Macau Business Daily, Dec 2nd, 2014

PAGES

2&3

MOP 6.00 Year III

Number 679 Tuesday December 2, 2014

Publisher: Paulo A. Azevedo

Closing editor: Joanne Kuai

Government announces new cabinet

N

o real surprises for the new line-up. All current secretaries as well as other top officials in the government were replaced by Chief Executive Chui Sai On. Lionel Leong Vai Tac is confirmed as Macau’s next Secretary for Economy and Finance. The new government will be sworn in on December 20. Sweeping changes but will new brooms sweep clean?

GGR in freefall Macau gaming revenues are in freefall.

Gross gaming revenue plunged almost 20 percent y-o-y in November to MOP24.3 billion. Gamblers’ appetite for the Vegas of the East continues to wane. Breaking even with last year is the best scenario. But nobody’s betting the house on December improving

PAGE 4

Rollercoaster Here we go again.

November manufacturing data returned China back to 8 months ago. The cooling process that China is undergoing continues to confuse analysts and officials. All eyes on PBOC in search of solutions

PAGE

8

Brought to you by

HSI - Movers December 1

Name

%Day

Cathay Pacific Airwa

3.40

Swire Pacific Ltd

-0.09

Tingyi Cayman Island

-0.22

Ping An Insurance Gr

-0.31

Sun Hung Kai Propert

-1.15

PetroChina Co Ltd

-4.40

China Resources Land

-4.80

China Life Insurance.

-4.82

CNOOC Ltd

-5.47

Kunlun Energy Co Ltd

-5.48

Source: Bloomberg

www.macaubusinessdaily.com

I SSN 2226-8294

Clarion call unheeded It’s pledged to do so many times. Diversify its investment portfolio. International institutions and luminaries have strongly advised it to do so. But the Monetary Authority of Macau is smitten with China. Nearly 50 per cent of all Macau’s investment is in Chinese financial products. Growing financial exposure to the Mainland may not be so wise

PAGE

7

Macau Pass to be purchased online through Alipay PAGE 5 Chow Tai Fook ready to invest in casino project in Vietnam PAGE 9

Brought to you by

2014-12-2

2014-12-3

2014-12-4

16˚ 23˚

14˚ 17˚

14˚ 17˚

2 | Business Daily

December 2, 2014

Macau

Faces of the new government

Lionel Leong Vai Tac To assume: Secretary for Economy and Finance Current title: Member of the Executive Council Lionel Leong is a local businessman and member of the Executive Council whose political influence has noticeably grown. He switched from the textile manufacturing business to start a large laundry facility that would come to serve casino hotels in Macau. In public affairs, he was elected Macau Deputy of the National People’s Congress of China (NPC), chaired the Advisory Council on the Environment, and was standing director of the Macao Chamber of Commerce. He replaces Francis Tam Pak Yuen as Secretary for Economy and Finance.

André Cheong Weng Chon To assume: Commissioner Against Corruption Current title: Director of Legal Affairs Bureau The mainland China-born official has worked in Macau since the early 1990s, landing his first job at the Macau Foundation. After serving in legal affairs in various posts for several years, Mr. Cheong finally assumed office as chief of the Legal Affairs Bureau in August, 1999 and has since been in charge of helping resolve several legal disputes over the city’s public services – including the cable television service and public bus contracts. Mr. Cheong replaces Mr. Vasco Fong Man Chong as the new Commissioner Against Corruption.

Raimundo Arrais do Rosário To assume: Secretary for Transport and Public Works Current title: Head of the Macau Economic and Trade Representative Office in Lisbon Throughout the last 14 years, he has become a diplomat as ambassador for Macau, and a representative of the territory in both Lisbon and Brussels.

He was formerly in the public works and transport sphere but left to become a legislator twice between 1992 and 1999. Since 2000, he has been the head of the Macau Economic and Trade Representative Office in Lisbon. This will be an almost ‘return home’ for him.

He is also very familiar with Macau’s portfolio, especially in the areas of economy and politics. Raimundo Arrais do Rosário replaces Lau Si Io as Secretary for Transport and Public Works.

Ho Veng On To assume: Commissioner of Audit Current title: Commissioner of Audit Mr. Ho, the only incumbent senior official that remains in office apart from the MSAR Chief Executive served as deputy chief of the Public Administration Bureau and a consultant to the Education and Youth Affairs Bureau’s top office during the Portuguese administration.

After serving as the head of the Chief Executive’s office for ten years since the handover in 1999, Mr. Ho was promoted to the post of Commissioner of Audit in 2009.

Sonia Chan Hoi Fan To assume: Secretary for Administration and Justice Current title: Coordinator of the Office for Personal Data Protection The incumbent personal data protection office chief is soon to replace Florinda Chan, who has served as Secretary for Administration and Justice for 15 years since the Macau handover in 1999. Prior to serving at the personal data protection office, Ms. Chan held the post of deputy director of the city’s Identification Bureau and was a legal consultant to the Education and Youth Affairs Bureau.

Ma Io Kun To assume: Commissioner General of the Unitary Police Service Current title: Director of Public Security Police Mr. Ma replaced the retiring Mr. Lei Sio Peng as director of the Public Security Police in February this year. Mr. Ma is soon to replace Mr. José Proença Branco as Commissioner General of the Unitary Police Service.

Alexis Tam Chon Weng To assume: Secretary for Social Affairs and Culture Current title: Government Spokesperson Wong Sio Chak To assume: Secretary for Security Current title: Director of Judiciary Police Mr. Wong Sio Chak has served with the Judiciary Police since 1994 after acquiring a Bachelor’s degree in law at Peking University and completing law courses at the University of Coimbra in Portugal. Soon to replace Mr. Cheong Kuoc Va as Secretary for Security, Mr. Wong assumed the office of director of Judiciary Police in December 2001, following his posts as deputy director of the police force and prosecutor.

He was first appointed government spokesperson in February 2010. Prior to that he was the chief-ofcabinet of Chief Executive Fernando Chui Sai On. Alexis Tam is 51 years old and was born in Myanmar, nee Burma. He moved to Macau as a child and studied in Taiwan, Lisbon, Scotland and mainland China. In 1989, Tam joined the Statistics and Census Service (DSEC), which he left a year later to pursue his studies in Scotland. Upon his return to Macau, he took up a job with the Public Administration Bureau. He also worked in the Social Security Fund, and in September 1999 was invited to head the future Secretariat for Social Affairs and Culture.

He replaces Cheong U as Secretary for Social Affairs and Culture. Victor Chan Chi Ping, the incumbent director of Government Information Bureau, is remaining in office while replacing Mr Alexis Tam as the government spokesperson.

Lai Man Wa To assume: Director of Macao Customs Current title: Deputy Director of Macao Customs Soon to replace her superior Mr. Choi Lai Hang as head of Macao Customs, Ms. Lai Man Wa served as superintendent of the maritime police (the former body of Macao Customs) prior to the handover. She was appointed deputy director of maritime police in 2001 before the unit became Macao Customs; later, she moved on to serve at Macao Customs as deputy director of the unit.

Ip Son Sang To assume: Prosecutor General Current title: President of the Lower Court and Administrative Court He was appointed president of the Lower Court and Administrative Court. Ip Son Sang was also chairman of the Election Commission for last year’s Legislative Assembly election.

Business Daily | 3

December 2, 2014

Macau

Top government officials announced In accordance with the Basic Law, the fourth term of the Macau Government’s principal officials were nominated by the Chief Executive Chui Sai On and appointed by the State Council on November 30, 2014. The list of personnel, exactly as rumoured, will take office at the handover anniversary on December 20, 2014, and are to serve for the next five years Kam Leong

kamleong@macaubusinessdaily.com

C

hief Executive Fernando Chui Sai On officially announced his new team for his second term yesterday evening. As rumoured, all incumbent Secretaries are leaving the top offices while other chiefs will be basically different from the current ones as well.

During the press briefing introducing his new team to the press, Mr. Chui admitted that the decision about the reshuffling of the leaders “was difficult to make”. “[Some] may question if the length of term of the chief officers should be too long, as such may lead the work of the government to stay in the same old rut. They also think it would affect the inheritance of the talent contributing to Macau,” he remarked, claiming that the city should consider whether to establish a scheme regulating the period of term of chief officers.

The CE also stressed that the list was made “very smoothly” and “without any worries”, claiming he did not encounter any problems when nominating the candidates.

According to him, these new chiefs are nominated to central government by considering their work experience, education and opinions of society.

Meanwhile, asked by reporters how the CE will assist the cooperation between departments to improve once the new Secretaries take up their posts, Mr. Chui said he would distribute the works well to reach improvement in cooperation; however, he will not ask all the Secretaries to sit on the Executive Council.

Secretary Leong: Cautious yet optimistic on economy challenges The new Secretary for Economy and Finance Mr. Leong remarked in the press briefing that the declining gaming revenue and gaming taxes will continue to be apparent during

the adjustment phase of the economy.

He reckons that society should be cautious about the possible effects that the slowdown in the gaming industry will bring to the city, such as whether it would affect the development of SMEs as well as the job opportunities of local residents. However, he also perceives that the city should remain optimistic about the economy in terms of sustainable development.

Meanwhile, he hinted that the interim review on the gaming industry next year will primarily focus on the fulfilment of gaming operators on the non-gaming elements and the government’s own gaming policy - whether it meets the requirements of the central government given to Macau, notably establishing it as a World Tourism & Leisure Centre.

In addition, he said that the review will offer a good reference for the

Academic: Different, innovative thinking needed for new term The reshuffling of the leaders for the coming term of government, including changing all the Secretaries, may be the response of Chief Executive Fernando Chui Sai On to a society clamouring for such change, University of Macau’s associate professor of public administrations of Hong Kong and Macau Eilo Yu Wing Yat perceives.

government on renewing the gaming licences in the future. He declined to offer more details, but will once he takes up the position.

On the other hand, the new Secretary for Transport and Public Works, Mr. Raimundo Arrais do Rosário, claimed that he understood that transportation and housing were of most concern to the government and that will also be his main tasks.

