Macau Business Daily, Feb 4, 2015

MOP 6.00 Year III

Number 722 Wednesday February 4, 2015

Publisher: Paulo A. Azevedo

Closing editor: Sara Farr

Jimei to expand junket business in Macau, team up with Packer in Oz | PAGE 5

Apps calling the shots

Telecommunications are the lifeblood of modern life. Spawning industries, products and services to match. Usually the operators are several steps ahead. But they may have been caught napping. They say revenues have dropped for local SMS services and calls. These are reserved for ‘special days’ as more people resort to mobile apps and free wi-fi. Increased mobile data usage isn’t compensating for declining revenue of SMS and calls, says an operator Page

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Crime creeping up Overall crime increased 4.5pct in 2014. Authorities say gamingrelated crimes – increased from 2,599 in 2013 to 3,023 last year alone. Some 71 people were illegally detained due to gambling: an 82pct increase over the previous year

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HSI - Movers February 3

Name

%Day

Lenovo Group Ltd

7.27

China Life Insurance

4.52

Hengan International

3.72

CNOOC Ltd

3.50

Ping An Insurance Gr

3.35

Henderson Land Devel

-1.77

Sun Hung Kai Propert

-1.88

Wharf Holdings Ltd/T

-2.47

Sino Land Co Ltd

-3.04

Cathay Pacific Airwa

-3.67

Source: Bloomberg

I SSN 2226-8294

The money movers Money talks, so say many. In Macau, it tops the list of employees’ reasons to move job. The 2015 Asia Salary Snapshot study by Links International confirms what most suspect. Career progression follows as a factor. With work/life balance next. Some 57.1 pct of employers anticipate increasing salaries this year, to varying degrees

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www.macaubusinessdaily.com

Common sense stocks The rules are increasingly tightening up. For listed companies in Chinese markets. Prompting investors to quit speculating and move their bets to blue chips.

Laws trump common sense once more

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Paradise spreads its wings

Brought to you by

Paradise Ent. has deployed 78 multi-game terminals in Grand Lisboa. Bringing the company’s total to 120 in SJM’s flagship property. Paradise also announced that 24 live multi-game terminals on trial at The Palazzo in Las Vegas since November 2013 have been converted into ‘an outright sale’

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2 | Business Daily

February 4, 2015

Macau Gov’t to revisit free TV channels The government will in future look at the local market environment for the territory’s television service and use public money when adjusting the number of existing free television channels, the so-called ‘basic television channels’, director of the Bureau of Telecommunications Regulation Hoi Chi Leong said in a written reply to legislator Chan Meng Kam’s enquiry. In April last year, a company entity owned by the local government called Macau Basic Television Channels, Ltd. was set to lead the relay of free-to-air broadcasts to local households. This initiative was followed by the ongoing installation of transmission cables underground via the use of the city’s fixed-line telecommunication networks.

Lei Cheng I wants affordable housing law amendment resolved

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egislator Ella Lei Cheng I has urged the government to explain the delay in the amendment to the Affordable Housing Law – which proposes changing the selection system to speed up the evaluation of applicants of subsided homes. In a written enquiry to the government, the legislator asked whether it had any measures in place to guarantee that the evaluation could be finished within two years in the event of delay.

In July 2014, the government tabled a bill suggesting several amendments to the current Affordable Housing Law, changing current selection practice from ‘first evaluate then draw’ to ‘first draw then evaluate’ following a basic evaluation of applicants’ submitted documents.

The Housing Bureau estimated that the evaluation time of the previous public housing application in March

Social Welfare Bureau to disburse additional MOP45mln

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he Social Welfare Bureau is going to increase the regular subsidy for local social services organisations by 6.8 per cent backdated to January, according to a statement issued by the Bureau yesterday.

The Bureau says an additional MOP45 million will be allocated because of the increase. Authorities stressed that the adjustment is an increase since the subsidy for local social services organisations was increased by a rate higher than inflation last April, at 7 per cent.

The government hopes that the increased subsidy will help give personnel in this sector a better salary and welfare so that human resources are more stable in addition to improving the conditions of the services.

The Social Welfare Bureau have also indicated that they have finished conducting research on the subsidy scheme for local social services organisations and are collecting opinions from relevant parties. The new scheme is expected to be launched in the second half of this year.

Ng Kuok Cheong: More gaming tables invite conflict

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egislator António Ng Kuok Cheong has expressed his concerns that conflicts between gaming employers and employees may be triggered following the upcoming opening of new casino projects.

On Macau Forum, a radio show broadcast by TDM, the legislator said that the number of casinos and hotels in Macau will double in number in 2016 as the six gaming corporations in the city increase their investment in the industry twofold. He perceives, however, that the doubling up may

not necessarily double demand, claiming that the increase of gaming tables may lead to excess capacity thus conflicts between employers and employees may be triggered.

In addition, he believes that the gaming operators should invest in improving their businesses and introduce innovation rather than solely expanding the scale of their casinos. He suggests that operators enable some venues to co-operate with local enterprises to diversify the economy.

K.L.

2014, which received more than 40,000 applications, could be reduced from the initial two years to one year following the future amendments.

‘It has been 10 months and the amendments are not yet completed.

Meanwhile, even if such a bill can be passed by the end of March this year it would not help the evaluation process of the application,’ the legislator wrote in her interpellation, questioning whether the government had processed the selection works to ensure the time taken will not exceed two years even though such amendments may not be passed.

In fact, the newly appointed head of the Housing Bureau, Ieong Kam Wa, revealed last month that the Bureau is striving to send the bill to the Legislative Assembly for discussion during the second quarter of this year.

K.L.

Business Daily | 3

February 4, 2015

Macau

Salary deciding factor for job hoppers When it comes to changing job nothing is as important as the pay for Macau’s labour force thus employers are ready to splash the cash this year, the 2015 Asia Salary Snapshot study by Links International reveals João Santos Filipe

jsfilipe@macaubusinessdaily.com

raise employee wages. The majority of employers (57.1 per cent) anticipate increasing salaries by 3 to 6 per cent, while 21.43 per cent of bosses are likely to increase wages by 6 to 10 per cent. Some 14.29 per cent will raise salaries by more than 10 per cent and 6.04 per cent will increase payments by 3 percent.

Increasing demand for labour

‘B

uild it and they will come’ is a common expression used in the Macau gaming industry to justify supply driving demand. However, when it comes to the labour market the expression could just as well be ‘increase their salaries and they will come’, as the 2015 Asia Salary Snapshot study by Links International concludes that the wage is the strongest argument to convince an employee to move to another company in Macau.

According to the results of the study related to human resources, salary is the factor most likely to influence a

candidate to move to another job in the MSAR. Career progression is the second most important factor and work/life balance is the third. The answer by workers in Macau is similar to that of employees in Hong Kong and Singapore. Only employees on the Mainland consider that the prospects of career progression outweigh salary.

Following the same trend, employers in Macau believe that in order for companies to have a good reputation salaries and benefits are the most important considerations.

The second most important factor is career path/training and development

available, while the third is the company’s financial stability.

In relation to the increase in salaries in 2014, in Macau 64.29 per cent of employers said they had increased wages by 3 to 6 per cent, while 14.29 per cent increased salaries by 6 to 10 per cent; 12.18 per cent of employers increased 10 or more per cent and 2.10 per cent increased salaries by 3 per cent. Only 7.41 per cent of employers said they had not increased salaries at all.

As for salary expectations concerning this year, only 1.10 per cent of employers say they will not

With relation to the sales & marketing and retail areas, Macau will continue to experience high demand for workers as the new wave of casinos become more focused on non-gaming aspects.

‘Macau continues to be one of the most demanding labour markets in Asia with 89 per cent of respondents expecting business activity and permanent staff levels to increase in the next 12 months despite recent drops in gaming related statistics’, the study explains. ‘The opening of new casino/hotel properties and new retailers in 2015 will continue to drive the demand for frontline sales staff in an already tight labour market.

Experienced store managers and retail area managers are in particular demand and their salaries continue to increase due to a relatively tight pool of candidates’, it added.

The same study notes, however, that in Macau it is very difficult to retain workers, as 42 per cent of the survey respondents had only been in their current positions for less than a year.

