prices, he said.

If Jokowi agrees to the fixedsubsidy plan, the finance ministry would need to go to parliament to get approval, the official said. The ministry is still calculating the possible fixed level for diesel, he said.

Once subsidies were set, pump prices would rise and fall with the exchange rate and oil costs, the official said. For the government, if it subsidizes 48 million kilo litres of gasoline a year, a 1,000 rupiah fixed subsidy would limit its cost to 48 trillion rupiah, he said.

Cost of subsidy Some 276 trillion rupiah was earmarked for fuel subsidies in the 2015 budget prior to this month’s fuel-price increase, equivalent to 13.5 percent of total spending. Last week’s adjustments will free 110 trillion rupiah to 140 trillion rupiah of state spending and reduce the 2015 budget deficit from the current forecast of 2.2 percent of gross domestic product, Brodjonegoro has said.

The finance minister said yesterday that the government is working on a mechanism for fixed subsidies and will wait for presidential approval.

The government will no longer be bothered with social political costs of fuel-price hikes and can focus on other spending Eric Sugandi, Standard Chartered, economist

Indonesia will revise the 2015 budget deficit to below 2 percent of gross domestic product, he said.

“A fixed fuel subsidy scheme would make the government budget more robust if future oil prices were to rise,” Thomas Rookmaaker, a director of sovereign ratings at Fitch Ratings, said by e-mail today. “It would be positive for the sovereign credit in the sense that public capital expenditures would be

GPIF Research keen on adding stocks India’s attorney general has recommended the government refrain from appealing a regional court ruling in favour of Vodafone Group Plc. in a long-running tax dispute, a person directly involved in the matter said. India’s tax office accused Vodafone India Services Private Ltd, a unit of the British group, of under-pricing shares in a rights issue to its parent company and demanded tax of about 30 billion rupees (US$486 million). Many tax experts expect the government, led by Prime Minister Narendra Modi, to hold off from appealing the court ruling.

NZ housing costs rise New Zealanders spending on their homes rose at a faster rate than their incomes in the two years to the end of June, the government statistics agency announced yesterday. The latest Household Economic Survey (Income) from Statistics New Zealand showed average annual household income rose 9.1 percent to NZ$88,579 (US$69,890) in the two years to June. In the same period, average household weekly spending on housing costs rose 11.1 percent to NZ$284 (US$224). The average weekly mortgage payment was up from NZ$357 (US$282) in the year ended June 2012 to NZ$389 (US$307).

The world’s largest investor of retirement savings overhauled its strategy last month, reducing domestic bonds and increasing local and foreign shares Anna Kitanaka and Shigeki Nozawa

J

apan’s public retirement fund must be ready to buy more stocks should Prime Minister Shinzo Abe’s policies succeed in reviving the nation’s economy, according to its head of research.

“We may see structural reform and Japan as we know it may change,” Tokihiko Shimizu, director general of the research department at the US$1.1 trillion Government Pension Investment Fund, said in an interview in Tokyo. “If we subscribe to that view, we must commit to different investment behaviour than just trading within a boxed range,” he said. “This is particularly true for local shares.”

While Japanese equity rallies faltered quickly in the past, this one may be longer-lasting, Shimizu said.

GPIF needs to be more flexible about its investments and move beyond the

Abenomics face a crucial phase that will reach zenith at December’s election

traditional pension-fund approach of selling when stocks rise to keep within allocation limits, he said. GPIF should review its portfolio at least once a year, or whenever unexpected events move markets, he said.

The comments by Shimizu hint at the possibility of further change as GPIF seeks better returns to meet swelling pension pay-outs as the population ages.

The fund will boost Japanese stocks to 25 percent of assets from 12 percent, it said October 31, as it widened their deviation limit to 9 percent from 6 percent. That means the nation’s equities can make up 34 percent of the portfolio, compared with 18 percent invested in shares at the end of September.