In addition, he said that he knows there are problems with the Light Transit rail, claiming he would follow up on the situation.

Meanwhile, new Secretary Mr. Alexis Tam claimed that he has made arrangements as well as targets regarding the development of the medical field in the city, claiming he would guarantee the completion of the Taipa hospital during his five-year term, which will be ‘the most glorious five years’ of the sector in Macau.

The scholar told Business Daily in a phone interview yesterday that although the new leaders, who were mostly civil workers before, may be more familiar with the works of the offices, it may result in making their way of working monotonous, and limit the development of the political system.

He indicated that the background of these leaders should be more diversified so that their thinking is more innovating by having a different mindset.

Nine of the ten new faces, except for the new Secretary for Economy and Finance Lionel Leong Vai Tac, were all public servants before. Mr. Yu believes

that this reflects that there are still not enough political elites in the city.

Meanwhile, he said that the pattern of appointment for the coming term of the government is similar to current and previous terms by appointing a businessman as the Secretary for Economy and Finance who is perceived to be familiar with the business world.

Asked by Business Daily if he is worried that the new Secretary Mr. Leong may have a conflict of interests after taking up the position, Mr. Yu said that it would depend on whether Mr. Leong obeyed his professional ethics, indicating that the current system is not yet developed enough to avoid the conflict.

K.L.

4 | Business Daily

December 2, 2014

Macau

Gaming industry heads for deepest crisis in recent history Gaming revenues dropped 19.6 year-on-year in November and have been decreasing for seven consecutive months. As the celebrations of the 15th anniversary of the handover are expected to hit the industry, GGR is on the brink of falling for the first time for eight months in a row João Santos Filipe*

jsfilipe@macaubusinessdaily.com

as well that the anti-graft campaign of the central government would continue to depress the numbers of VIP gamblers and that the betting amount will also drop.

In early November, during the third quarter conference call, the Co-chairman of Melco Crown, Lawrence Ho Yau Lung, said that the visit of the President of the People’s Republic of China to Macau would quieten gaming industry activity.

“In the short-term, at the same time, this has happened

G

ross gaming revenue (GGR) dropped 19.6 percent year-on-year to MOP24.3 billion (US$3.04 billion) in November, from MOP30.2 billion (US$3.78 billion) In the same period last year, and the industry is now heading for its deepest crisis since official data has been recorded in 2005.

According to information released yesterday by the Gaming Inspection and Coordination Bureau (DICJ), GGR has now fallen seven months in a row, the first time it has happened since June 2009. At that time the industry saw its revenue decline from December 2008 to June 2009 as a result of the financial crisis but it recovered the following

month with a year-on-year growth of 3.1 percent.

However the prediction is that recovery is not going to happen in December, which would cause GGR to have dropped eight consecutive months. This would be the first time that that had happened since 2005.

In relation to the GGR, since the beginning of the year Macau’s casinos have taken in MOP328.2 billion during the first eleven months, which represents an increase of 0.3 percent (MOP327.3 billion) in relation to 2013. In order to achieve the same value as last year (MOP360.7 billion), GGR cannot decline more than 2.8 percent year-on-year during December.

This month, Macau

will celebrate the 15th anniversary of the handover, which occurred in 1999. The ceremonies will feature the visit of the President of the People’s Republic of China, Xi Jinping, which is likely to keep gamblers away from the tables.

With regard to the visit, Ambrose So Shu Fai, Chief Executive of SJM, said he could not foresee a positive impact on gaming from the president’s visit hence he is not expecting the industry to recover. The CEO of SJM stressed to Hong Kong Economic Journal that visitor volume to Macau – which will likely be constrained by the presidential visit – will hardly surpass last’s year number.

Ambrose So mentioned

You will remember.

SJM retakes lead SJM is back at the top of the casino industry of Macau in terms of market share, according to data compiled by Business Daily.

The company founded by Stanley Ho achieved a 22.6 per cent slice in November and has topped the list for

SJM Sands China

two times in the past already, when the President does come, Macau generally is more quiet”, he said.

However, Lawrence Ho stressed that he would be ready to bite the bullet in relation to the visit of Xi Jinping because he was expecting the President to bring the gift of a 24-hour border crossing between Macau and Mainland China.

In fact, Mr. Ho got his gift earlier and that has already been guaranteed. *With Kam Leong

the first time since July.

As for Sands China, the company owned by Sheldon Adelson dropped from first to second with a market share of 22.5 per cent, and it is now followed by Galaxy on 21.5 per cent.

According to the data compiled by Business Daily, Melco Crown (13.4 per cent) is fourth, leading MGM (11 per cent) and Wynn (9 per cent).

Jun

Jul

Aug

24.90%

24.10%

22.40%

September October November 20.90%

23.50%

22.60%

22%

23.10%

24.60%

21.80%

23.70%

22.50%

Galaxy

21.10%

20.60%

21%

22.90%

21.40%

21.50%

MPEL

12.20%

12.40%

13%

12.70%

14.30%

13.40%

MGM

10.30%

8.70%

8.90%

10.80%

8.20%

11%

Wynn

9.50%

11.10%

10.10%

10.90%

8.90%

9%

Total

100%

100.00%

100.00%

100%

100%

100%

welcome

opportunity

@ : signature@macaubusiness.com tel : +853 2833 1258

Amax H1 posts losses of nearly HK$19 mln

M

acau junket investor Amax Holdings Ltd. posted a loss of HK$18.40 million (US$2.3 million) during the first half of its fiscal year ended September 30. The group said the interim loss is mainly because of the increase in costs.

The company informed Hong Kong Stock Exchange last Friday that the group’s turnover had reached some HK$2.44 million, a slight drop from the HK$2.53 million of the same period last year.

Facing increased losses of revenue, the group explained in the filing that the loss ‘was mainly attributable to the increase in general and administrative expenses and finance costs during the period under review.’

According to its filing, the group’s general and administration expenses reached HK$14 million, in addition to which the group experienced a loss of HK$11.95 million from its operations.

Meanwhile, the group expressed that it is optimistic about its gaming

business prospects in the Republic of Vanuatu.

The junket company announced in October that it had finally concluded a deal with Forenzia Enterprises Limited for a gaming licence in Vanuatu, acquiring 60 percent stake of the foreign company for a total consideration of HK$48 million.

“The company has full confidence in the high potential of Vanuatu and is well-poised to absorb the unfulfilled demand by establishing a casino

operation there,” the group wrote in the filing, claiming ‘Macau’s position as destination of choice for Chinese gamblers has been gradually eroded by the increasing competition elsewhere in Asia’ following the slowdown of the gaming industry in Macau.

The deal was first proposed in March this year when the chairman of Amax, junket operator Ng Man Sun, announced that the company had entered into a non-legally binding letter of intent with Forenzia, which holds a gaming licence on Vanuatu issued by the Ministry of Finance and Economic Development of Vanuatu for a term of 15 years.

K.L.

Business Daily | 5

December 2, 2014

Macau

Handbags, wallets imports down 27pct in Oct Macau’s total merchandise trade MOP8.97 billion Sara Farr

in October.

Imports of mobile phones, on the other hand, have registered a notable increase of 55 percent to MOP1.03 billion, as has that of watches, the imports of which increased 45 percent to MOP829.9 million. These two categories recorded a steady increase between January and the end of October, as did construction materials (up 2 percent to MOP292.9 million) plus food and beverages (up 24 percent to MOP1.03 billion).

The great majority of imports originate from mainland China (33 percent) followed by Hong Kong at 10 percent, France and Switzerland both at 9 percent, Italy at 7 percent, and the US and Japan both at 6 percent.

Imports from mainland China increased by 11 percent to MOP23.8 billion, while those from the European Union increased by 20 percent to MOP18.29 billion in the first 10 months of the year.

Meanwhile, the overall

value of exports amounted to MOP829 million, up 19 percent year-on-year, with the value of re-exports increasing 24 percent to MOP658 million; domestic exports rose by 2 percent to MOP171 million.

The majority of Macau’s exports go to Hong Kong at 59 percent, followed by mainland China at 16 percent, the US at 3 percent, Japan at 2 percent, and France and Taiwan both at 1 percent.

At the end of October, the total value of exports to Hong Kong amounted to MOP4.76 billion, up 22 percent in the first 10 months of the year over that of a year ago, while exports to the European Union totalled MOP237 million, a 3 percent increase year-on-year.

The value of exports to mainland China dropped 5 percent to MOP1.28 billion, while those to the US dropped 13 percent to MOP263 million.

Macau’s trade deficit for the month of October was MOP7.31 billion.

sarafarr@macaubusinessdaily.com

M

acau is importing fewer handbags and wallets than it did last year. In the month of October alone, imports of such goods dropped 27 percent to MOP246 million compared to the same month a year earlier.

Official data released yesterday by the Statistics

and Census Service (DSEC) shows that the overall import of handbags and wallets had dropped 4 percent in the first 10 months of the year to MOP2.98 billion from a year ago.

In all, imports have been increasing steadily with merchandise value amounting to MOP8.14 billion, up 16 percent over that of October 2013.

Still on the imports side, beauty and cosmetic products amounted to MOP287.7 million, down 5 percent yearon-year. However, this is still a 13 percent increase for the first 10 months of the year over that of a year ago. Gold jewellery has also recorded a year-on-year decrease of 5 percent to MOP778.5 million

Source: DSEC

Alipay facilitates electronic purchase of Macau Pass Macau Pass is also mulling a pre-order package for Alipay users that bundles both public transport smartcard and telecom services here Stephanie Lai

sw.lai@macaubusinessdaily.com

M

acau is one of the three overseas destinations where users of mainland China’s leading online payment service Alipay can directly purchase the public transport smartcard via their account before coming to visit the city.

Alipay announced this latest service yesterday.

Under this new service that came online yesterday, some 190 million Alipay users can pay from their e-wallet online or via mobile application for the Macau Pass here, or the public transit smartcard Rabbit card of Thailand and Nets card of Singapore. With a barcode that marks the completion of the payment made, once the users arrive in Macau, Thailand or Singapore, they can collect the public transport smartcard from the designated counters at most visitor checkpoints in these destinations.