PJ: Gaming industry slump raises security concerns Director of the Judiciary Police Chau Wai Kuong said that gaming related crimes are on the rise, citing illegal detainment and loan sharking, due to decreasing gaming revenues. The police head pledged to step up efforts to fight crime Joanne Kuai

joannekuai@macaubusinessdaily.com

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udiciary Police (PJ) director Chau Wai Kuong said that in 2014 the bureau opened files on 10,737 cases, a 4.5 per cent increase on 2013 when there were 10,272 cases. He was speaking during the annual briefing that took place yesterday at Judiciary Police headquarters at Avenida da Amizade.

The PJ head also said that the bureau had closed 12,238 cases last year, 2,506 more than in 2013, with more than 2,627 suspects handed to the Public Prosecutor’s Office, some 208 more than the previous year.

Mr. Chau said that the phenomenon indicated that criminal activities here have become more rampant and complicated with the development of society.

With regard to gaming-related crimes, which the authorities describe

as occurring on casino premises, some 3,023 came to their attention in 2014.

The number was 2,599 and 2,070 in 2013 and 2012, respectively.

There were 71 cases of illegal detainment related to gambling, an 82 per cent increase over the year before.

Loan sharking cases totalled 208, while 16 cases were recorded in 2013.

Police attribute the increasing number of crimes related to gaming to ‘the adjustment period of the gaming industry that has occurred since the second half of last year’ as well as more effort in fighting such crimes by the police and more frequent visits to gaming venues.

Another figure worth noting is the number of fraud incidents, which totalled 505 in 2014, a 54.4 per cent increase over that of 2013. Mr. Chau

said the reasons behind it are primarily the lack of awareness of residents; in addition, the Internet has made such crimes more sophisticated, many of which are cross-border which make them complicated to solve as well.

Internet fraud alone stood at 452 cases last year, increasing 33.7 per cent compared to a year earlier.

In addition to online patrols and enhancing people’s awareness of such kinds of crime, he pledged to bring on board more professionals in that field.

“Internet crimes usually involves privacy and are sometimes conducted outside the region which involves the issue of cross-border jurisdiction,” said Mr. Chau. “Collecting evidence of such crimes requires a great deal of professional knowledge in information

technology, criminology and so on.

We plan to hire more professionals that have expertise in that matter.”

Representatives of the media present at the meeting were also concerned about the increasing number of mainlanders involved in crimes, both as suspects and victims.

They urged police to step up efforts as the border between the SAR and the mainland is now open 24 hours.

Mr. Chau pledged to study the new trends in crime in order to conduct proper measures.

Judiciary Police also officially launched its Wechat account yesterday whereby residents can access anticrime information and public notices from the police regarding updates on crime and investigation plus police co-operation with communities.

4 | Business Daily

February 4, 2015

Macau

Macau people texting, calling on special dates Macau mobile users are texting and calling less as they increasingly use mobile apps, resulting in an increase in mobile data usage. This new trend is challenging the market as text and phone calls are the most important sources of revenue for mobile operators João Santos Filipe

jsfilipe@macaubusinessdaily.com

S

ince 2013, the trend of telecommunication service statistics for special dates has demonstrated that people are using more and more local mobile data driven by instant messaging applications, such as WeChat or WhatsApp. As a consequence of this new trend, however, the number of local SMS, International SMS and Outgoing International Calls has been decreasing, giving mobile operators a new reality to face.

From 2013 to 2015, the number of local SMS on New Year’s Day decreased by more than a third (36.7 per cent) from 1,468,976 to 929,453, according to the data of the Bureau of Telecommunications Regulation (DSRT).

With regard to international SMS during the same day, the number plummeted 32.2 per cent from 175,343 messages in 2013 to 118,639 in 2015. As for Outgoing International Calls, despite an increase of

mobile applications to communicate and less SMS or phone calls. This is a new trend that is requesting the operators to adapt”, he explained.

The same trend was also remarked upon to Business Daily by Ebel Cham Pou I, Vice President of Commercial of Companhia de Telecomunicações de Macau (CTM).

“In general, the traditional services are declining, while data usage is increasing. People are using different channels to communicate, such as WiFi connections. But this also creates new business opportunities”, she said.

However, the trend to replace SMS and phone calls with instant messages is not having the same impact on all segments of the market.

“Talking generally and not about CTM’s numbers, while the mass market related to traditional services appears to be declining, the business market is going in the opposite direction, as companies tend to SMS their clients in order to confirm online reservations and related services”, Ebel Cham said.

4G open tender

2,611 minutes from 2013 to 2014, from last year to this there has been a cut of 14.6 per cent from 869,568 minutes to 742,761 minutes.

By contrast, on New Year’s Day local mobile data usage more than doubled (increased by 125 per cent) from 7,685 gigabytes in 2013 to 17,315 gigabytes this year.

“For the time being, the telecommunication operators are dealing with a decrease of revenues related to SMS and international calls, which are important sources of revenues. Meanwhile, the increase related to mobile data usage is not compensating for the drop in revenue related to SMS and calls”, the Assistant General Manager of China Telecom Macau, Samuel Chan, told Business Daily. “Today, people are using more

By the end of the year, the Macau Government expects 4G wireless services to be available in Macau. At the moment there is an ongoing open tender to award four licences. In total, there were six bids; results will be announced during the first quarter of the year.

“4G will increase data usage as the speed capacity will increase with the implementation of this technology. So the trend is for mobile date usage to continue increasing in the future”, Samuel Chan told Business Daily.

Ebel Cham, the Vice President of Commercial of CTM, refused to acknowledge a direct correlation between the increase of speed and the increase of data usage stressing that 4G would increase the quality of the services.

“The implementation of 4G will offer better quality for Macau mobile users, as this technology is faster than 3G. However, I cannot say that faster connections will result in more data usage”, she said.

CTM, Smartone, China Mobile Hong Kong, U Hong, China Telecom Macau and Hutchinson are all in the running for 4G licences.

Sands workers complain shuttle buses ‘overloaded’

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n online Facebook page titled ‘Macau Buses and Public Transport Enthusiastic’ claims that police found a shuttle bus offered by gaming operator Sands China to its workers to be overloaded early yesterday morning. However, a spokesman for the Public Security Police (PSP) told Business Daily that there is no record of prosecutions being made.

The news, later disseminated by local gaming labour union Forefront of Macau Gaming (FMG), claimed that a Sands China shuttle bus was stopped by police in front of the gas station near residential building La Baie Du Noble in the Northern district. The bus, licensed to carry 65 passengers, is believed to have been carrying 85.

Contacted by Business Daily yesterday, a spokesman for PSP said that there was no record of the police prosecuting any overloaded gaming shuttle bus [drivers or owners] during the period.

According to FMG, the bus was stopped by police after a worker had

called the enforcement department complaining about the problem in the bus.

In fact, Sands China was recently slammed by local gaming unions regarding its shuttle bus service.

According to local news outlet TDM, a survey conducted by labour union New Gaming Employees Advance Association released on Monday revealed that nearly 80 per cent of Sands China workers were dissatisfied with the shuttle bus service of the corporation, claiming that the frequencies of the shuttle buses are low while the buses are ‘seriously overloaded’.

FMG hosted a meeting with its Sands China members regarding the shuttle bus service on January 27. These members mostly complained that the shuttle buses offered by the gaming operator are always ‘too crowded’.

Business Daily contacted Sands China for comment about the complaints yesterday but received no reply from the gaming operator before this story went to press.

K.L.

Business Daily | 5

February 4, 2015

Macau St. Regis Macao slated to open in Q3 The St. Regis Macao is scheduled to open in the third quarter of this year, the company said in a statement released yesterday.

Mark McWhinnie - senior vice president of development and shared services, and director of Sands Cotai Central - said the “integrated resorts deliver outstanding and unforgettable experiences to our guests and visitors.” The St. Regis Macao will offer 400 guestrooms and suites, ‘providing the most discerning travellers with a unique luxurious respite from the hectic urban pace,’ the statement reads.

Jimei to expand junket business in Macau, team up with Packer in Australia An agreement with New International Club gives Jack Lam’s company access to new VIP rooms and 30 gaming tables in Wynn Macau. Jimei will also have junket operations in Crown Perth Casino Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

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imei International Entertainment Group has announced that it is expanding its junket business in Macau and Australia, together with the appointment of a new chief executive officer.