Japanese stocks have almost doubled since elections were called in November 2012 that brought Abe to power. The Topix, the broadest measure of the country’s shares, jumped 19 percent from an Oct. 17 low through yesterday, spurred by additional monetary easing by the Bank of Japan and GPIF’s decision to back Abe by buying more local equities. The Topix is still trading at about half its 1989 peak.

Bloomberg News

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

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Business Daily | 13

November 28, 2014

Asia Singapore central bank wants to contain household debt

subsidy from oil-price fluctuations

In recent years, MAS has taken a series of steps to cool the property market to curb excessive household borrowing

S

President Widodo faces a tough test when dealing with oil subsidies

more stable, whether future fuel prices rise or not, and this would likely benefit the growth outlook in the longer run.”

Politically sensitive Dismantling the decades-old fuel subsidy program is a political hot potato -- protests accompanied past price increases and riots spurred by soaring living costs helped oust dictator Suharto in 1998. The front page headline in

the English-language Jakarta Globe newspaper read “A Bold Move” on Nov. 18, the day of the fuel price increase.

After last week’s announcement, a student association in Jakarta burnt tires at one junction and put up a sign saying: “Fuel expensive. Jokowi go.”

The price of subsidized gasoline was increased to 8,500 rupiah a litre from 6,500 rupiah, and diesel was raised to 7,500 rupiah a litre from 5,500 rupiah.

Bloomberg News

ome highly leveraged households in Singapore may be vulnerable if interest rates rise or the economy slows, its central bank said yesterday, adding that it will take more steps if needed to keep household debt at manageable levels.

“Despite some moderation in the overall level of household indebtedness, the level of debt among highly leveraged households bears close watching,” the Monetary Authority of Singapore (MAS) said in its annual Financial Stability Review.

“MAS will continue to monitor lending and borrowing activities, and take further measures where necessary to keep household debt at a manageable level,” it added.

A Bank of America Merrill Lynch report said that at June 30, Singapore household debt was equivalent to 75.6 percent of gross domestic product (GDP), while the highest level in Asia was Malaysia, at 86.5 percent The MAS said Singapore’s household balance sheets remained healthy overall, with total household net wealth now at roughly four times the country’s GDP.

In recent years, MAS has taken a series of steps including ones to cool the property market to curb excessive household borrowing.

It said expansion of household debt slowed to 5.6 percent year-onyear in the third quarter, down from a 9.2 percent average over the last five years.

Housing loans accounted for 74 percent of household liabilities as of the end of September, followed by motor vehicle loans, which made up 3.6 percent of such debt, the MAS said.

The central bank said it will continue to monitor the property sector and take appropriate steps to maintain a stable and sustainable market. Private property prices remained at an “elevated” level even though they have moderated, it said.

The MAS said Singapore’s banking system remains sound, is resilient to risks stemming from the property market and holds a healthy buffer against falls in property prices.

Reuters

Australian business investment a plus for Q3 growth With major projects coming to completion and a much smaller pipeline of new work, spending is set to fall steeply Wayne Cole

A

ustralian business investment outpaced forecasts last quarter while future spending plans were upgraded beyond expectations, a hopeful sign the economy can cope with a cooling mining boom.

The Australian dollar rose a quarter of a U.S. cent after the Australian Bureau of Statistics (ABS) reported capital spending edged up by 0.2 percent in the third quarter, a solid result given analysts had tipped a fall of 1.5 percent.

Importantly, spending on equipment jumped 4.4 percent for the biggest rise in three years and a healthy contribution to economic growth.

“That exceeded way above what the market was expecting, so all up it will be a positive read through into GDP,” said Prash Newnaha, macro strategist for the Asia Pacific at TD Securities in Singapore.

Official gross domestic product (GDP) data is due next week and was expected to show growth of around 3.1 percent for the year to September, well ahead of much of the rich world.