“Under this new service,

it means that the 190 million Alipay users can pre-order Macau Pass and collect the card from the counters of China Travel Service Ltd. at the immigration checkpoints here or at our two service centres,” deputy general manager of Macau Pass SA David Lao explained to us yesterday. “They just need to show the barcode to our staff for scanning and then we’ll give them the Macau Pass card.”

Alipay is also considering extending this advance purchase of the public transport smartcard for users travelling in South Korea, where “T-money” is the rechargeable public transport smartcard used in and around Seoul.

With this new pre-order service for public transport smartcards, Alipay users can divert the money left unused on the smartcards to their own Alipay account.

This new service that

allows Alipay users to preorder public transit smartcard in an overseas destination adds to the online payment platform’s existing range of services that cater to the spending habits of China’s outbound visitors, including hotel room booking and handling tax refunds for shopping.

Mainland Chinese visitors still occupy a significant portion of the inbound visitors coming here: official data reveals that among the 26 million-plus visitors

travelling here for the first ten months of this year, 67 per cent or 17.6 million visitors were from the mainland.

This number of mainland visitors travelling in Macau in the period also represent a year-on-year growth of 14 per cent.

“Through this cooperation with Alipay we’re facilitating mainland visitors travelling here, especially those that come here under the individual visit scheme,” Mr. Lao told us.

“The cooperation has tapped into a great potential where we’re not only offering them easier acccess to purchase a public transport smartcard but we also offer packages where users can pre-order this smartcard along with e-coupons that offer discounts when they shop at the souvenir stores here,” the Macau Pass deputy general manager added.

The stored value smartcard issuer told Business Daily that the company is now mulling a new package that bundles both the Macau Pass card and telecommunications service here to offer Alipay users in a pre-order format.

“We’re now in talks with the telecom operators on this new package for pre-order, and I think it can be released online within months,” said Mr. Lao, adding that his company is now also probing a plan to bundle the sales of Macau Pass card with tickets to events and shows here.

6 | Business Daily

December 2, 2014

Macau Brands

Trends

Razor Sharp Raquel Dias newsdesk@macaubusinessdaily.com

W

e’ve noticed, since last year, a new trend in menswear runway shows. Facial hair is back. Be it in the form of the less popular mustache or the full-blown beard, a cleaned face is definitely out.

Although this is truer for the European fashionistas than the Asian, models, actors and celebrities are spending more and more time grooming. This being the case, you might want to give your retro style a retro treatment to match. Go to any quality beauty retailer and in the men’s section you will notice a difference; not only does it occupy more shelf space but old school shaving is back. Put aside your Braun and embrace the magic trio: soap, brush and razor.

Don’t think that this will come cheaper, as it probably won’t. It also requires a lot of maintenance, but those in the know swear by it. We had a look around and the most impressive set can be bought online.

The handmade set of safety razor and brush set is from the Pittsburgh-based Studebaker company. A double-edged safety model, each razor is made from 260-alloy brass and sterling silver, with stainless steel blades.

The matching brush is made with badger hair and sports a brass handle. Christmas is just around the corner so why not go all out and cutting edge?

Grand Prix Committee’s remit extended until 2016

T

he Government has decided to extend the tenure of the Grand Prix Committee and its responsibilities for another two years, until 31 December 2016. The decision was published yesterday in Macau’s Official Gazette.

The dispatch was signed on 21 November by the Chief Executive of the Government, Fernando Chui Sai On, as the current legal authorisation for the Grand Prix Committee to organise the Macau Grand Prix was due to end this month.

“This is just a normal procedure that occurs every two years”, the Coordinator of the Committee, João Costa Antunes, told Business Daily yesterday.

The million-dollar question at this moment in relation to the Macau Grand Prix, however, is to know whether it will be integrated into the World Touring Car Championship calendar, as has happened for the last ten years.

The FIA World Council will meet this week to discuss the 2015 series calendar.

Asked by Business Daily about this, Antunes said, “I will not answer that question at this moment. We may have to wait for some months to cast a light on that matter”.

Gov’t approves MOP254.1mln for Ka-Ho tunnel

Extra year to build Macau wholesale market

A

Zhu Kuan Fomento Imobiliario Lda consortium has been granted MOP254.1 million for the construction of the Ka-Ho tunnel in Coloane. The payment by the Macau Government to the company will be made in four instalments, the first of which for 2014 is MOP96.6 million, while those for 2015 and 2016 are both of MOP70 million, and that for 2017 is MOP17.6 million.

The dispatch was signed by Chief Executive Fernando Chui Sai On and published in yesterday’s Official Gazette.

The project is for a 500-metre long tunnel that will link the east of Cotai to the northeast tip of Coloane Island. Construction was expected to begin in the third quarter of the year and last for at least two years.

The Infrastructure Development Office (GID) announced at the end of April that the two-way tunnel, comprising four lanes, will have its northern entrance start near the Rua da Central Térmica de Coloane in eastern Cotai. The tunnel will be connected to the area near Ka-Ho Port, the northeastern tip of Coloane island where Macau Oil Terminal

T and Macau Cement Manufacturing Co Ltd are located.

Currently, cars have to go through Estrada do Istmo, and the narrow Estrada da Barragem de Ká Hó, Estrada do Altinho de Ka Ho to traverse the urban zones of Coloane and Taipa to Ka-Ho. The tunnel is expected to cut travel time for the said distance by 10 to 15 minutes.

S.F.

he government will spend MOP860 million on building the new Macau wholesale market and allot an extra year for its construction, which is expected to be finished by 2016. According to the Official Gazette, the Guangdong Nam Yue Group will receive some MOP860 million to build the new market, located in Ilha Verde. The construction company will get the sum in three tranches paid from 2014 to 2016. This year, authorities will pay MOP350 million, next year another MOP300 million and in 2016 MOP210 million more will be spent on the market construction. In the Official Gazette, the government also announced that it had just granted an extra year to Guangdong Nam Yue Group to finish the construction of the wholesale market. Any budget not spent in one year will be transferred to the next.

Business Daily | 7

December 2, 2014

Macau

Dangerously in love with China If Macau is already a single resource economy, now it is becoming a single destination investor. Government and residents today invest 47 per cent of their money in mainland assets, while a year ago the figure was only 41 per cent.

International institutions, rating agencies and even Nobel prizewinners recommend diversification but that’s not happening Luís Gonçalves

Luis.goncalves@macaubusinessdaily.com

M

acau continues to put the profits of its booming economy into China, choosing not to diversify its investments in other destinations in order to reduce the impact of an economic downturn in China.

Despite several warnings from major institutions and economists, Macau continues to increase its exposure to the Mainland with the territory’s investment in Chinese assets reaching an all-time high, and with no signs of slowing down.

Today, almost 50 per cent of all financial investment conducted by the government - and residents here - is in Chinese financial products, ranging from bonds to equities, official data revealed. Three years ago, the share was only 35 per cent.

The demands for diversification are not exclusively with regard to the economy. If Macau has to go beyond the gaming industry to reduce its exposure to casinos, in terms of its

financial investments, the territory has to go beyond China.

The latest data from the Monetary Authority of Macau (AMCM) reveals that 47.5 per cent of all financial investment undertaken by the government and residents as at the end of June was in assets from the Mainland, an all-time record. A year ago, the share was 41.5 per cent.

AMCM data reveals that government and residents are buying bonds and equities from China like never before.

Not all eggs in same basket The growing financial exposure of Macau to the Mainland has been noted by several institutions this year, especially now that the Chinese economy continues to weaken and the banking sector struggles with less credit and more debts likely to remain unpaid.

The International Monetary Fund recommended financial diversification

Macau’s growing dependency on China China share of all Macau portfolio investment Period

Share (%)

End-June 2014

47.5

End-December 2013

45.7

End-June 2013

41.8

End-December 2012 Source: AMCM

35

by the government in May, following the first visit of the institution to Macau in 15 years. The same was said by the world’s biggest rating agencies, like Fitch and Moody’s, just last week, and the 2003 Nobel Prizewinner for Economics, Robert Engle, recently delivered a lecture here underscoring the fact that Macau has to diversify its investments to reduce its risk of an economic downturn in China.

The government has said on several occasions that it’s investing more in other destinations but the reality it that China is increasingly soaking up all of Macau’s investments.

For example, investment in longterm bonds, an investment done mainly by the government and that accounts for 55 percent of all Macau’s financial applications is dominated

by China. At the end of June, 70 per cent of all long-term bonds bought

by Macau were Chinese. According to AMCM, the government here had MOP161 billion invested in Chinese bonds until the end of June of this year. That’s a 13 per cent increase from a year ago.

Even investment in equities, like stocks, has seen a growth of Chinese presence at the expense of Hong Kong, a per se investment destination in terms of these financial products. The Macau Government and residents invested 1.3 per cent more in Chinese equities in the last year (from June

2013 to June 2014 ) and 20 per cent less in Hong Kong equities.

Today, China is responsible for 15 per cent of all investment by Macau in equities (Hong Kong has a share of 50 percent) but this figure is likely to increase as the new link between the Hong Kong and Shanghai stock exchanges make it easier for Macau residents to buy shares from Mainland companies.

AMCM’s portfolio investment report also reveals that investment in financial products by locals and authorities in Chinese assets are growing almost two times faster than the average. At the end of the first half of this year, the investment in mainland assets increased 10.8 per cent compared to a year ago, while total investment jumped 6.6 per cent.

As Macau buys more and more financial assets from China – from stocks to bonds - the territory is also increasing its exposure to the Mainland and its financial risk. If China’s economy slows more than expected or the property market plunges the negative effects in Macau will be fast and big. This second half, for example, Macau’s economy will likely suffer a recession due to gaming revenues dropping 15 percent. If China suffers an economic crisis, part of the almost MOP200 billion invested in mainland assets is likely to be lost.

8 | Business Daily

December 2, 2014

Greater China HK suffers worst trading day since February Hong Kong’s benchmark share indexes suffered their worst-single day losses since February yesterday as weak manufacturing surveys added to worries about China’s slowing economy. The Hang Seng index fell 2.6 percent, to 23,367.45 points in a broad-based decline, while the China Enterprises Index lost 2.9 percent, to 10,818.20 points.