In a filing with the Hong Kong Stock Exchange yesterday, the company chaired by renowned local junket operator Jack Lam - and responsible for Jimei Casino and nine VIP rooms here - said it had signed an agreement with New International Club to ‘indirectly participate in the gaming promotion business in Macau’.

New International Club Ltd. and its sole shareholder Carlos José Lok received a gaming promoting licence in December to operate in Macau, and is in negotiations with Wynn Macau to manage several VIP rooms.

The company expects to get ‘no less’ than 30 gaming tables in these Wynn rooms and earn ‘not less’ than 40 per cent of the revenues from the gaming

tables. The agreement also stipulates that Jimei will assume all the revenues generated by New International Club activity as well as all the risks.

If executed, the co-operation with New International will expand Jimei’s junket portfolio business. Currently, Jimei runs Jimei Casino in Macau and nine high-roller rooms in several casinos here such as Wynn (three rooms), City of Dreams, Altira and Sands (three).

Jimei justified the rationale behind the operation with the goal of ‘diversifying the business of the group – Jimei – with the objective of broadening its sources of income and enhancing its profitability’, the filing reads.

Outside Macau, Jimei runs operations in Hong Kong (wealth management) and in the Philippines where it has the Fontana Hot Spring Leisure Parks, Fort Ilocandia Resort Hotel and Solaire Resort and Casino, according to the company’s information.

In its strategy to expand its business and markets, Jimei International also announced a junket agreement with Australian casino mogul James Packer, CEO of Crown Resorts and partner here with Lawrence Ho in Melco Crown Entertainment, who steers City of Dreams and the upcoming Studio City.

According to the same filing,

Jimei will be responsible ‘for administration and management’ for its junket patrons playing at the Crown Perth Casino and provide the necessary services to them. The casino is located in Perth, Western Australia and has been open since 1985 and ‘is renowned for its world class facilities, entertainment, premium restaurants and luxury accommodation’, the filing said. The goal of the agreement with Crown is to ‘tap into other prosperous overseas gaming market of good income potential and establish a long-term partnership with Crown Resorts, which is a globally reputable casino operator and could thereby enhance the Group’s reputation and competitive position in the gaming industry’.

Separately, the company said it had appointed Wong Kwok Leung as chief executive officer and Wah Teik Hwai as chief financial officer.

Paradise Ent. deploys new live gaming terminals in Grand Lisboa The electronic gaming equipment supplier said that the 78 new live gaming terminals placed would deliver an ‘attractive return on investment’ Stephanie Lai

sw.lai@macaubusinessdaily.com

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he Hong Kong-listed electronic gaming equipment supplier Paradise Entertainment Ltd. has announced that it has ‘successfully’ deployed 78 of its live multi-game (LMG) terminals in the Grand Lisboa casino, an addition that makes 120 such terminals placed in the flagship property of operator SJM Holdings Ltd. Paradise Entertainment’s electronic gaming terminals are marketed under the LT Game brand.

The company also manages the Kam Pek Paradise casino, which is situated next to SJM’s Hotel Lisboa and is operated under licence supplied by the local unit of SJM. “Casino operators in Macau

are increasingly seeking table gaming solutions that allow them to quickly adapt to a changing market environment,” Paradise Entertainment’s chairman and chief executive officer Jay Chun was quoted as saying in the statement released on Monday.

“Our patent-protected LMG solution improves the productivity and efficiency of casino operators and allows operators to broaden their customer reach. We believe the 78 LMG terminals installed in Grand Lisboa will deliver an attractive return on investment and further enhance the player experience,” Mr. Chun said in the statement.

Live multi-game terminals are

a type of electronic table game that encircles a live dealer handling multiple table games such as baccarat, roulette and sic bo.

According to the local casino regulator, the Gaming Inspection and Co-ordination Bureau, the gross gaming revenue generated by live multi-game products amounted to MOP2.26 billion (US$282 million) last year, representing a year-onyear growth of 51.7 per cent when compared to the MOP1.49 billion of 2013. But it was already a revenue growth pace that has slowed from previous years, when the city saw a growth pace peak at 187 per cent in the year 2012 with 895 live multigame terminals.

In the Monday statement, Paradise Entertainment also announced that the 24 live multi-game terminals on trial at The Palazzo in Las Vegas since November 2013 have been converted into ‘an outright sale’. It was actually the first sale of Paradise Entertainment’s live multi-game terminals in the US gaming market.

“This is a big milestone for us.

We’re excited to further expand our global relationship with Las Vegas Sands and look forward to working with them to ensure the long-term success of this and any future deployments,” Mr. Chun remarked regarding the sale of the live multi-gaming terminals to The Palazzo.

6 | Business Daily

February 4, 2015

Macau

Empty gaming tables presage slide in US$44bln industry

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n the heart of Macau stands a 56-storey tower with soaring gold-trimmed arches. On the second floor of the L’Arc Macau, there’s a sight that would have been unheard of a year ago: An abandoned room for highend gamblers.

There are no tables, no dealers and no players.

Carpets have been rolled up, leaving a trash-covered concrete floor. A sign on the VIP room reads “Heng Sheng Group,” one of Macau’s top junket operators, which shuttle Chinese high-rollers to exclusive gaming venues and finance their bets.

The dimming fortunes of Heng Sheng, whose name in Chinese translates to “everlasting rise,” reflects those of an industry that had soared since it was opened to foreign operators in 2002. The city, which grew to become seven times the size of Las Vegas Strip, has started to lose business to a government corruption crackdown that is forcing casinos, hotels, junket operators and local officials to overhaul how they operate.

Heng Sheng and rivals including David Group and Gold Moon are among the most vulnerable. Chinese President Xi Jinping has widened his two-year battle against graft which has increased gamblers’ concern that big spending will attract scrutiny, and a stricter visa rules have also deterred them from traveling to the world’s largest gambling hub.

Xi’s high-profile effort

to catch “tigers and flies,” officials high and low, includes an investigation of the former chief of staff of his predecessor Hu Jintao, and led to the 2013 life sentence for Bo Xilai, former Chongqing party chief.

Shutting rooms Amid the pall, casino revenue fell in January for an eighth straight month. The slump has forced operators to shut some VIP rooms where the highest rollers can bet as much as HK$1 million (US$129,000) per hand, according to Leon Liao, an analyst at Jefferies Hong Kong Ltd. “The rate and scale of junket closures beginning in the fourth quarter of last year was faster than we were expecting,” said Jamie Soo, an analyst at Daiwa Securities Co. “More are likely to close this year.”

Heng Sheng has closed three of its 10 VIP rooms since October, including one at The Venetian owned by Sands China Ltd., according to company employees. A Heng Sheng official who would only give her surname as Lai said the company is operating normally and declined to disclose any information.

Heng Sheng had about 10 percent of the junket market share at its peak, Soo estimated.

At its peak about a year ago, Heng Sheng, which was set up in 2011, had HK$80 billion (US$10

billion) in monthly rolling chip turnover, the amount VIPs bet inside its rooms, said Tony Tong, co-founder of Hong Kong-based Pacific Financial Services Ltd. and a veteran investor in Macau’s junkets.

Revenue drop Revenue has plunged by half at some junkets over the past few months and the drop may continue, said Tong, who also advises operators on how to collect gambling debts.

Junket operators invite wealthy gamblers to visit Macau and arrange private jets, helicopters and luxury cars to get them into and around casinos packed into a city half the size of Manhattan.

They also arrange hotel rooms and provide credit, skirting China’s limit on the amount of yuan that can be exchanged for the patacas needed to gamble. The companies typically draw a commission from casinos.

High-end players last year contributed 60 percent of the US$44 billion casino revenue to the Chinese city.

Sheldon Adelson, the billionaire chairman of Sands China Ltd., said on January 29 that fourthquarter volume of Macau’s VIP junkets last year was the lowest in four years.

Smoking ban Traffic into junkets may dwindle further as the

government said last week it intends to impose a full smoking ban on all areas at casinos. Private high-roller rooms operated by junkets are currently exempted from a smoking ban already implemented in other casino areas, further weighing on the VIP business, wrote DS Kim, an analyst at JPMorgan Chase Bank in Hong Kong, wrote in a January 30 note.

There were 217 licensed junket operators last year, down from 221 in 2013, according to government figures. A slump in junkets may mean job losses in Macau.