The Reserve Bank of

KEY POINTS CAPEX +0.2 pct in Q3, confounds forecasts of 1.5 pct fall Strength in equipment spending a positive for Q3 GDP Investment plans for 2014/15 improve, mining still a drag

Australian Bureau of Statistics (ABS) reported capital spending edged up by 0.2 percent in the third quarter

Australia (RBA) has been counting on a revival in the non-resource sectors of to help offset the winding down of a decade-long boom in mining investment.

There were some hints of progress in yesterday’s data which found firms planned to spend A$153.2 billion in the year to end June 2015, above analysts’ forecasts of

A$148 billion.

Within that, the ABS’s catch-all for “other industries” posted the highest spending intentions in over two years.

Still, the hole left by mining is set to be a large one, given investment in the sector quadrupled as a share of the economy over the past 10 years.

Just this week the government’s chief commodities forecaster reported there were still 44 major resource projects at the committed stage with a combined value of A$228 billion, only a fraction down from six months earlier.

But it warned that the massive projects already completed have led to glut

of resources, a steep fall in prices, and a pullback in future investment plans.

“We are seeing a reduction in the number of projects across all categories of the investment pipeline,” said Wayne Calder, deputy executive director at the Bureau of Resources and Energy Economics in a sober outlook for the sector.

“It is likely these conditions will persist over the medium term as the markets adjust to soak up additional supplies.”

Reuters

14 | Business Daily

November 28, 2014

International Scotland to acquire more tax control Scotland is set to gain the biggest transfer of power since its devolved parliament was set up when an influential commission recommends on Thursday that the country should have large new powers over income tax, media reports said. Scottish voters rejected independence from the UK in a referendum in September, swayed in part by promises by British politicians of a greater say in managing their own affairs, including more powers to set their own tax rates.

General strike grips Greece Public services ground to a halt in Greece yesterday as unions launched a general strike in protest at more austerity planned in the coming year. The walkout came a day after crucial talks between Greece and its EU-IMF creditors failed to break a deadlock on the country’s planned budget and reform agenda for 2015. Air and ferry traffic was disrupted and operations of hospitals, schools, shops and banks affected.

“We are responding to the dogmatic insistence of the government and (the creditors) for further austerity policies and tax raids,” the main Greek union GSEE said.

Rusagro targets record Russian farming conglomerate Rusagro said yesterday its third-quarter net profit jumped to 6.6 billion roubles (US$138 million) from 2.2 billion roubles a year ago, boosted by Russia’s ban on Western meat imports. The company, listed in London as Ros Agro and controlled by senator Vadim Moshkovich’s family, plans to post the highest annual net income in its history, Maxim Basov, its chief executive, said in a statement. Its third-quarter sales jumped 68 percent, year-on-year, to 14.7 billion roubles.

Shell could pay US$4 bln for oil spill

EU expects gas supply to be stable Despite Gazprom has not resumed shipments and Ukraine has not provided the pre-payment that Moscow says is a condition for restarting supply Raushan Nurshayeva

T

he European Union expects stable gas supplies this winter under a deal by Russia and Ukraine, a senior EU energy official said, even while Moscow has yet to resume shipments and Kiev has yet to pay in advance as agreed.

Russia provides a third of European Union gas supplies, and half of that volume flows through Ukraine. Previous spats between Kiev and Moscow led to temporary supply cuts to Europe.

Ukraine and Russia signed an agreement, brokered by the European Commission, at the end of October to cover gas supplies over the winter as a temporary solution to a long-standing price dispute between Moscow and Kiev.

But Russian gas producer Gazprom has not resumed shipments, suspended in June, and Ukraine has not provided the pre-payment that Moscow says is a condition for restarting supply.

“So far, everything is in order,” Maros Sefcovic, the European Commission’s new energy chief, told reporters yesterday on the side-lines of an international energy conference in the Kazakh capital Astana.

“We are in close and, I would even say, everyday contact with both Ukraine and the Russian Federation, and I hope that we will have no problem with gas this winter,” he said in Russian.

Sefcovic’s comments were among the first from newly appointed members of the EU executive body on the gas supply issue.