The index measuring price differences between dual-listed companies in Shanghai and Hong Kong was 110.01, its highest level since July 2013. A value above 100 indicates Shanghai shares are pricing at a premium to shares in the same company trading in Hong Kong.

China to bid again for Mexico train

PMIs show economy cooling Analysts see more moves in coming months if the economy continues to stumble China plans to tender again for Mexico’s US$3.75 billion high-speed rail project after the Latin American nation abruptly cancelled its earlier win, one of the firms in a Chinese-led consortium that had bid and a source close to the bid said. Local media also later reported that one of the Mexican firms in the consortium, Grupo Higa, owned a US$7 million house that the Mexican president’s wife was in the process of acquiring. Mexico’s first lady said she would give up the house.

Ping An Insurance to issue H shares Ping An Insurance Group Co of China Ltd, China’s second-largest insurer by market capitalisation, said it planned to raise HK$36.8 billion (US$4.75 billion) in a private placement of its H-shares.

The insurer will issue 594.056 million new H Shares at HK$62 per share to between six and 10 investors, it said in a filing to the Hong Kong stock exchange on Sunday evening. The placing price is at a discount of about 4.7 percent to Friday’s closing price of HK$65.05. H shares are shares of companies incorporated in mainland China that trade on the Hong Kong Stock Exchange.

PLA gets tough on duty crimes

New rules released by the People’s Liberation Army (PLA) show its toughening stance on duty crimes in the areas of construction, and materials and armament procurement. The PLA rules, which came into effect yesterday, detailed 44 high-risk links and more than 130 outstanding problems. It set clear preventative measures in 71 clauses under ten chapters. The key fields identified included personnel and finance management; construction; oil management; material and armament procurement; health care; real estate; and reception services. More than 90 percent of duty crime cases in the military occurred in these key fields.

G

rowth in China’s manufacturing sector slowed in November, suggesting the world’s second-largest economy is still losing momentum and adding pressure on authorities to ramp up stimulus measures after unexpectedly cutting interest rates last month.

After saying for months that China does not need any big economic stimulus, the People’s Bank of China (PBOC) surprised financial markets by lowering rates on November 21 to shore up growth.

“The PBOC’s rate cut appears to have failed to improve sentiment,

and we see little improvement in activity indicators in November,” ANZ said in a research note.

“In order to maintain growth for the whole year at around 7.5 percent (the official target), we believe that Chinese authorities will intensify easing efforts in December

New Zealand-Taiwan trade surges under FTA In the year ending September 2014, Chinese Taipei was New Zealand’s seventh largest goods export market

N

ew Zealand exports to Taiwan have risen by more than 20 percent in the year since a two- way free trade agreement, the New Zealand government announced yesterday.

Primary Industries Minister Nathan Guy and Trade Minister Tim Groser issued a joint statement to mark the one-year anniversary of the Economic Cooperation Agreement between New Zealand and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Cooperation.

New Zealand’s total exports to Taiwan were up by NZ$150 million (US$117.31 million) to NZ$884 million (US$688.36 million) from December 2013 to September this year.

“Over 69 percent of New Zealand’s exports to Chinese Taipei are now tariff free, representing savings of around NZ$78.4 million (US$61.33 million) to date,” said Groser.

The agreement would see complete removal of tariffs on New Zealand’s current exports to Taiwan, with 99 percent eliminated in four years.

“Tariffs on virtually all dairy products were removed from day one, along with apples, cherries and wine.

This has been a boost to all these industries, especially apple exports which have tripled from NZ$13 million to NZ$39 million (US$10.17 million to US$30.5 million),” said Guy.

In the year ending September 2014, Chinese Taipei was New Zealand’s seventh largest goods export market worth more than NZ$1 billion NZ dollars (US$778.69 million).

Milk powder was the single biggest export to Taiwan, rising by 43 percent to NZ$233 million (US$181.43 million) from December last year to September this year, according to figures from the government.

Over the same period, imports from Taiwan were up 12 percent to NZ$661 million (US$514.59 million).

Xinhua

Over 69 percent of New Zealand’s exports to Chinese Taipei are now tariff free Tim Groser, New Zealand’s Trade Minister

Business Daily | 9

December 2, 2014

Greater China KEY POINTS Nov official manufacturing PMI at 8-month low Nov HSBC final PMI at 6-month low Cooling manufacturing sector adds to fears More policy easing seen to avert sharper slowdown

to accelerate growth momentum.”

The official Purchasing Managers’ Index (PMI) eased to an eight-month low of 50.3 last month, the National Bureau of Statistics said yesterday, still indicating a modest expansion in activity but below forecasts for 50.6 and October’s 50.8.

The official PMI survey, which is biased towards large, state-owned factories, showed that demand for Chinese goods was stronger in China than abroad. New export orders contracted.

A similar private survey showed growth at Chinese factories stalled last month. The final HSBC/Markit China Manufacturing Purchasing Managers’ Index (PMI) edged down to 50 in November, a six-month low and right on the boom-bust 50-point level that separates growth from contraction on a monthly basis.

The reading was unchanged from a preliminary “flash” figure and down from the final 50.4 in October.

The HSBC survey focuses more

on smaller firms, which are facing more stresses as cooling demand cuts into sales and rising borrowing costs make it tougher to pay off debts, a point the PBOC stressed when it eased rates.

The gloomy reports reinforce expectations that the economy has lost steam despite a flurry of measures to lift growth, fuelling bets that more policy loosening is on the cards, either in the form of more rate cuts or reductions in the amount of reserves banks must hold to encourage them to lend.

Hurt by a sagging property market, unsteady exports and cooling domestic demand and investment, China’s growth is expected to slow to a 24-year low of 7.4 percent this year, though the fourth quarter is shaping up to be possibly weaker than earlier thought.

Growth is expected to cool further to 7.1 percent in 2015, a Reuters poll showed.

Sources familiar with China’s policy-making said leaders are prepared to lower rates again and loosen lending curbs on concerns that falling prices could cause a spike in bad loans, business failures and job losses. Prior to the rate cut, some policymakers had feared growth was on the verge of slipping below 7 percent, a level not seen since the global financial crisis.

The PMI surveys also showed the labour market remained under stress, and other reports abound of many workers being kept on the payrolls of inefficient “zombie” companies.

The official PMI has shown employment contracting mildly since June 2012, while the HSBC survey showed jobs shrank for the 13th straight month.

Reuters

Home prices drop again in November Compared with a year ago, home prices fell 1.6 percent

C

hinese home prices fell again in November from the previous month, two private surveys showed yesterday, pointing to a persistent property downturn despite efforts by the authorities to energise the market.

Prices of new homes in 288 cities fell an average 0.27 percent in November from October, the eighth consecutive drop on a monthly basis, a poll by real estate services firm E-House China Holdings Ltd showed.

Compared to a year ago, home prices in November were still up a barely perceptible 0.04 percent, compared with October’s 1.1 percent annual increase.

A separate survey by China Real Estate Index System (CREIS) showed average prices in the 100 biggest cities fell 0.38 percent in November from October, the seventh monthly drop in a row, according to its figures.

Compared with a year ago, home prices dropped 1.6 percent in November, the second consecutive month showing an annual fall, said CREIS, a consultancy linked to China’s largest property data provider, Soufun Holdings But in a microscopic sign of the property market bottoming out, home prices in the country’s 10 wealthiest cities showed a 0.07 percent in November

0.38 pct average prices decrease in the 100 biggest cities China Real Estate Index System survey from October, the first month-onmonth increase after dropping for the past six months, according to CREIS. “Although there were early indications that China’s property market had improved, most cities face large inventories of unsold homes,” said CREIS. “Home prices in major cities still face downward pressures.”

To halt the slide in home prices, China cut mortgage rates and down payments in September for some home buyers, but analysts doubted whether those measures would stem the weakness in the property market.

Meanwhile, China’s interest rate cut on Nov 21 may also spark some renewed interest in housing, but insiders say it will take more than that to spur a full rebound.

Reuters

Chow Tai Fook eyes Vietnam casino Chow Tai Fook also wants to expand its gaming business in South Korea and Australia

C

how Tai Fook Enterprises Ltd., a Hong Kong company with businesses from property to jewellery, is ready to invest in a US$4 billion casino project in Vietnam.

“We are interested,” Henry Cheng, a director at the closely-held investment company, said in a November 28 interview about the casino resort in the central Vietnam province of Quang Nam. “We are doing something now to secure this project.” He didn’t disclose more details.

Chow Tai Fook, controlled by the family of Hong Kong’s fourth richest man, Cheng Yu-Tung, is looking to tap a boom in gaming demand as more Chinese travel overseas.

Vietnamese policy makers are seeking to replicate the success of Singapore and Macau in attracting gaming resorts and tourism.

VinaCapital Group, Vietnam’s largest fund manager, is developing the Quang Nam project and had almost completed negotiations with an unnamed foreign partner, according to an October report by the Vietnam Investment Review.

Don Lam, chief executive officer at VinaCapital, declined to comment and

US$4 billion

Chow Tai Fook Vietnam’s casino project investment said in an e-mail the project is “still going through various issues and not yet finalized.”

In June, Chow Tai Fook, Hong Kong-based property developer Far East Consortium International Ltd. and Echo Entertainment Group Ltd. joined hands to bid for a contract to build a casino in Brisbane, Australia. The two Hong Kong companies will each take 25 percent stakes in the project, according to a June

23 statement from Brisbanebased Echo.

Macau Gaming Cheng Yu-Tung’s family also has separate investments in gaming in Macau. Cheng Yu-Tung owns a 10 percent stake in closely held Sociedade de Turismo & Diversoes de Macau SA (STDM), founded by his long-time friend Stanley Ho. The 10 percent stake in STDM gives him control of

more than 290 million shares of SJM Holdings Ltd., Asia’s largest casino operator.