Junket operators “have to cut people, the luxury cars they own and VIP rooms” to save costs, said Tong of Pacific Financial. “VIPs now say it’s a sensitive time and it isn’t convenient for them to come.”

Tong, who started doing business with junket operators in 2006, said he has reduced his investment in the industry by at least half in the past year because of the increasing risks. He declined to name the junkets he has invested in.

Lonely floors Outside another VIP room sharing the same L’Arc hotel floor as Heng Sheng’s, employees were chatting by the entrance with no gamblers in sight. The room is operated

by David Group, which last month announced it was shutting three of its seven rooms.

L’Arc, owned by Asia’s largest casino company, SJM Holdings Ltd., has its own VIP room on the 21st floor with nine tables, and only one was occupied when a Bloomberg reporter visited in mid-January.

“It’s quiet everywhere; we mainly serve regulars now,” a duty manager said, while trying to convince the reporter to set up a gambling account.

Across the street from L’Arc is billionaire Steve Wynn’s only casino in the territory. It was similarly quiet at Wynn’s seven members-only VIP sections.

While VIP rooms aren’t always fully occupied, highroller traffic has dropped sharply, said Cloee Chao, a labor leader who works as a supervisor on Wynn Macau Ltd.’s gaming floor.

“Sometimes you don’t even see one VIP all day in some areas,” said Chao, who has worked as a dealer in Macau for 17 years.

As China’s anti-graft campaign widens and the government imposes tighter rules for visiting the former Portuguese enclave, high rollers are asking for easier gambling destinations, Tong said. The Philippines, Vietnam, Singapore and the U.K. are among their choices.

“We have increased a lot of our overseas gaming business,” Tong said. “We go where customers demand to go.”

Bloomberg

Business Daily | 7

February 4, 2015

Macau

Melco Crown not eyeing South Korea expansion “As of this moment there is no better market than Macau and Manila,” co-chairman Lawrence Ho said

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acau’s Melco Crown Entertainment Ltd is not eager to include South Korea in its resort-casino portfolio and will instead focus on ramping up operations at its newly opened City of Dreams Manila project, a top company official said.

The conservative Korean culture has largely excluded locals from gambling in casinos. Operators setting up in the country are banking on its proximity to northeast China and Korean culture as a draw for Chinese gamblers who bet billions in places like Macau.

Areas like Incheon in South Korea cannot guarantee a daily traffic of 30,000 visitors, a key requirement to make an integrated casino-resort project viable, Lawrence Ho, Melco Crown co-chairman, told reporters in Manila where he led the formal opening of the over US$1-billion City of Dreams “In our opinion, foreigners-only gaming market is difficult. Korea and its policy of not letting locals in, to us, is difficult,” Ho told reporters.

“But one day, if the government changes its policy about locals, we would jump in head first,” Ho said, in his first comments about prospects in South Korea.

South Korea has already approved a consortium of U.S.-based Caesars Entertainment Corp and Lippo Ltd as well as a joint venture of local player Paradise Co Ltd and Japan’s Sega Sammy Holdings Inc to build two casino resorts in Incheon, west of Seoul, part of a three-year plan to boost the economy.

Melco’s Manila resort-casino is its first outside Macau. The company hopes to take advantage of the expanding domestic consumption in the Southeast Asian country, the

Melco Crown co-chairman Lawrence Ho

fastest growing in Asia after China, as Macau reels from China’s crackdown on corruption and Japan indefinitely postpones casino legalisation.

“As of this moment there is no better market than Macau and Manila,” Ho said.

City of Dreams Manila, which

Phua may get FBI search evidence tossed out

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high-rolling Malaysian poker player accused of running an illegal World Cup betting operation out of his luxury villa at Caesars Palace may get the evidence the FBI collected against him thrown out of court.

A federal magistrate judge in Las Vegas on January 30 agreed with Paul Wei Seng Phua and his son Darren that the Federal Bureau of Investigation used false and misleading information to obtain a search warrant for their villa and recommended that the U.S. be barred from using contraband found during a July raid.

“The investigators’ suspicions that Phua was engaged in illegal sports betting at Caesars Palace may be borne out by the evidence recovered in the execution of the warrant,” U.S. Magistrate Judge Peggy

Leen said in a non-binding recommendation to a district judge. “However, a search warrant is never validated by what its execution recovers.”

The FBI failed to disclose in its request for a warrant that agents intentionally cut off the villa’s Internet connection and gained entry to look for evidence while posing as technical support staff, according to the recommendation.

Misleading warrant In addition, Leen said the warrant application also misleadingly linked Phua to the occupants of another villa at Caesars who had asked for an unusually large number of computers and other equipment. Hotel employees first became suspicious that those occupants were operating an illegal gambling hub, which led to the FBI’s investigation.

held a soft opening in December, is comprised of three hotels, 380 gaming tables, 1,700 slot machines and 1,700 electronic tables.

Melco Crown, through local unit Melco Crown Philippines Resorts Corp, built the Manila project with Premium Leisure Corp of the

In a separate report Monday, Leen said the FBI’s ruse to gain entry to the villa by disrupting the DSL connection wasn’t illegal, even though an agent and a technician shouldn’t have entered the unit’s interior when they had been told by a butler to wait in the pantry area.

“We are currently reviewing Magistrate Judge Leen’s reports of findings and recommendations,” U.S. Attorney Daniel Bogden in Nevada said in an e-mailed statement.

Wei Seng Phua, who also goes by Paul Phua, and his son are the only remaining defendants after five others from Hong Kong, China and Malaysia agreed to plead guilty. Phua, a regular at million-dollar poker games, and the others were arrested after technicians at Caesars Palace discovered a villa set up as an apparent gambling hub, with banks of computers and monitors and three TVs switched to World Cup games.

Phua had been arrested in Macau a month earlier for allegedly operating an illegal sports gambling business there.

Bloomberg

Philippines’ richest man Henry Sy. City of Dreams Manila is the second casino resort to open in Entertainment City, Manila’s version of the Las Vegas gaming strip. Rival Bloomberry Resorts Corp opened its Solaire Resort & Casino in 2013.

Reuters

Hotel Shilla weighs buying US duty free firm DFASS

H

otel Shilla, the company that manages half of the Duty Free shopping area at the Macau International Airport, says it is interested in buying in-flight duty-free retailer DFASS Group, a deal that would give the fast-growing South Korean company a retail foothold in the U.S. market.

South Korea, the world’s biggest duty-free market, is seen by analysts as offering little room to grow due to the dominance of competitors Shilla and Lotte Duty Free and a government move to earmark new licences for smaller firms.

Hotel Shilla has been looking to expand overseas and last year set up shops in Macau and Singapore’s Changi

Airport. It has never acquired another duty-free operator.

The world’s No.7 dutyfree retailer by revenue saw shop revenue grow an annual 27.1 percent in the fourth quarter of 2014, mostly due to increased Chinese tourist traffic into South Korea.

A Hotel Shilla spokesman said several other global dutyfree operators were looking at a DFASS deal, and that Shilla had not decided whether to pursue a transaction.

Miami-based DFASS operates more than 25 dutyfree shops in the United States, Latin America and the Caribbean as well as in-flight duty-free services, according to its website. DFASS could not immediately be reached for comment.

Reuters

8 | Business Daily

February 4, 2015

Hong Kong

Everbright Securities agrees to buy Sun Hung Kai brokerage Sun Hung Kai provides wealth management, securities brokerage and consumer finance in 180 locations across Macau, Hong Kong and China

E

verbright Securities Co., China’s eighth- biggest brokerage, agreed to buy a controlling stake in Sun Hung Kai & Co.’s securities and wealthmanagement businesses for HK$4.1 billion (US$529 million).

Everbright Securities will pay cash to acquire 70 percent of the Hong Kong-based company’s Sun Hung Kai Financial Group Ltd. unit, according to a statement filed to the city’s exchange on Monday.

An acquisition will help Everbright bolster its presence in the city after the introduction of a Shanghai trading link that allows foreigners to buy a net 13 billion yuan (US$2.1 billion) of mainland shares each day. Officials said in January they’re discussing

an expansion of the program to Shenzhen.

“Chinese brokerages, especially the larger ones, have been stepping up their efforts to expand overseas following the Shanghai-Hong Kong stock connect,” He Zongyan, a Shanghai-based analyst at Shenyin & Wanguo Securities Co., said before the announcement. Brokerages are aiming to build Hong Kong networks “as quickly as possible,” He said.