Under the EU-brokered deal, Ukrainian state firm Naftogaz has agreed to pay Gazprom US$2.2 billion in debt and upfront payments before supplies resume.

Naftogaz has transferred the first US$1.45 billion tranche of the payment, but it has not said when it will place new orders, nor for what volume.

Naftogaz Chief Executive Andriy Kobolev said on Monday that Ukraine planned to buy 1 billion cubic metres (bcm) of gas from Russia by the end of the year and up to that amount monthly through the winter.

“We are now waiting for the

Ukrainian side to order gas,” Sefcovic said. “The Ukrainian side is now discussing how much gas it needs before the end of the winter period, and by the end of December Ukraine will pay off the second half of this debt.”

Ukraine’s gas storage sites currently hold around 3.5 months of supply, depending on the weather.

Kiev, meanwhile, has declared a state of emergency in its electricity market due to a shortage of coal, rather than gas, after conflict in eastern Ukraine has cut off supplies.

Moscow says Kiev owes statecontrolled Gazprom up to US$5.4 billion for gas, but a tribunal in Sweden will rule on the exact amount of Ukraine’s debt.

Reuters

Citi seeing gold as bitcoin in Swiss vote Switzerland holds a national referendum on November 30 that would require the central bank to hold at least 20 percent of its assets from 8 percent in gold Glenys Sim

T Nigeria’s National Assembly said oil major Shell should pay US$3.96 billion for a 2011 spill at its offshore Bonga oilfield in the latest assessment of damage to the environment. The non-binding decision comes after years of analysis by various Nigerian state agencies, which have proposed a range of fines as high as US$11.5 billion. The parliament finally reached a decision based on the report of the National Oil Spill Detection and Response Agency (NOSDRA), which previously recommended a fine of US$5 billion.

he initiative requiring the Swiss National Bank to hold a fixed portion of its assets in gold makes no sense, according to Citigroup Inc., which said the metal was the equivalent of the virtual currency bitcoin.

“There is no economic or financial case for a central bank to hold any single commodity, even if this commodity had intrinsic value,” Willem Buiter, the bank’s chief economist and a former Bank of England policy maker, wrote in a report dated yesterday. “Forbidding a central bank from ever selling any gold it owns reduces the value of those gold holdings to zero.”

In a move that SNB President Thomas Jordan calls “dangerous,” Switzerland holds a national referendum on November 30 that would require the central bank to hold at least 20 percent of its assets

from 8 percent in gold, all of which have to be stored in the country, and never sell any. A plurality of voters oppose the “Save Our Swiss Gold” measure, though a portion of them were still undecided, polls last week showed.

Proponents of the initiative, which would also require repatriation of SNB bullion held in Canada and the U.K., say it would preserve national wealth, while the government and the central bank oppose it as they say it would hinder monetary policy. The central bank would have to buy at least 1,733 metric tons of gold, compared with annual production of about 2,500 tons, to meet the threshold by 2019, Citigroup said.

Gold reserves With 1,040 metric tons, Switzerland is already the seventh-

largest holder of gold by country, International Monetary Fund data show. The additional purchases, estimated by the SNB to be about 70 billion francs (US$72.8 billion), would make it the biggest after the U.S. and Germany.

The complexity of the referendum is a “substantial” hurdle for a ‘yes’ outcome, according to Morgan Stanley. While ‘yes’ is good for gold prices, ‘no’ would be neutral, HSBC Securities (USA) Inc. said in a November 24 report.

Like bitcoin, gold has no intrinsic value and is costly to produce and store, Buiter wrote.

“If the central bank is to invest in commodities, better to have a balanced portfolio of commodities or, more conveniently, a balanced portfolio of commodity ETFs or other derivatives,” he said.