Henry Cheng, Cheng YuTung’s son, is also chairman of Hong Kong-listed International Entertainment Corp., an entertainment company that agreed in January to pay as much as HK$7.35 billion (US$948 million) for a stake in Macau gambling-junket operator Sun City Gaming Promotion Co. Junket operators arrange

trips to Macau for high-stakes bettors from Mainland China.

Chow Tai Fook also wants to expand its gaming business in South Korea and Australia, and will use the profits for charity, Cheng said in the interview in Shanghai.

“We would like to promote this business and try to increase the revenue for our foundation, and try to do more charity in the future,” Cheng said. “That’s my aim.”

Bloomberg News

10 | Business Daily

December 2, 2014

Greater China

China winning OPEC price war The world’s second-biggest economy consumed the largest volume of oil on record in October, according to data compiled by Bloomberg

C

hina is emerging as the winner from OPEC’s battle with rival oil producers as the world’s biggest energy consumer stockpiles crude.

The nation’s efforts to boost reserves may increase its imports by as much as 700,000 barrels a day in 2015, according to London-based Energy Aspects Ltd. That’s more than half the global glut forecast by Citigroup Inc. after the Organization of Petroleum Exporting Countries refrained from cutting output at its meeting last week. Brent crude has slumped 41 percent from its peak in June.

The dwindling number of investors still betting on a rebound in prices can at least count on Chinese demand.

OPEC decided to maintain output targets even as a shale boom boosts U.S. production to the highest in more than three decades and causes a global supply glut. As crude extends its slump to the lowest level in more than four years, China is seeking to build a strategic petroleum reserve.

China boosted imports by 8.3 percent, or 460,000 barrels a day, in the first nine months of this year, the fastest pace since 2010, customs data show. The country will overtake the U.S. as the world’s biggest oil consumer within two decades, according to the International Energy Agency in Paris.

OPEC inaction OPEC will keep its production target at 30 million barrels a day, signalling it won’t adjust supply to influence prices, instead preferring to maintain market share amid the

weakest pace since 1990, and 7 percent in 2015, according to the median of as many as 56 economists surveyed by Bloomberg.

Slumping prices will “push China to expedite its emergency reserve program,” Gao Jian, an analyst at Shandong, China-based consultant SCI International, said by phone November 28.

Record purchases The unit of the nation’s biggest energy company may be helping build stockpiles for commercial or strategic purposes, according to Victor Shum, a Singapore-based vice president at IHS Inc., an industry consultant.

Commercial crude stockpiles increased to 35.63 million metric tons, or about 261 million barrels, in September, according to data compiled by Bloomberg from a newsletter published by the official Xinhua news agency.

That was a third consecutive monthly record.

Second phase

unprecedented shale boom.

Citigroup estimates the global oversupply will almost double to 1.3 million barrels in the first half of next year, according to a November 27 report.

Benchmark oil prices have plunged 40 percent from a June peak, the worst decline since the collapse of the financial system in 2008.

That’s threatening to have the same global impact of falling prices three decades ago that

led to the Mexican debt crisis and contributed to the end of the Soviet Union.

The speculative net-long position, or bets on rising prices, in U.S. crude futures tumbled 51 percent since June, as investors lost faith in OPEC’s willingness to act.

Short positions expanded more than threefold over that period, U.S. Commodity Futures Trading Commission data show.

While China currently

We know that China has already been taking advantage of lower prices to fill the SPR. They still have a long way to go Simon Powell CLSA head of Asian oil and gas research

holds reserves equivalent to about 30 days of imports, the government is seeking to boost that level to 100 days by 2020, according to China Petrochemical Corp., Asia’s biggest refiner. That would be the equivalent of about 570 million barrels, based on the most recent monthly imports.

China is buying more oil even as its economic expansion slows. Gross domestic product will grow 7.4 percent this year, the

China bought about 440,000 barrels a day more crude than it consumed from January to September, the most since 2010 based on data compiled by Bloomberg from Chinese statistics.

The surplus is calculated by subtracting the amount processed by refineries from net imports and domestic production.

The government has filled four sites with 91 million barrels of crude, the National Bureau of Statistics said in a statement November 20.

China finished building the sites, which have a capacity of about 103 million barrels, in 2009 under the first of three construction phases.

Two of seven sites in the 191 million-barrel second phase were completed last year and construction has begun on two of the three sites for the third phase, China National Petroleum Corp., the nation’s top energy producer, said in January.

The U.S. government established its Strategic Petroleum Reserve in 1977 following the 1973-74 Arab oil embargo. The stockpiles, located in underground salt caverns along the Gulf Coast, peaked in 2009 at 726.6 million barrels, according to the Energy Information Administration. Supplies were 691 million as of November 21, enough for 37 days of demand.

“Our base case is for a modest increase in imports but the growth is coming off a very high base,” Amrita Sen, the chief oil market analyst at Energy Aspects, wrote in an e-mail November 28. “If China builds more caverns, imports could rise by 600,000 to 700,000 barrels a day.”

Bloomberg News

Business Daily | 11

December 2, 2014

Asia

Low oil price proved to be decisive on Asian PMI index

Asia factories find demand lacking While lower commodity prices are a boon to consumer spending power, they have damaging side effects in a world where official interest rates are already at historic lows in many countries

A

sia’s factories appeared to have stepped down a gear last month as a glut of supply met a dearth of global demand, piling pressure on prices of manufactured goods and the commodities used to make them.

Oil sank to its lowest in over five years yesterday, with the industrial bellwether copper not far behind. The rout spread to gold and silver while the U.S. dollar cleared seven-year peaks on the Japanese yen.

Both U.S. crude and Brent have now fallen for five straight months, the longest losing streak since the 2008 financial crisis.

With domestic and export demand softening and production growth weak, many Asian manufacturers were more reluctant to stock up on raw materials, activity surveys yesterday.

While lower commodity prices are a boon to consumer spending power, they have damaging side effects in a world where official interest rates are already at historic lows in many countries.

Slowing inflation acts as an unwanted tightening of policy as it pushes up real interest rates, one reason China and Japan surprised with new stimulus measures in recent weeks.

“Domestic demand expanded at a sluggish pace while new export order growth eased to a fivemonth low. Disinflationary pressures remain strong while the labour market weakened further,” said Hongbin Qu, chief economist for China and co-head of Asian economic research at HSBC. “We continue to expect further monetary and fiscal easing measures to offset downside risks to growth.”

After saying for months that China does not need any big economic stimulus, the central bank wrong footed markets by lowering rates in late November.

China’s troubles were felt broadly across the region, with South Korea reporting exports to the Asian giant fell for the first time in three months, while its measure of manufacturing activity stayed stuck in contractionary territory.

In Indonesia, the HSBC Markit PMI reached the unwelcome milestone of the lowest since the survey began in April 2011 at 48.0.

That was down from 49.2 in October.

In Japan, the Markit/ JMMA version of the PMI eased to 52.0 in November, from 52.4 the month before.

The economy slipped into recession in the third quarter as the baleful impact of a hike

Domestic demand expanded at a sluggish pace while new export order growth eased to a five-month low.

Disinflationary pressures remain strong while the labour market weakened further Hongbin Qu, HSBC, co-head Asian economic research

in sales taxes lingered longer than anyone expected.

Still, the extent of the contraction may have been overstated, given figures out yesterday showed business investment was stronger than thought.

India was a rare bright spot, as it has been for a few months now, with its PMI climbing to a 21-month high of 53.3 last month.

A host of European and U.S. surveys are yet to come yesterday. The euro zone measure is expected to be barely positive at 50.4, woefully short of the U.S. ISM which is forecast to come in at 58.0.

The European Central Bank releases its latest economic estimates this week when inflation is back at a five-year low, adding to the case for more aggressive stimulus in the bloc.

Reuters

Indonesian inflation spikes on fuel hike Many expect inflation to be higher in December and January, but November’s surge did not spur concern

I

ndonesia’s annual inflation rate spiked slightly more than expected in November after fuel prices were hiked, but economists said the central bank does not need to raise rates again anytime soon.

The statistics bureau said yesterday the annual headline rate was 6.23 percent, compared with October’s 4.83 percent and above a Reuters poll forecast of 6.06 percent.

On November 17, President Joko Widodo increased fuel prices more than 30 percent. Traditionally in Indonesia, hikes spur a chain of price rises because of higher transport costs.

Right after fuel prices went up, Bank Indonesia increased its policy rate by 25 basis points to 7.75 percent.

Inflation is “nothing too worrisome at this juncture,” said Gundy Cahyadi of DBS Bank in Singapore, who expects a peak of 7.8 percent, likely in January.

KEY POINTS Nov inflation 6.23 pct y/y, Oct pace was 4.83 pct Inflation rate expected to be higher in December Oct had US$23.2 mln trade surplus, Sept had US$270 mln deficit The central bank might raise rates again “but there is no strong reason to do that now”, Cahyadi said.

When Indonesia raised fuel prices in mid-2013, inflation neared 10 percent and the central bank raised its benchmark rate 1.75 percentage

points over six months, hurting growth.

This time, inflation is not expected to near double-digits.

Bank Indonesia has predicted the annual inflation of around 7.9 percent at the end of the year while Finance Minister Bambang Brodjonegoro sees 7.3 percent.

Gareth Leader of Capital Economics in Singapore agreed a rate hike is possible in coming months “however given that the spike in inflation will be temporary, we do not expect to see an aggressive tightening of monetary policy.”

Transportation factor The head of Indonesia’s statistics bureau, Suryamin, said inflation “shouldn’t spike too high” in December if the government can maintain the prices of rice, chillies and transportation.

Transportation, which accounts for 19.1 percent in Indonesia’s inflation basket, increased 4.29 percent in November from a month earlier.

Also on Monday, Indonesia reported a US$23.2 million trade surplus for October, smaller than the poll’s US$70 million projection but a swing from September’s US$270 million deficit.

In January-October, exports were US$148.06 billion, 1.1 percent lower than a year earlier. The trade deficit for the first 10 months was US$1.65 billion, compared with US$6.38 billion in the same period of 2013.

Aldian Taloputra, economist at Mandiri Sekuritas in Jakarta, said the trade outlook was “positive but not by much. We forecast either small surpluses or small deficits in the coming months.”