Haitong Securities Co., based in Shanghai, bought a majority stake in Hong Kong’s Taifook Securities Co. for US$235 million in 2009, the first purchase of an overseas brokerage by a mainland securities firm. The deal was followed by Citic Securities Co.’s 2013 takeover of Hong Kong-

based CLSA Ltd., which provides equity broking, research and assetmanagement services in 21 locations across Asia.

Shares suspended Shares of Everbright Securities and Sun Hung Kai & Co., which were suspended pending announcements, are due to resume trading yesterday.

Everbright Securities’s net income rose 907 percent to 2.07 billion yuan last year, according to a preliminary earnings report last month. Its Hong Kong unit, set up in 2010 with HK$2 billion of registered capital, offers stock trading, underwriting and investment-management services, according to the company’s 2013

annual report.

Everbright Securities is 33.3 percent owned by Hong Konglisted China Everbright Ltd., whose operations include private equity investment, asset management and aircraft leasing, according to China Everbright’s website.

Sun Hung Kai & Co. provides wealth management, securities brokerage and consumer finance in 180 locations across Hong Kong, Macau and China, according to company statements. It posted net income of HK$610.3 million for the six months through June.

UBS Group AG advised Sun Hung Kai & Co. on the transaction, according to the exchange filing.

Bloomberg

HK-Shenzen link: (Almost) ready to go

H

ong Kong’s Secretary for Financial Services and Treasury, Chan Ka-keung, said yesterday that the direct stock exchange link between the city’s bourse

and Shenzhen are under way and likely to start before the completion of a six-month review of the Hong KongShanghai link-up due in April.

“We’re preparing to link

up the stock markets between Hong Kong and Shenzhen.

We’re also reviewing the procedures to enhance the Hong Kong-Shanghai connect,” Chan is quoted

as saying by South China Morning Post.

Hong Kong Stock Exchange is also making plans to expand its financial links to other Mainland

financial centres beyond Shanghai and Shenzen, Mr. Chan confirmed.

Hong Kong’s Securities and Futures Commission chairman, Carlson Tong Ka-shing, told the Post that stock investments from the mainland have not been that big since the HK-Shanghai link started.

“But it’s only been three months, we expect turnover to increase in the longer term.

We will do a six-month review of the scheme,” Tong said.

To SCMP, a HKEx representative said: “The HKEx and the Shenzhen Stock Exchange are now working out the details of the linkage. The two exchanges will seek the approval of their respective regulators and other relevant authorities once the detailed proposal is ready.”

The China Securities Journal has reported that the Shenzhen Stock Exchange head met Hong Kong officials, the SFC and the Hong Kong Monetary Authority bosses, and decided to proceed with the Hong Kong-Shenzhen linkage. Authorities are now working out the details of the scheme, it added.

Hong Kong retail sales drop to record low

T

hey can call it the perfect storm: Occupy Central demonstrations disrupted several of the main shopping areas in the city, the anti-graft campaign in China diverted big spenders, and fewer non-Chinese tourists travelled to Hong Kong last year.

All these factors combined to make 2014 an ‘annus horribilis’ for the Hong Kong retail industry. Sales dropped to an 11-year low, delivering a performance comparable only to

2003, when the SARS outbreak started.

Retail sales in Hong Kong dropped for the first time in eleven years in 2014, falling 0.2 per cent year-onyear due to weaker sales of luxury products and durable items. The government said that the figures reflected ‘the slackening in visitor spending’. In December alone, sales dropped 3.9 per cent to HK$47.8 billion inverting four straight months of growth.

The main driver, statistics reveal, was the slump in luxury goods with sales declining 13.7 per cent yearon-year, followed by durable goods – a drop of 8.1 percent – which is a category that includes items like photographic cameras and computers.

Economists told South China Morning Post that despite 2014’s drop, they were confident that this year sales would rebound with an improving economy. Caroline Mak

Sui-king, chairwoman of the Retail Management Association, attributed the decrease in sales value to the central government’s crackdown on graft and a drop in non-Chinese tourists.

She added that Occupy Central had affected sales performance, but “not entirely”. Ryan Lam, a senior economist with Hang Seng Bank, pointed to another factor: the difficult comparison with 2013, when the price of gold dropped significantly thereby stimulating spending.

Business Daily | 9

February 4, 2015

Greater China

Investors finally abandon “junk stocks” Only 78 Chinese firms have been delisted since China established its modern stock market in 1990

C

hinese investors are finally dumping shares in lossmaking companies after years of speculation on them in a sign that punters are at last taking seriously tighter regulations and new delisting rules that make holding their stock a huge risk.

The struggling firms have often been market outperformers in China as they were almost never delisted, providing an implicit floor on downside risk that speculators have exploited to their advantage.

But China’s broad efforts to reform its capital markets, and in particular recent rules aimed at fostering a robust stock market and efficient allocation of capital, signal an end to such policy aberrations.

“Tighter rules and stricter implementation are pushing investors away from ‘junk’ shares’,” said Xiao Shijun, analyst at Guodu Securities in Beijing. “It’s an attitude reversal; investors are finally turning to blue chips, given their surprisingly high returns of late,” he said.

An unprecedented 38 firms published obligatory formal delisting warning statements in December, many citing fraud investigations as the cause, after the China Securities Regulatory Commission (CSRC) issued tougher delisting rules in October.

So long as CSRC enforces the rules, most of these 38 firms will be kicked out of the Shanghai or Shenzhen stock exchanges within a year, though in the past the regulator has failed to walk the talk.

This time around, however, Chinese investors are bailing out of at-risk shares as the regulators show more zeal in cracking the whip.

Two thirds of the mentioned firms have suffered sharp stock price falls since December. Zhuhai Boyuan Investment, for example, has lost 36 percent to 7.52 yuan, while Weifang Beida Jadebird Huaguang Technology has dived 32 percent to 5.27 yuan before both companies suspended trading on December 22.

Nowhere to hide?

Indeed, over the past three months shares in these 38 companies climbed only 2.3 percent on a weighted average basis, massively underperforming China’s blue-chip CSI300 index, which gained 39 percent during the same period.

In 2013, by point of comparison, the same companies outperformed the CSI300 by an average of six percentage points.

Only 78 Chinese firms have been delisted since China established its modern stock market in 1990 and not a single stock was delisted from 2008 until mid-2014.

There are two primary reasons for this.

Firstly, most firms that manage to get through the highly regulated IPO

queue are well connected politically and able to evade being evicted from the boards.

Secondly, the length of the IPO queue, in which hundreds of companies are still mired, makes an existing ticker valuable real estate.

Using a process called a reverse merger, a public company can acquire listed companies, allowing the acquiring firm a ticker without having to queue for an IPO - such acquisitions can also produce the massive stock pops speculators are looking for.

Now regulators say there will be no exceptions and they even have a first target. China Erzhong Group Deyang Heavy Industries Co Ltd, under a trading halt since last year, looks likely to be delisted after posting a fourth year of losses of about 7.8 billion yuan

38 firms published obligatory formal delisting warning statements in December

Under current rules, the CSRC will halt trading in shares of companies with three consecutive years of losses, then eject them one year later if there is no turnaround in profitability.

In addition, local media reported 18 firms are expected to remain in red for the third straight year.

About half of them have suffered heavy losses in their share prices since late 2014.

However, speculative investment continues in some loss-making firms, particularly those backed by powerful parent companies. For instance, Sinovel Wind Group has seen its share prices jump 40.4 percent since November.

“With the CSRC at a ministry level and having only the same administrative power as some local governments and major companies, its ability to enforce rules is always in question,” said a trader at a major Chinese brokerage. “Political power plays a major role in China and the equity market is no exception.”

Reuters

10 | Business Daily

February 4, 2015

Greater China Preliminary account surplus published China posted a current account surplus of US$61.1 billion and a US$91.2 billion deficit on its capital and financial account in the fourth quarter of 2014, preliminary data from the country’s foreign exchange regulator showed yesterday.

The figures, published by the State Administration of Foreign Exchange(SAFE) on its website, are subject to revisions.

For the whole of 2014, China had a current account surplus of US$213.8 billion and a US$96 billion deficit on its capital and financial account, the SAFE said.