Bloomberg News

Business Daily | 15

November 28, 2014

Opinion

Low oil prices are ongoing boost wires to China stockbuilding: Russell Business

Leading reports from Asia’s best business newspapers

THE JAPAN NEWS The government has begun to consider continued inclusion of costs for the decommissioning of aging nuclear reactors in electricity charges, even after the full liberalization of the electricity retail market scheduled in April 2016. By establishing a system to collect the cost from electricity users, the government aims to ensure some means to secure the necessary funds, which are said to vary between about ¥35 billion and ¥60 billion for each small or mediumsized reactor. The system, in principle, may also target those who buy electricity from businesses newly entering the market.

Clyde Russell Reuters columnist

THE STAR Malayan Banking Bhd (Maybank) posted earnings of RM1.608bil in the third quarter ended Sept 30, 2014, which was an improvement from the second quarter’s RM1.58bil. South East Asia’s fourth largest bank by assets said on Wednesday that the Q3 earnings were lower by 7.9% from RM1.746bil a year ago. Among the factors for the decline in Q3, 2014 were due to losses from its insurance and takaful business.

Maybank said its revenue was RM8.934bil compared with RM8.276bil a year ago.

Earnings per share were 17.62 sen versus 20.05 sen.

THE NEW ZEALAND HERALD New Zealand’s mobile phone sector is performing well on an international basis, with competitive pricing and good mobile coverage, according to a report released this morning by the New Zealand Institute of Economic Research. The report, which commissioned by the telco Spark, found that 97 per cent of populated areas in New Zealand had 3G coverage, with a similar number expected to have 4G when the roll out is complete.

It also found that prices had been declining steadily, with consumers enjoying more competitive pricing plans and value packages.

VIETNAM NEWS In spite of continuing economic difficulties, cement and clinker consumption next year will reach roughly 71 million to 73 million tonnes, a fourto seven- per cent year-onyear increase. The Ministry of Construction made this prediction and added that of the total, about 52 million to 53 million tonnes would be consumed in the domestic market and the rest would be exported. Domestic cement production currently meets demand. The country currently has 74 cement production lines with a total output of 77 million tonnes per year.

C

hina has done two surprising things in oil markets recently; pledging to be more open about its strategic stockpiling and buying crude very openly in the daily trading window in Singapore.

What’s not surprising is that the world’s second-biggest oil consumer is buying increased volumes, as this fits a pattern seen over the past five years.

Since 2009, China has tended to boost crude purchases when it judges prices to be cheap on a relative basis.

The bulk of these extra purchases have gone into strategic and commercial inventories, both of which have been ramped up in recent years as China completed and filled its first phase of strategic storage tanks and partially filled the second phase.

Also, commercial inventories have increased in line with rising refining capacity, something that isn’t surprising as it’s established industry practice for a refinery to have at least three weeks working inventories.

While it will be positive to have official confirmation of changes in strategic and commercial inventories, it hasn’t been too hard to work out when China has been stockpiling crude.

Taking refinery throughput, domestic crude output and net imports allows a rough calculation of the surplus crude, and Reuters estimates this amounts to more than 360,000 barrels per day (bpd) in the first 10 months of the year.

It’s possible that this will be ramped up in the coming months, given a recent rout in global oil prices. Brent has plunged 32 percent from this year’s highest close of US$115.06 a barrel reached on June 19 to Tuesday’s finish of US$78.33.

Oil price, import correlation When Brent dropped about 18 percent between April and September 2011, Chinese crude imports were 16.7 percent higher in November than in July.

A more than 20 percent drop in Brent between March and June 2012 saw October imports jump 28.6 percent from August levels.

In 2013, when Brent fell about 13 percent between January and May, China’s crude purchases were 25.6 percent higher in July than in February.

While there are seasonal factors at play in China’s crude imports, it appears the country buys more when prices fall, allowing for a one- to two-month lag from purchase to delivery.

Chinese imports in November are forecast by Thomson Reuters Oil Analytics to rise to 25-26 million tonnes, up from 24.09 million in October. If the upper end of the forecast for November is reached, it would equate to 6.33 million bpd, a gain of 11.6 percent on October’s 5.67 million bpd.