Reuters

12 | Business Daily

December 2, 2014

Asia Philippines eyes global bond issue The Philippine government would prefer to sell a long-term, benchmark-sized bond issue when it returns to the offshore debt market, National Treasurer Rosalia de Leon said yesterday. “We’re looking at a longer term (bond), a benchmark of US$750 million to US$1 billion,” she told reporters, adding there is demand for long-term issues though she declined to be specific on the tenor the government is looking at. On Friday, de Leon said the government was on the lookout for market opportunities to “do a dollar funding or a liability management structure.”

Japan corporate capex up Japanese companies raised spending on plant and equipment in July-September by 5.5 pct from the same period last year, Ministry of Finance data showed yesterday, pointing to a gradual recovery in capital expenditure. The rise followed a 3.0 percent annual increase in the previous quarter. Excluding spending on software, capital expenditure rose 3.1 percent from the previous quarter on a seasonally adjusted basis. The data will be used to calculate revised gross domestic product figures due on December 8.

ADB unveils investment in Cambodia

Australia’s inflation refrained Central bank officials have been on something of a verbal campaign to revive “animal spirits” among businesses and consumers, though with only tentative success so far Wayne Cole

A

ustralian inflation looked to have been well contained in November while national house prices showed further signs of cooling, only reinforcing the case for interest rates to stay at historic lows for months to come.

The Reserve Bank of Australia (RBA) holds its last meeting of the year on Tuesday and is thought certain to keep rates at 2.5 percent as the A$1.6 trillion (US$1.36 trillion) economy deals with weakness in commodity prices and mining investment.

Data out on Wednesday are likely to confirm Australia is earning less for its resource exports even as it produces more, eating into corporate profits, household incomes and the government’s taxation coffers.

Prices for U.S. crude tumbled to their lowest in over five years yesterday, while gold shed more than US$40 in two sessions. Iron ore, the country’s single biggest export earner, has been on the slide for pretty much all of 2014.

The Reserve Bank of Australia

Japan’s Q3 recession seen milder than feared The Asian Development Bank (ADB) announced yesterday that it would provide over US$800 million in concessional finance to Cambodia over five years to support the Southeast Asian nation in economic development and poverty reduction. Under the scheme, ADB will support higher agricultural productivity and commercialization, build rural and urban infrastructure, improve natural resource management, and support trade and transport facilitation, the bank said in its press statement.

Singapore to adopt Euro VI Standards Singapore will adopt the Euro VI emission standards from September 2017 for petrol vehicles, said Singapore’s National Environment Agency (NEA) yesterday. The new regulation will further reduce NOx (nitric oxide and nitrogen dioxide) and fine particulate emissions, in particular the PM 2.5 from vehicular emissions. This move is in line with the NEA’s efforts to further improve air quality by regulating vehicular emissions, the agency said. Euro VI is the latest engine emission standards set by the European Union (EU).

Economists expect Japan to resume growth in the current quarter as consumer spending and yesterday’s strong capital expenditure show that growth will become more broad-based Stanley White

J

apan’s fall into recession between July-September could turn out to be less severe than feared, with new capital expenditure figures out on Monday suggesting revisions will put the third quarter in a slightly more positive light.

The 5.5 percent year-on-year rise in capital expenditure over the third quarter reported yesterday followed a 3.0 percent annual increase in April-June, which could ease concerns about recovery from a sales tax increase earlier this year.

“The revised data will show a smaller contraction in GDP that could be close to zero,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co. “Other data on consumer spending, factory output and business investment show these three factors will drive future growth.”

Japan’s economy still contracted in the third quarter, following a decline in the second quarter and confirming a recession. But rising business investment means the contraction was not as severe as initially estimated.

Compared with the previous quarter, capital spending excluding software rose a seasonally adjusted 3.1 percent, versus a 1.5 percent decline in April-June in an encouraging sign of vigorous business investment.

Preliminary data showed the economy contracted an annualised 1.6 percent in July-September, confirming Japan had entered its third recession in the past four years as a sales tax hike in April hurt consumer spending and business investment.

Revised gross domestic product

data is due on December 8. The finance ministry data released yesterday is used to re-calculate the capital expenditure component of GDP. In preliminary GDP data, capital expenditure shrank 0.2 percent, but this could be revised up to show a 1 percent gain, according to Hidenobu Tokuda, senior economist at Mizuho Research Institute.

The recession set the stage for Prime Minister Shinzo Abe to delay a second sales tax hike that was originally scheduled for next year.

Pushing back the tax hike has eased concerns about consumer spending, but the recession has also shown that Abe’s policies have not been enough to strengthen the underlying economy - even after some two years in office.

Reuters

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Business Daily | 13

December 2, 2014

Asia growth could run above trend for a couple of years without endangering inflation, a major reason policy was set to stay loose for some time yet.

KEY POINTS TDMI inflation gauge slows to muted 2.2 pct in Nov House prices dip nationally, big variations between cities Real economic growth masks weakness in incomes, spending RBA seen certain to keep rates at 2.5 pct on Tuesday

While analysts expect inflationadjusted gross domestic product (GDP) grew a respectable 3.1 percent in the year to September, measures of incomes and spending in current dollars will be far more sober.

“The data will highlight that real outcomes remain decent, but the nominal economy, where we all live and pay taxes, could do better,” said Michael Workman, a senior economist at Commonwealth Bank. “Confidence is the missing ingredient.”

Just last month, RBA Governor Glenn Stevens estimated there was enough slack in the economy that

Housing off the boil Survey evidence out on Monday underlined the benign outlook for inflation. The TD SecuritiesMelbourne Institute’s monthly measure of consumer prices grew at an annual pace of 2.2 percent in November, near the floor of the RBA’s long-term target band of 2-3 percent.

Figures from property consultant CoreLogic RPData showed dwelling prices over all of Australia’s major cities dipped 0.3 percent in November from October, when the national index had risen 1.0 percent.

The result masked big differences in the cities with prices in Melbourne diving 2.6 percent for the month, while Sydney boasted a gain of 1.0 percent.

For the three months to November, prices rose a modest 0.8 percent with five of the eight capital cities recording falls. The annual pace of price growth slowed to 8.5 percent, the slowest for 2014 and down from a peak of 11.5 percent in April.

The moderation should be welcomed by policy makers concerned that a surge in borrowing to buy investment properties could lift prices to unsustainable levels.

Indeed, it might be enough to dissuade regulators from tightening lending standards as has been mooted in recent months.

Reuters

NZ Reserve Bank clings to inflation focus New Zealand’s central bank chief yesterday defended its focus on containing inflation despite concerns over the country’s over-valued currency

I

nflation targeting had delivered price stability without reducing long-term growth, and it remained the appropriate focus for monetary policy, Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler said in published speech in Wellington to mark its 25th year of inflation targeting.

“Price stability has brought many benefits. It enables people to plan and contract with greater certainty for longer periods. It reduces the inflation risk premium in interest rates and the need for speculative inflation hedges, and it reduces the insidious toll that inflation exacts on the more vulnerable and less financially sophisticated,” Wheeler said.

In the 20 years before the RBNZ was made independent of the government with a mandate to control inflation, New Zealand’s annual real gross domestic product growth averaged 2.2 percent while annual inflation was volatile around an average of 11.4 percent.

Since 1990, real GDP growth had averaged 2.6 and annual inflation 2.3 percent.

Wheeler said the RBNZ was a “flexible inflation targeter,” which enabled it to lower the official cash

rate by almost 6 percentage points in 2008 and 2009 to cushion the impact of the Global Financial Crisis, despite the headline inflation rate being initially well above the 1-percent to 3-percent target range.

However, Wheeler, who has frequently warned that the overvalued New Zealand dollar is “unjustified and unsustainable,” said that central banks operating in floating exchange rate regimes, particularly in smaller countries, could influence short-term rates, but not set their own long-term rates.

Since the float of the New Zealand dollar in 1985, New Zealand had seen four major exchange rate cycles, including the current cycle, and each was characterized by a significantly over-valued exchange rate, followed by an initial correction, then a rapid depreciation.

“Past policy attempts to give the exchange rate more weight in monetary policy decisions tended to generate more interest rate volatility, with little lasting effect on the real exchange rate,” said Wheeler.

Xinhua

Thai Nov inflation eases to 5-year low The core inflation rate, which strips out fresh food and energy prices, eased to 1.60 percent in November from 1.67 percent in October Orathai Sriring and Kitiphong Thaichareon

T

hai headline inflation fell to a five-year low in November as oil prices weakened, but analysts say interest rates are not likely to be cut soon with the country under martial law.

With inflation easing amid more pressure on global growth, central banks in Japan and China have loosened policy. Thailand’s economy is also confronting a slowdown with domestic consumption struggling amid high household debts.

Thailand’s annual headline inflation in November dropped to 1.26 percent, slightly less than the forecast 1.30 percent in a Reuters poll, government data showed on Monday.

The core inflation rate, which strips out fresh food and energy prices, eased to 1.60 percent in November from 1.67 percent in October.

Despite easing inflation, economists believe the central bank will not cut rates soon as such a move could raise doubts about the junta’s leadership.

“A rate cut might be seen as a vote of no confidence to the current administration’s handling of the economy,” said Kobsidthi Silpachai,

KEY POINTS Nov headline CPI +1.26 pct y/y vs +1.48 pct in Oct Nov core CPI +1.60 pct y/ vs +1.67 pct in Oct Poll saw Nov headline CPI at +1.30 pct y/y, core CPI +1.57 pct Govt sees headline inflation at 2.0 pct this yr, 1.8-2.5 pct in 2015 Most economists still expect no rate cut in near term

head of capital markets research at Kasikornbank in Bangkok. He added that any monetary policy under martial law was unlikely to change much.

Others said the government would likely delay a change in policy as one now would have limited effect.

Bernard Aw, economist with Forecast in Singapore,

said: “policy ammunition should be conserved for the moment while the monetary authority awaits core data on economic developments.”

The Bank of Thailand has left its policy rate steady at 2 percent since March, when it was cut by 25 basis points to help businesses hurt by months of political unrest.