SHG Disneyland opening delayed

Walt Disney Co will push back the opening of Shanghai Disneyland until the first half of 2016 from a scheduled start at the end of this year due to an expansion of its plans for the theme park, said a person familiar with the matter. Results from consumer studies and weather concerns had also played a part in the decision, said the person. The US$5.5 billion theme park is being jointly developed with China’s state-owned Shanghai Shendi Group. In April, the firms said they would increase investment in the theme park by US$800 million.

Compensation from Mexico railway State-backed China Railway Construction Corp (CRCC) said it plans to seek compensation from the government of Mexico after it scrapped a US$3.75 billion high-speed rail project the company was bidding for. The company did not say how much it was seeking, but this is the second time Mexico has shelved the project. A consortium led by CRCC had been the only bidder for an earlier tender, but Mexico cancelled it. Mexico re-launched the tender last month, however, Government scrapped the project altogether due to budget cuts.

PBOC to inject repos China’s central bank started injecting 90 billion yuan (US$14.38 billion) into the money markets through seven-day and 28-day reverse bond repurchase agreements yesterday, traders said. Maturing reverse repos will drain a net 30 billion yuan from the banking system this week.

The People’s Bank of China conducted a net injection of 55 billion yuan into the banking system last week.

Nissan says Jan China sales up Nissan Motor Co Ltd and its Chinese joint venture partner sold 116,400 vehicles in China in January, up 22.2 percent from a year earlier, the Japanese carmaker said yesterday. The result breaks a streak of six straight months of sales declines in China.

Nissan’s China sales fell 9.1 percent in December and declined 11.8 percent in November. Japanese carmakers in China have faced the twin challenges of a slowing economy and political tension between Beijing and Tokyo. Nissan operates a car venture in China with Dongfeng Motor Group Co Ltd.

Miners and power firms agree to cut coal price The industry has been hit by a demand slowdown as well as a campaign against pollution

C

hina’s coal firms have agreed to cut contract prices with power plant customers for the first quarter of 2015, but prices are still well above global levels as regulators work to prop up a sector hit by overcapacity and weak demand.

The decision could boost demand for cheaper foreign supplies after shipments jumped by nearly a third in December in response to rising domestic prices, helping to push up Australian export prices despite China trying to restrict low-grade imports.

Shenhua Group, China’s top coal producer, agreed a price of 520 yuan (US$83) for a tonne of benchmark 5,500-kcal coal, down

19 yuan or 3.5 percent on the year, setting the benchmark for firstquarter contracts, the official China Securities Journal reported.

This puts the Chinese price over

US$13 a tonne higher than the benchmark Australian seaborne cargo, which currently trades below US$70 a tonne. The last time Australian exports were priced

KEY POINTS Top producer Shenhua agrees price of 520 yuan/T, down 3.5 pct Price still a fifth higher than international market China bucking market to support ailing mining firms

Graft probing broadens into financial sector The Chinese government’s probe into the financial sector comes as part of a broader campaign to root out corruption at major state-run conglomerates

B

ank of Beijing Co Ltd board director Lu Haijun is under investigation for serious disciplinary violations, the bank said, the latest high-ranking banker to fall under scrutiny as China’s anticorruption drive turns to the finance sector.

The investigation comes after China Minsheng Banking Corp’s president, Mao Xiaofeng, resigned on Saturday for personal reasons after media reports that he was being investigated by China’s anti-corruption watchdog.

Chinese President Xi Jinping has warned that the problem of official graft is serious enough to threaten the Communist Party’s legitimacy and has vowed to go after powerful “tigers” as well as lowly “flies”.

Graft-busters have investigated business leaders and politicians alike, including powerful former domestic security chief Zhou Yongkang, and Ling Jihua, once a top aide to Hu Jintao, Xi’s predecessor.

Chinese media have connected the fall of Mao with the probe into Ling without giving specific details, except to note they both rose up through the Communist Youth League. Ling was sacked as head of a department which works to co-opt non-communists in December after having been implicated in a scandal over his son’s death in a luxury sports car accident.

Graft-busters have investigated business leaders and politicians alike

Neither Mao nor Lu could be reached for comment.

Mao, once a rising star in China’s banking world, had only been named to his post in August.

Bank of Beijing’s Lu was the former chairman of Beijing Energy Investment Holding Co Ltd, one of the bank’s

shareholders, according to a statement posted on the Shanghai stock exchange late on Monday.

The bank was operating normally, the statement added.

The party’s graft-fighting body, the Central Commission for Discipline Inspection, said on Friday it was probing Lu, who it identified only as the former chairman of Beijing Energy Investment, although it gave no details.

Beijing Energy Investment holds 5.08 percent of the bank’s shares. Bank of Beijing has a market value of 106 billion yuan (US$16.93 billion) and operates primarily in the domestic market.

The official Xinhua news agency said on Monday that anti-graft teams would be sent into 72 major state-run firms, including 19 in the financial and rail sectors.

Reuters

Business Daily | 11

February 4, 2015

Greater China around the newly set Chinese price was in early 2014.

Including freight costs, coal import prices stand at around 460 yuan, analysts estimated, still 10 percent lower than domestic benchmark Qinhuangdao port spot prices of 510 yuan.

Regulators have repeatedly called on producers to avoid undercutting rivals as industry losses mount, leading to a widening price gap between domestic and overseas markets.

Calls to Shenhua yesterday went unanswered, but analysts said the price was within expectations, with coal firms originally proposing a figure of 530-550 yuan and power plants holding out for 490-500 yuan.

“The final price shows that both sides made compromises, but it benefits coal companies more when it comes to the current market price,” said Zheng Nan at Shenyin & Wanguo Futures in Shanghai.

China has also tried prop up the ailing sector by imposing output controls and restricting low-grade imports, but Zheng said domestic spot prices were expected to fall further in coming months.

According to the China Coal Industry Association, more than 70 percent of domestic miners suffered losses in the first 11 months of 2014, with profits down 44 percent.

Wang Xianzheng, chairman of the coal association, said last week that “price cuts won’t do us any favours” as the coal sector was a big employer and needed protection, adding that “social unrest is the last thing the government wants to see.”

China’s coal production and consumption is believed to have fallen for the first time in more than a decade in 2014.

Reuters

Airlines to scrap fuel surcharge from Thursday The move follows consecutive cuts in the surcharge since late 2014

C

hinese airlines are set to scrap their fuel surcharges for domestic flights for the first time since late 2009, two airlines executives told Reuters, even as oil prices start to climb away from sixyear lows this week.

Passengers heading home for family reunions in the upcoming Chinese New Year holiday, nevertheless, may still have to pay a premium to board flights during the peak travel period.

Starting from February 5, Air China, China Eastern Airlines Corp Ltd, China Southern Airlines Co Ltd and other carriers will cancel the fuel surcharge for domestic service, two airlines executives said. The move follows consecutive cuts in the surcharge since late 2014.

“We’ve got notification from the regulator and informed our ticket agencies already,” an executive with

Chinese News Year rates will not be affected

China Southern told Reuters.

Spring Airlines Co Ltd was also aware of the latest round of fuel fee cuts, an executive there said.

A spokeswoman with the Civil Aviation Administration of China confirmed the fuel surcharges will be scrapped. No public announcement has been made.

The last time Chinese carriers cut the fuel surcharge was on January

5, when the rate for domestic routes longer than 800 km was slashed by half to 30 yuan, with the fee for shorter routes down to 10 yuan from 30 yuan.

Still, the cheapest one-way ticket from Shanghai to Beijing is 553 yuan on February 19, the first day of the week-long Chinese New Year, up from 370 yuan yesterday, according to Ctrip.com, a Chinese online travel company.

Many other Asian airlines slashed fuel surcharges last month, but they may raise base ticket prices to protect profit margins, according to aviation experts.

Australia’s Qantas Airways Ltd, the latest Asian carrier to eliminate the surcharge, said it was raising fares as oil was not cheap enough to offset the impact of competition on international routes.

Shanghai to auction 40 billion yuan of deposits China amended its budget law last August to allow local governments to issue debt directly for the first time

S

hanghai’s municipal finance bureau said yesterday it would auction 40 billion yuan (US$6.40 billion) of 6-month deposits in February, in what traders said would be the first such move by a local government in China.

The auction would be a step forward in the development of the country’s municipal bond market that would wean local governments off their dependence on external financing vehicles.