December may also see higher

While there are seasonal factors at play in China’s crude imports, it appears the country buys more when prices fall

imports, especially with Chinaoil, the trading arm of state-controlled major PetroChina , buying a record 47 cargoes, or 24 million barrels, in the Platts trading window last month.

Traders said this was unusual behaviour for the Chinese trading firm, given its usual preference to buy physical oil outside the so-called window.

It’s been speculated that much of the extra crude bought by Chinaoil will find its way into strategic or commercial storages, although some may be

refined given the coming peak winter demand season.

It’s also likely that Chinaoil was trying to execute a trading strategy whereby it buys oil in the most visible manner possible, thereby driving up the physical premium, while at the same time trading in the paper market on hopes that any losses on the physical side will be offset by gains in derivatives.

Low prices to boost storage Nonetheless, the simple truth is that Chinese imports appear headed higher, and may remain that way if more crude flows into storage tanks.

While China has completed and filled the first phase of strategic storage of about 91 million barrels, this equates to only 9 days of consumption, versus the 90-days required by the International Energy Agency, of which China is not a member state.

The partially-filled second phase may hold about 80 million barrels currently, according to consultancy Energy Aspects.

This is less than half of its planned 170 million barrel capacity, meaning there is plenty of scope for more imports to flow into storages, assuming they are ready to be filled.

This raises the likelihood of higher Chinese crude imports in coming months, especially if prices stay near four-year lows.

Reuters

16 | Business Daily

November 28, 2014

Closing China’s lottery sales top 32 bln yuan

Indonesia to join China-backed bank

China’s lottery sales in October hit 32.7 billion yuan (US$5.34 billion), up 20.3 percent year on year, the Finance Ministry said yesterday. Welfare lottery sales reached 17.75 billion yuan, up 14.5 percent year on year. Sports lottery sales rose 27.9 percent year on year to 14.95 billion yuan. In the first ten months of 2014, total lottery sales stood at 312.11billion yuan, up 24 percent from a year earlier. Under China’s lottery management rules, proceeds from lottery ticket sales cover administrative fees and public welfare projects as well as the jackpot.

Indonesia’s finance ministry has signed a memorandum of understanding to join a China-backed Asian infrastructure bank, according to a statement on a Chinese embassy website. Indonesian Finance Minister Bambang Brodjonegoro on Tuesday signed the MOU with Chinese Ambassador to Indonesia Xie Feng in attendance, said the statement, which included a picture of the ceremony. Indonesian Cabinet Secretary Andi Widjajanto later said the MOU was not yet finalised as it was still being processed between the finance and foreign ministries. The US$50-billion Asian Infrastructure Investment Bank (pictured on foundation day), launched last month in Shanghai.

Banking tricks blunt drive to increase lending Outstanding yuan loan growth slipped to its slowest in almost nine years in October Engen Tham

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hina hopes that last week’s interest rate cut will increase lending into the economy to shore up flagging growth, but measuring any rise will be impeded by a number of tricks the country’s bankers use to manipulate the figures.

Chinese banks, which are heavily controlled by the government, are often instructed to match their lending practice to further official policy, and when the People’s Bank of China cut rates for the first time in two years on Friday, it made clear that helping smaller firms gain access to credit was among its goals.

Outstanding yuan loan growth slipped to its slowest in almost nine years in October, and the PBOC’s efforts might well succeed in raising the headline figures, but bankers say it is commonplace to game the statistics to hit targets.

One trick is to extend a loan but then ask the borrower to use a portion of the fund to purchase wealthmanagement products sold by

The CBRC is feeling the stones to cross the river ... but bankers have already reached the other side Jimmy Leung, PwC China

the bank, helping to hit both loan goals and sales targets.

Another technique is to require a portion of the money lent - anywhere between 30 and 40 percent, according to bankers - returned as deposits, so it can earn interest on the whole loan, while effectively retaining part of it.