It next reviews policy on Dec. 17.

A military coup in May has restored some confidence, but key sectors of the economy such as tourism are barely picking up. Southeast Asia’s secondlargest economy grew 0.2 percent in the first nine months of 2014.

Inflation in Thailand has been benign, with prices curbed by government controls and subsidies and

also weak domestic demand.

The Commerce Ministry forecast annual headline inflation of 2.0 percent for this year and 1.8-2.5 percent for next year.

The central bank aims to keep core inflation in a range of 0.5-3.0 percent, and sets policy to achieve that. But it wants to switch to targeting headline inflation.

Reuters

14 | Business Daily

December 2, 2014

International German utility E.ON to split in two Germany’s biggest utility E.ON announced plans to split in two and spin off most of its power generation, energy trading and upstream businesses, responding to a crisis that has crippled the European energy sector. E.ON said it wanted to focus on its renewable activities, regulated distribution networks and tailor-made energy efficiency services, citing “dramatically altered global energy markets, technical innovation, and more diverse customer expectations”.

Germany’s power sector has been in turmoil, hit by a prolonged period of weak energy demand, low wholesale power prices and a surge in renewable energy sources.

Cyprus sees return to growth in 2015 Cyprus is expected to return to growth in 2015 and this year’s slowdown should be shallower than expected, its central bank governor said yesterday. Chrystalla Georghadji told parliament she expected 0.5 percent growth in 2015.

A European Commission forecast a 2.8 percent contraction in the island’s economy this year was “realistic”, she said. Authorities had previously forecast a 2014 contraction of 3.2 percent.

Cyprus slipped into recession in 2011.

Data in November put the annualised fall in output at -2.2 percent in the third quarter, from -2 percent in the second quarter.

John Laing makes offer for Balfour assets John Laing Infrastructure Fund yesterday offered to buy Balfour Beatty’s portfolio of public-private partnership assets, in sectors like education and health, for 1 billion pounds (US$1.6 billion) in cash. JLIF said it would fund the deal by issuing shares. The group is one of Europe’s largest listed infrastructure funds which partners with public sector groups across the world to deliver local and national infrastructure projects.

Europe targets deal to stay in space race Weeks after its dramatic coup in landing a probe on a speeding comet, Europe is hoping a last-minute deal to provide funding for the workhorse Ariane rocket will prevent its space ambitions falling back to earth this week. Anxious to preserve its own access to space, the 20-nation European Space Agency will seek to put aside differences over how to respond to U.S. low-cost rival SpaceX and safeguard thousands of high-tech jobs at ministerial talks on Tuesday. With the arrival in 2013 of SpaceX, offering cut-price satellite launches, Ariane needs to lower costs dramatically.

Fixing euro zone flaw with bonds As the European Central Bank comes closer to buying sovereign bonds, one London-based think tank says an opportunity has arisen to fix one of the euro zone’s birth defects -- the absence of a credible “risk-free” asset. Regulators deem domestic sovereign bonds riskfree -- so-called although no asset is entirely without risk -- and push financial firms to buy them as a safety buffer, exempting them from a rule that requires setting aside capital for holding other assets.

Fed rattled by elusive inflation For the Fed, 2 percent inflation provides a necessary buffer against deflation

W

ith the U.S. economy humming along at its fastest clip in more than a decade, the Federal Reserve should be confident about its ability to weather a global slowdown and start lifting interest rates around the middle of next year.

But then there is inflation.

Interviews with Fed officials and those familiar with its thinking show the mood inside is more sombre than the central bank’s reassuring statements and evidence of robust economic health would suggest. The reason is the central bank’s failure to nudge price growth up to its 2 percent target and, more importantly, signs that investors and consumers are losing faith it can get there any time soon.

Despite undershooting the goal for three years, the Fed has long succeeded in convincing markets that the target was within reach. However, inflation expectations have begun slipping in recent weeks, threatening to amplify downward momentum from plunging energy prices and stuttering global growth.

Barring a turnaround, Fed officials would hesitate to raise interest rates as soon as mid-2015 even as gradually as their forecasts now suggest. On Friday, prices of short-term interest rate futures showed traders pushed back their expectations for a “lift-off” in rates from near zero until October 2015, later than most Fed officials have signalled so far.

“The primary concern at the moment is whether you can get back to 2 percent in a way that keeps expectations anchored, and maintains the credibility of the Fed

Federal Reserve of the United States

as an institution that can achieve its goal,” said Jeffrey Fuhrer, the Boston Fed’s senior policy advisor.

At first sight, a combination of economic growth of nearly 4 percent, falling unemployment and price increases of around 1.6 percent looks good. Central bankers worry, though, that inflation, instead of picking up further, could head the other way.

Resisting the urge For the Fed, 2 percent inflation provides a necessary buffer against deflation, and sufficient leeway to leave crisis era “zero lower bound” on interest rates behind and start using them as the main policy lever again.

“We’re below the Fed’s 2-percent target now, but what if we get to 1 percent? And then 0.5? You need to cut that off,” said former Fed Vice Chairman Alan Blinder, who teaches at Princeton University.

One Fed official, who declined to be named, told Reuters policymakers must resist the urge to lift rates at the first opportunity because they might be forced to backtrack if inflation failed to pick up.

Narayana Kocherlakota, who has been a dissenting voice and voted against ending the Fed’s bond buying program in October, says time is ripe for the Fed to come clean on inflation and act.

“A key for us would be to be communicating effectively and then taking actions to live up to that communication that we are trying to get inflation back to 2 percent as rapidly as possible,” the Minneapolis Fed president said last in November.

Other officials flagged a growing concern that oil prices will depress the “core” price measures the Fed uses to steer its policy.

Reuters

Ageing Europe needs the migrants it doesn’t want Going by current trends, Europe’s industrial powerhouse Germany, along with Spain and Poland, will see its population shrink from now on, slowing potential economic growth

E

urope is ageing faster than any other region of the world. It badly needs immigrants. But many Europeans don’t want them.

The European Union will need to attract significant numbers of skilled workers from beyond its borders - and overcome growing public opposition highlighted by the rise of populist anti-immigration parties.

Germany’s 82 million residents will dwindle to 74.7 million by 2050 and their average age will rise to nearly 50, assuming unchanged levels of migration, according to EU statistics agency Eurostat. Some projections are even more dire, putting the German population as low as 65 million by 2060. That will mean “serious labour supply constraints” in some of the strongest EU economies.

By contrast, Britain, France, Ireland and to a lesser extent Italy

can expect healthy expansion. Britain will have overtaken the Germans by 2050 as the EU’s most populous nation with 77.2 million - if it stays in the bloc - while France will have caught up with Germany on 74.3 million.

Regardless of their place on the scale, many European countries still recovering from six years of economic crisis are being tugged in the opposite direction from demographic realities by a tide of anti-immigration political rhetoric.

Another pressing argument for rational debate is the growing impact of the demographic reversal on the funding of pensions and healthcare, especially in countries such as Germany and Spain which will have the oldest populations.

As the post-World War Two baby boom generation retires, the ratio of

over-65-year-olds to the working age population is set to rise dramatically, while the number of under-15s declines by nearly 15 percent by 2060, according to projections by Eurostat.

At present, the age dependence rate is 27.5 on average in the 28-nation EU, but Germany and Italy are well above that level. The rate is projected to jump to 49.4 in 2050, when there will be only two people of working age for every retiree.

Most EU countries have raised their retirement age to 65 or beyond and are making citizens contribute longer for a full pension - but further increases lie ahead.

That growth potential, regarded as necessary to maintain the current level of European welfare provision, collapsed during the crisis and has yet to return in most countries.

Reuters

Business Daily | 15

December 2, 2014

Opinion

Sliding investment, cost-cutting wires shows commodity boom-bust lives Business

Leading reports from Asia’s best business newspapers

TAIPEI TIMES

Clyde Russell Reuters columnist

The Chinese Nationalist Party’s (KMT) setback in the nine-in-one elections on Saturday might lead the nation’s stock market to face short-term volatility, analysts said. “The nation’s equity market might show some volatility in the coming days after the unfavourable election results in Taipei and Greater Taichung for the ruling party,” Masterlink Securities Investment Advisory Corp president Liu Kun-hsi told the Taipei Times by telephone. Liu said he now expects the index to see a downward correction of about 100 points to 9,100 over the next few days.

VIETNAM NEWS Reducing logistics costs is important to enhance further integration into global value chains and increase Viet Nam’s competitiveness, speakers said at a forum held in HCM City.

Speaking at the second Viet Nam Logistics Forum, Deputy Minister of Industry and Trade said: “With rapid growth of imports and exports over the past few years, logistics has become an important service sector in international trade.”

He said that logistics costs were too high in the country, up to 25 per cent of GDP, while the figure in developed nations was only 10–13 per cent of GDP.

THE PHNOM PENH POST Cambodia’s appetite for mobile data and internet plans is translating into significant profits for telecom firm Smart, according to the latest stock exchange filling from Malaysian parent company, Axiata. Smart reported aftertax profits totalling 77 million ringgit (US$22.7 million) for the first nine months of the year, up 126 per cent from 34 million ringgit (US$10 million) during the same period in 2013, according to Axiata’s thirdquarter financial statements released November 24. Smart’s gains in 2014 partly offset Axiata’s losses in its Celcom business in Malaysia.

THE JAKARTA POST Global logistics company DHL recently partnered with SOS Children’s Villages to provide a soft skills training workshop for marginalized Indonesian children from unstable socioeconomic family backgrounds. Twenty-five of SOS’s youths, ranging from 15 to 22 years of age, were invited to visit and learn more about the workings of the DHL Express facility and DHL Supply Chain warehouse in Graha Intirub in East Jakarta.

The participating children at this November 12 event were also given a short practical course on how to develop good resumes and prepare for job interviews.

A

nybody who still has lingering doubts that the commodity cycle has turned bearish need only delve into two reports released last week on Australia’s resources sector.

The half-yearly report from the Bureau of Resources and Energy Economics (BREE), the government’s forecaster, showed only three projects, worth a total A$597 million (US$507 million), reached a positive final investment decision (FID) in the six months to October.