Local governments have been able to resell deposits of their own money held in commercial banks since 2013 in search of higher returns; in December, for example, Beijing sold a few tranches through a unit of China International Capital Corporation.

In the past, these deposits were basically controlled at the central government level, which heavily restricted local governments from using them to support their budgets, because their budgets were not independent.

But bond traders consider the Shanghai auction a first in

Shanghai branch of the People’s Bank of China in Pudong financial sector

terms of purpose and design because of its implications for budget management for China’s legions of local governments suffering under heavy debt loads incurred during a sloppy stimulus spending spree that began in 2009.

In addition to the managerial presence of the central bank, the collateral for

the issue will be government bonds, and this and other details mimic the way the central government managed bond auctions on behalf of localities in the past.

The announcement was made in a joint statement with the local branch of the central bank.

The bonds would be auctioned together by

the Shanghai city finance office and the Shanghai headquarters of the People’s Bank of China (PBOC).

Joint auctions by the central Ministry of Finance and the People’s Bank of China have been one of the main ways for the Chinese authorities to manage government finance in the past, but this is the first time

Reuters

that the model is being used for a local government deposit auction, traders said.

In order to allow local governments to issue debt directly, those governments have to have some sort of assets or revenue streams under their direct control.

In the follow-through steps, the State Council, the cabinet, in a document published last October banned the local government financial vehicles (LGFVs), the previous main channel for them to raise money, from issuing new debt.

The finance ministry then ordered all local governments to report their LGFVs’ debt by January, encouraging localities to use a Public-Private-Partnership (PPP) model to help fresh fundraising, among other channels, to raise funds.

Analysts have said all these moves will require letting local governments manage their finances independently.

China experimented with allowing local governments to issue municipal bonds last year, with a small quota at 109.2 billion yuan for all of 2014. Shanghai has already issued bonds directly under the pilot programme.

Economists have expected the quota will surge as China moves towards using the muni bond market to replace the fundraisings by LGFVs, with some estimating it would exceed 1 trillion yuan in 2015 alone.

Reuters

12 | Business Daily

February 4, 2015

Asia Japan’s No.1 bank profit up

India encourages banks to lower lending rates Central bank held interest rates but lowered statutory liquidity ratio

Mitsubishi UFJ Financial Group Inc., Japan’s largest lender by assets, reported an 18 percent rise in nine-month profit, with aggressive overseas expansion offsetting continued weakness in domestic lending. MUFG, which acquired Bank of Ayudhya Pcl, Thailand’s fifth-largest lender, in 2013, has been faring better than its Japanese rivals due to its larger business activities in the United States and in Asia outside Japan. The bank said yesterday net profit came in at 927 billion yen (US$7.9 billion) for the April-December period, up from 785.4 billion yen a year earlier.

Indonesia pushes Islamic megabank Indonesian authorities are pushing ahead with a plan to create an US$8 billion Islamic megabank even after a similar proposal fell through in Malaysia.

A combination of the Shariah-compliant units of government- controlled PT Bank Mandiri, PT Bank Rakyat Indonesia and PT Bank Negara Indonesia could happen as soon as this year, Financial Services Authority Chairman Muliaman Hadad said in Jakarta on January 23.

Talks are on-going with the Ministry of State-Owned Enterprises on a merger first proposed in May 2013.

Sumitomo warns of further write-down Japanese trading house Sumitomo Corp warned yesterday that it may take additional impairment losses on its energy and metal assets due to slumping oil and iron ore prices, although its annual profit forecast remained unchanged. The warning came after its surprise forecast in September last year that it would writedown about 240 billion yen (US$2.05 billion) in the value of its assets, mainly in energy and metals. Like international oil majors and mining companies, Japan’s trading companies have been caught flat-footed by the rout in commodities.

Bombs in Bangkok won’t affect tourism Two small bombs outside a Bangkok shopping mall over the weekend will have a minimal impact on Thailand’s vital tourism industry, the prime minister said yesterday, while promising better security to avoid any more such incidents.

Two people were slightly injured in the twin explosions on Sunday outside the Siam Paragon mall in a busy shopping district, the first blasts in Bangkok since the military seized power on May 22 to end months of sometimes deadly street protests. Thailand’s tourist sector accounts for about 10 percent of the economy.

I

ndia’s central bank held interest rates steady yesterday, while boosting banks’ liquidity in a bid to persuade them to lower lending rates after they failed to pass on the benefits of the last official rate cut three weeks ago.

The Reserve Bank of India kept its policy repo rate unchanged at 7.75 percent, as expected by analysts, leaving its next reduction probably until after the government presents its annual budget at the end of this month.

“Given that there have been no substantial new developments on the disinflationary process or on the fiscal outlook since January 15, it is appropriate for the Reserve Bank to await them and maintain the current

South Korean inflation steady on cigarette hike Most economists are also of the view that deflation risks are minimal Christine Kim

S

outh Korea’s annual inflation held steady in January as a sharp increase in cigarette prices offset a plunge in energy costs, and importantly a rise in core inflation helped to alleviate the immediate risk of deflation.

The consumer price index rose 0.8 percent in January from a year earlier, Statistics Korea data showed yesterday, unchanged from December but just below a median 0.9 percent rise tipped in a Reuters survey.

Cigarette prices rose by nearly 80 percent on average after the government levied higher taxes from January 1, which alone pushed the consumer price index by about 0.6 percent and offset downward pressure on prices exerted by the plunge in global energy prices.

Despite the effects of weaker energy costs on consumer prices, a finance ministry official said inflation pressure would gradually increase as Asia’s fourth-largest economy steadily picks up momentum this year.

“Price pressures are expected to rise

KEY POINTS Jan inflation +0.8 pct y/y (Reuters poll +0.9 pct) Core inflation picks up on cigarette price hike Deflation worries overdone, says finmin official

as production and household spending improve while low global oil prices will also contribute to boosting public consumption,” said a finance ministry official.

“Deflation fears are overdone. Even if you take away cigarette prices, core inflation maintained its rise in January.”

Most economists are also of the view

that deflation risks are minimal, but say the central bank would need to cut rates further to forestall the threat of sharper disinflation.

The central bank’s inflation target currently stands at a range of 2.5 percent to 3.5 percent, but annual inflation has stayed below this range since June 2012, sparking concerns the economy may tip into deflation.

Annual core inflation, which strips out volatile agricultural and oil products’ prices, rose to 2.4 percent from 1.6 percent in December, also picking up rapidly on cigarette price hikes that were enforced at the start of the year.

Cigarette prices, which have a weighting of 0.77 percent on the consumer price index, rose 77.3 percent.

Month-on-month, the consumer price index in January edged up 0.5 percent, compared with a median 0.4 percent rise tipped in the Reuters survey.

Reuters

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Business Daily | 13

February 4, 2015

Asia KEY POINTS RBI keeps repo rate steady at 7.75 percent Lowers banks SLR to 21.5 pct from 22.0 pct Markets expect more rate cuts after budget Government to present budget February 28

interest stance,” the central bank said in a statement.

Instead, to prod banks to lend more and lower their lending rates, the RBI cut the statutory liquidity ratio (SLR) - the minimum portion of net deposits that banks must hold in government bonds, cash or gold - by 50 basis points to 21.5 percent from February 7.

Only three of India’s 45 commercial banks cut base lending rates in the wake of the RBI’s reduction in the repo rate by 25 basis points on January 15, hurting the government’s drive to lift business investment.

Bank profits have been poor, but RBI Governor Raghuram Rajan said that given the weak credit growth, banks would have to start lending again at some point.

“To get that lending they will have to be more competitive, which means they will have to cut base rate. I am

hopeful it is a matter of time before banks judge that they should pass it on,” Rajan told a news conference.

“Many have been relatively quick to cut their deposit rates, but not so quick to cut their lending rates, I presume some are hoping they can get the spread for a little more time to repair banks’ balance sheets.”

While RBI officials suspect banks are trying to protect profit margins, commercial bankers complain that liquidity conditions have been too tight for them to lower lending rates.

Encouraged by falling world oil prices and inflation slowing, the RBI had surprised investors last months by kicking off a new easing cycle, to boost credit in a economy struggling to gather momentum.

The RBI held out the prospect of more rate cuts, but said that would depend on government efforts to reduce India’s fiscal deficit and fix the supply constraints that keep food and energy prices high in the country.