“It’s just internally generated business through a dummy counterpart,” said

Bill Gates wants Chinese to stop smoking

Jimmy Leung, banking and capital markets leader and partner at PwC China.

The banking regulator has said these practices are illegal but say only “some commercial banks” engage in them. Bankers say manipulation is still rampant.

“It’s very common,” said a banker at a major stateowned bank who declined to be identified.

Step-up in policing As the world’s secondbiggest economy heads for

its slowest yearly growth in 15 years, authorities have been stepping up efforts to reduce the cost of financing for small and medium-sized enterprises, which included instructions from China’s cabinet to “prevent the illegal diversion of loans and ensure that loan funds flow directly to the real economy”.

In early September, the China Banking Regulatory Commission posted a notice asking banks not to “use underhand measures to illegally attract and falsely

E-cigarettes have 10 times more carcinogens

T

increase deposits”.

But bankers say the efforts are slow and ineffective and have done little to curb the practices.

Another banker said agreements to return some of the loan as deposits have now become verbal, as opposed to being written into loan documents previously.

“The CBRC is feeling the stones to cross the river ... but bankers have already reached the other side,” he said.

Reuters

Chinese overseas students mull work at home

E

M

o advance its anti-smoking campaign, the Bill & Melinda Gates Foundation has launched a social media campaign in China to raise public awareness, and especially aiming to empower non-smokers.

A charity song, “Say No to Forced Smoking”, which carried the same name as the campaign was unveiled Wednesday in Beijing and the music video will be uploaded to several Chinese video streaming websites.

The online campaign has invited more than 1,000 volunteers, including some celebrities, to share their anti-smoking stories across social networking sites such as Sina Weibo, China’s equivalent of Twitter.

Angela Pratta, who is leading the World Health Organization’s (WHO) Tobacco Free Initiative in China, said the WHO wanted to make use of new media as a communication platform to discuss health-related issues with the public.

Lang Yongchun, a TV host and one of the campaign’s volunteers, said education, especial aimed at the younger generation, was crucial to ensure people led healthy lives.

-cigarettes contain up to 10 times the amount of cancer-causing agents as regular tobacco, Japanese scientists said yesterday, the latest blow to an invention once heralded as less harmful than smoking. A team of researchers commissioned

by Japan’s Health Ministry studied the vapour produced by e-cigarettes for signs of carcinogens, a media report said.

The electronic devices -- increasingly popular around the world, particularly among young people -- function by heating flavoured liquid, which often contains nicotine, into a vapour that is inhaled, much like traditional cigarettes, but without the smoke. Researchers found carcinogens such as formaldehyde and acetaldehyde in vapour produced by several types of e-cigarette liquid, TBS television reported. Formaldehyde -- a substance found in building materials and embalming fluids -- was present at levels 10 times those found in the smoke from regular cigarettes, TBS said.

Researcher Naoki Kunugita and his team at the National Institute of Public Health submitted their report to the ministry on Thursday, the broadcaster said.

ore and more Chinese students are choosing to seek employment back home following overseas study, according to a report released by the Education Ministry. A total of 353,500 overseas graduates returned home in 2013, while nearly 410,000 went abroad to study, said director of the ministry’s service centre for overseas study Sun Jianming.

Since oversees study was opened up in 1978, 3.05 million Chinese citizens have taken advantage of the initiative. By the end of 2013, 1.44 million had brought their skills back to China. The United States remained the top destination of choice for Chinese overseasstudents for master and doctoral degrees last year. The United Kingdom welcomed the majority of high school and undergraduate Chinese students, the report said.

Nearly 50 percent of overseas Chinese students chose business management or economics majors, which could intensify competition back home, the report said.

Over 60 percent of graduates were eyeing employment opportunities in the first-tier cities including Beijing, Shanghai, Shenzhen and Guangzhou, said the deputy director of the service centre, Che Weiming.

Xinhua

AFP

Xinhua