This is not only the lowest number, but the lowest value for more than a decade, and is conclusive proof that investment in projects is waning under the burden of low prices and more muted demand forecasts as growth in top buyer China slows.

The other report released last week came from consultants PwC, with their annual review of mid-tier Australian miners showing companies are now trying to maximise productivity by boosting output while cutting costs.

The problem is so far these efforts aren’t bearing fruit, as prices fall faster than the companies can make improvements.

“In fact, the worst may be yet to come, at least for iron ore and coal miners,” PwC said in the November 25 release.

What both reports confirm is that the decline in commodity prices has put the brake on new projects, while also forcing companies to cut costs in a bid to try and survive for longer than competitors.

This has both short- and longterm consequences for the resources sector, not just in Australia, which is the top ex-

Reports confirm that the decline in commodity prices has put the brake on new projects, while also forcing companies to cut costs in a bid to try and survive for longer than competitors

in prices at Australia’s Newcastle port since early 2011, the post-2008 recession peak, by increasing output and cutting costs.

This has led to higher coal supply in the seaborne market, thus driving the price even lower.

But it has also allowed some miners to move far enough down the cost curve to justify continuing operations. It can also limit the size of losses for those that aren’t profitable by enough for it to make more sense to keep mining rather than face the expense of mothballing pits.

The same dynamic is now likely in iron ore, Australia’s most valuable export, as smaller miners will do everything to keep going even as the major producers such as BHP Billiton, Rio Tinto and Fortescue Metals Group increase capacity by way more than the market can possibly absorb.

LNG next to join iron ore, coal porter of iron ore, coal and will be in liquefied natural gas (LNG) once the seven projects being built are completed.

The reports may be focused on Australia, but they will resonate in other resource-rich countries such as Indonesia, South Africa, Brazil and Canada, where companies are all exposed to much the same pressures and dilemmas.

The short-term impact of cost-cutting and trying to lower the unit cost of production by boosting volumes and productivity is likely to be lower prices for a number of commodities.

This has already been seen in coal, where miners responded to a more than 50 percent drop

A similar story is likely to play out in LNG, where Australia will overtake Qatar as the world’s top exporter by 2019, when the last of the seven projects under construction, worth a combined US$200 billion, comes on line.

The extra LNG will come on stream in a flood in the next few years, pushing what had been a deficit market into a surplus, and therefore pushing prices lower.

This can already be seen in spot Asian LNG prices, where prices haven’t enjoyed much of a rally ahead of the northern winter, in stark contrast to the previous two years.

While natural gas storages are

at comfortable levels in Asia and a milder-than-normal winter is currently forecast, it’s unusual that spot prices should be dropping as much as they are.

After rallying from the summer low of US$10.50 per million British thermal units (mmBtu) to US$15 in late September, the price has subsequently slumped to US$10.10 in the week to November 23, a near four-year low.

This is perhaps a sign of things to come in LNG, where producers will keep pumping out the super-chilled fuel even as profits evaporate, while they try desperately to cut costs.

All this cost-cutting shows up in the form of cancellations or delays in new projects or expansions, as well as the curtailment of exploration spending.

BREE figures show exploration spending in Australia on mineral and petroleum dropped 12 percent in the 2013-14 fiscal year from the prior year, a trend likely to accelerate.

The number of projects at the feasibility stage dropped by eight to 138 in the six months to October, while those at the committed stage fell by four to 44, BREE said.

This means by the time the current excess supply in several commodities is worked through, the possibility that new supply will be available is decreasing as companies backtrack from expansion plans.

The overall message is that the old cycle of boom to bust to boom in commodities is still alive and kicking, despite the belief among resource companies, analysts and consultants that they have improved at forecasting supply and demand.

Reuters

16 | Business Daily

December 2, 2014

Closing South Korea launches yuan/won trading

Taiwan cabinet resigns after massive polls defeat

Direct trading between the Chinese and South Korean currencies began yesterday, with traders and government officials in Seoul saying transactions were more active than expected. The two Asian trade giants have pushed hard for the direct trading in Seoul, with China looking to boost international use of the yuan, while South Korea wants to be among the global hubs for increasing yuan-related business. South Korea hopes more companies will adopt use of the yuan or won for payments, instead of using the U.S. dollar. Latest data shows only 1.2 percent of trade is settled in yuan.

Taiwan’s cabinet resigned en masse yesterday after the ruling party suffered a massive defeat at the island’s biggest ever local elections. The current cabinet members will continue to serve as caretakers until a new line-up is selected by the next premier, who is likely to be chosen by embattled President Ma Ying-jeou in the coming days. Although he defended the performance of his team, Jiang admitted that “voters were not happy”. The KMT has been struggling with an increasingly unfavourable and unpopular situation. A proposed services trade pact with the mainland sparked mass student-led protests this year.

October, opposing China’s decision to screen candidates for the city’s first leadership election in 2017. The unrest prompted Chow Tai Fook Jewellery Group Ltd., Chow Sang Sang Holdings International Ltd. and Luk Fook Holdings International Ltd. to temporarily shut some stores.

Luk Fook, which posted a 3 percent gain in same-store sales in Hong Kong and Macau during Golden Week, said the disruption from the protests in some shopping districts was mitigated by a substantial growth of sales in other areas.

Not optimistic

Police clear pro-democracy protesters from Lung Wo Road, next to the Hong Kong Chief Executive’s Office, part of the Central Government Office complex. Students fought running battles with police outside government headquarters yesterday

HK retail sales rise as Iphone outweighs protests Sales of consumer durables surged 26 percent, masking weakness elsewhere Lisa Pham

D

esire for the latest smartphone proved a bigger force for Hong Kong’s retail sales than pro- democracy protests that caused gridlock in key shopping areas.

Retail sales by value rose 1.4 percent in October from a year earlier, according to government data released yesterday, exceeding the median estimate for a 1.2 percent

increase from economists surveyed

by Bloomberg News. Retail sales by volume rose 4.3 percent in October from a year earlier.

Sales of consumer durables surged 26 percent, masking weakness elsewhere. The performance of sales tied to local consumption was “lacklustre,” the government said, which may reflect the impact of the

Moody’s cuts Japan’s credit rating

Occupy Movement.

“It’s similar to September when there was a boost to retail sales as a result of the smartphones,” said Mole Hau, an economist with BNP Paribas SA in Hong Kong. “The impact of the protests are there. The retailers are basically cutting prices to shore up demand.”

Protesters blocked roads in some of the city’s retail areas through

Hong Kong’s image will be seriously damaged if the Occupy Central movement continues, John Tsang, the city’s financial secretary, told reporters yesterday. The impact of the protests on the economy is “worrying” and may affect Hong Kong’s business climate next year, he said.

Tsang said he was not optimistic about the city’s growth in the fourth quarter. The government last month forecast gross domestic product to expand 2.2 percent in 2014, near the low end of the 2 percent to 3 percent range announced in August.

Hong Kong retailers had been suffering before the protests began.

Chow Tai Fook Chairman Henry Cheng in July said that the company will probably post a slower pace of sales growth this fiscal year on weaker economic expansion and as Chinese President Xi Jinping’s probes into corruption and lavish spending deters some buyers.

Hong Kong’s retail sales may remain weak due to subdued spending

by Chinese tourists and recent political unrest, Nomura Holdings Inc. economists Young Sun Kwon and Aman Mohunta wrote in a report last month.

Bloomberg News

Half million Chinese tourists Euro zone factory in Cambodia growth stalls

M

C

E

oody’s Investors Service cut Japan’s credit rating, a setback to Prime Minister Shinzo Abe a day before he begins campaigning for an election that he wants to focus on the economy.

Moody’s reduced the rating by one notch to A1, the same level as Bermuda, Israel, Oman and the Czech Republic. It had been rated in line with South Korea, Saudi Arabia and Taiwan.

There are increasing risks of a rise in bond yields that could make it harder for Japan to manage its debt, according to Moody’s.

Standard & Poor’s has Japan at AA-, equivalent to the Aa3 level at Moody’s before the reduction.

Fitch Ratings has Japan at A+, matching Moody’s.

Investors routinely ignore ratings companies’ decisions. In almost half the instances, yields on government bonds fall when a rating action by Moody’s and S&P suggests they should climb, or they increase even as a change signals a decline, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back as far as the 1970s.

ambodian Prime Minister Hun Sen said yesterday that his country is expected to greet about 500,000 Chinese tourists this year, an estimated increase of 8 percent year-on-year.

“Some 407,000 Chinese visitors had come to Cambodia in the first nine months of this year,” he said during a graduation ceremony of students at the Institute of Technology, adding that the country is projected to draw about 1.3 million Chinese tourists by 2020.

“Now, Chinese people are rich and keen to travel abroad,” Hun Sen said. “Moreover, there are many direct flight connections between Cambodia and Chinese cities.” China is the second largest source of tourists to Cambodia after Vietnam.

Kong Sopheareak, director of the Tourism Ministry’s Statistics and Planning Department, said Sino-Cambodian excellent ties and Cambodia’s attractive tourism sites are also key factors to attract more Chinese tourists. Tourism is one of Cambodia’s four economic pillars. Last year, Cambodia received 4.2 million foreign tourists, earning US$2.5 billion.

uro zone manufacturing growth stalled in November and new orders fell at the fastest pace in 19 months despite heavy price cutting, painting a bleak picture for the coming months, a survey showed yesterday.

Also worryingly for policymakers at the European Central Bank, who are struggling to bolster growth and drive up dangerously low inflation, factory activity declined in the bloc’s three biggest economies of Germany, France and Italy.

“The situation in euro area manufacturing is worse than previously thought... There is a risk that renewed rot is spreading across the region from the core,” said Chris Williamson, chief economist at survey compiler Markit.

Markit’s final November manufacturing Purchasing Managers’ Index was 50.1, its lowest reading since June 2013 and down from an earlier flash reading of 50.4 and from 50.6 in October.

That is barely above the 50 mark that separates growth from contraction, and in a sign that there is little prospect of improvement in December.

Bloomberg News

Xinhua

Reuter