Most economists polled by Reuters expect the RBI to start reducing its repo policy rate after the budget, due to be unveiled by Finance Minister Arun Jaitley on February 28, so long as it does not disappoint in terms of reducing the fiscal deficit.

The rupee currency, bonds and share markets all eased slightly after the RBI announced it was leaving rates unchanged this time.

Markets are pricing in more interest rate cuts over the rest of the year given consumer prices rose 5 percent in December, well within the RBI target of 6 percent by January 2016.

Reuters

StanChart considering sale of Philippines retail unit The sale could attract bids from Philippine lenders who dominate the local banking business

S

tandard Chartered is looking to sell its retail business in the Philippines, part of a wider bid by embattled CEO Peter Sands to cut costs and shrink the bank’s asset base, a person with direct knowledge of the matter said.

The London-listed bank, which entered the Philippines in 1872, would continue to operate its corporate banking business in the country to focus on top clients such as San Miguel, the nation’s biggest conglomerate, the source said.

A spokesman for Standard Chartered said the bank would “not comment on speculation”. The source declined to be identified as the matter is not yet public.

Standard Chartered’s assets in the Philippines total US$1.72 billion, according to the country’s central bank. It currently has five branches and over 500 employees in the Southeast Asian nation, according to the bank’s website.

Two-thirds of those employees are in its retail business, the source said.

It was not immediately clear how

much the retail business would fetch, as no breakdown of StanChart’s retail assets in the Philippines is available. It could be left with one branch if the sale goes ahead, the source said.

Sands is under pressure from investors to reverse a two-year decline in the bank’s fortunes that have seen its shares lose 46 percent of their value in the last two years.

Some are calling for him to be replaced.

The CEO has been shuttering businesses where the lender had failed to achieve sustainable scale.

Last month StanChart closed the bulk of its global equities business and said it would axe 4,000 jobs in retail banking.

In December Standard Chartered sold its Hong Kong and Shenzhen consumer finance businesses to a consortium that included China Travel Financial Holdings, U.S. hedge fund York Capital Management Global Advisors and financial firm Pepper Australia Pty Ltd. Reuters

Australian central bank cuts rates to historic low It is the Reserve Bank of Australia’s first easing since August 2013 Wayne Cole

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ustralia’s central bank cut its cash rate to an all-time low of 2.25 percent yesterday, breaking an 18-month hiatus on stimulus as it seeks to spur a sluggish economy while keeping downward pressure on the local dollar.

The currency duly sank more than a full U.S. cent after the Reserve Bank of Australia (RBA) ended its first policy meeting of the year by announcing the quarter point cut.

“Overall, the Bank’s assessment is that output growth will probably remain a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected,” RBA Governor Glenn Stevens said in a brief statement.

“This action is expected to add some further support to demand, so as to foster sustainable growth and inflation outcomes consistent with the target.”

Markets had been leaning toward a cut this week, though only 9 of 29 analysts in a Reuters poll had tipped a move.

Interbank futures jumped on the news while pricing in a near 50-50 probability of a

KEY POINTS RBA cuts rates 25 bps to 2.25 pct in surprise to some Market moves to price in 2 pct rates by May, A$ falls RBA cites slower growth, higher unemployment among reasons

Reserve Bank of Australia Governor Glenn Stevens

further move to 2.00 percent at the next policy meeting in March.

Yields on 10-year government debt had already been trading below the cash rate and dropped further to a record low of 2.36 percent, while Australian stocks hit their highest since 2008.

It was the RBA’s first easing since August 2013 and marked a sharp turnaround

from its previous meeting in December when it had signalled a period of stability for policy.

The move was partly aimed at offsetting painful price declines for many of Australia’s resource exports which are hurting both company profits and mining investment.

The situation has been made all the tougher by a

protracted slowdown in China, Australia’s biggest export market.

The move was given extra urgency by the recent rush to ease by other central banks, which meant the RBA had to follow suit if only to stop its currency from rising to uncompetitive levels.

The outlook for domestic inflation had also moderated as petrol prices plunged and

wage growth stayed stuck at decade lows. Core inflation is now expected to hold near the floor of the RBA’s 2-3 percent target band for much of this year.

An added wrinkle is political uncertainty as speculation swirls around the future of Prime Minister Tony Abbott.

A bruising voter backlash in state elections and a slump in his personal approval ratings has sparked chatter of a party revolt against his leadership.

Reuters

14 | Business Daily

February 4, 2015

International BP cuts capital expenditure BP announced it would cut capital expenditure by 13 percent to US$20 billion in 2015. Last week, Chevron announced a 13 percent cut in capital expenditure to US$35 billion. The announcement of capital expenditure cuts by major oil companies are helping support prices, said Michael Hewson, chief market analyst at CMC Markets. Prices jumped in the past two days after data showed the number of U.S. oil drilling rigs had fallen the most in a week in nearly 30 years.

UK construction growth unexpectedly rebounds Growth across British construction companies rebounded unexpectedly in January after a slow end to 2014, boosted by improving order books and rising confidence, a business survey showed yesterday. The Markit/CIPS construction purchasing managers’ index (PMI) rose to 59.1 from December’s 17-month low of 57.6, topping all forecasts in a Reuters poll and far above the 50 mark that signifies growth. While official data last week showed construction output shrank at the end of last year at the fastest pace since 2012, yesterday’s PMI pointed to better months ahead.

German machinetool orders jump Rising foreign demand boosted Germany’s key mechanical engineering sector in December, the VDMA industry federation said yesterday. The manufacture of machine tools is a key part of Germany’s industrial and export performance.

In December, overall incoming orders rose by 13 percent compared with the same month a year earlier, VDMA said in a statement, with export orders soaring by 15 percent and domestic orders up by 8.0 percent. Taking a three-month comparison to iron out short-term fluctuations, overall orders rose by 3.0 percent in the period from October to December.

ECB considering leaving troika The European Central Bank is considering withdrawing from the “troika” of international lenders that governs Greece’s international bailout, German business daily Handelsblatt reported yesterday.

The debate about whether to withdraw reflects concerns within the ECB that its large-scale sovereign bond-buying plan, announced last month, could lead to conflicts of interest, Handelsblatt reported.

“The ECB will use the chance to exit,” the paper quoted a German government source as saying. The new left-wing government of Greek Prime Minister Alexis Tsipras has said it wants to end the bailout deal and will not cooperate with troika inspectors in Athens.

Russia discussing food price controls The Russian government is discussing the introduction of price caps for essential food products, Deputy Prime Minister Arkady Dvorkovich was quoted as saying yesterday. A slump in the rouble and a ban on the import of some Western food products last year have led to a surge in inflation, hitting consumers. Inflation is not seen easing in 2015 and will be at 12 percent by the year-end, the economy ministry forecasts.

News agencies RIA and Interfax quoted Dvorkovich as saying that there would be possible restrictions on raising retail prices for socially significant products.

Perception of regulator’s bank fix dragging down global growth Banking industry groups said regulator should limit the requirement to a maximum of 16 percent of risk-weighted assets Ben Moshinsky

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lobal regulators’ push to solve the issue of too-big-to-fail banks may hinder economic expansion, according to banking industry groups.

Planned requirements for banks to have a buffer of securities that can be written down in a crisis “will almost certainly raise bank funding costs” and “can be expected to have fallout effects on real-economy financing costs,” the Institute of International Finance (IIF) and the Global Financial Markets Association (GFMA) said.

The Financial Stability Board (FSB), the global regulator led by Bank of England Governor Mark Carney, proposed last year that the world’s biggest banks issue liabilities equivalent to as much as a fifth of their assets weighted for risk to ensure investors rather than taxpayers foot the bill for financial failure.

“It is essential to make sure that the calibration of the loss-absorbing requirement would cover likely loss scenarios, without being so demanding that it would unnecessarily burden credit capacity or the dynamics of a global economy,” the groups said in a joint letter to FSB Secretary General Svein Andresen. The letter was obtained by Bloomberg News.

The proposed rules on total lossabsorbing capacity, or TLAC, would apply to the FSB’s register of global systemically important banks. The list contains 30 banks, with HSBC Holdings Plc and JPMorgan Chase & Co. identified as the most significant.

In its own response, Standard & Poor’s said that “based on rough estimates,” the world’s biggest banks “would potentially need to issue in excess of US$500 billion in TLAC

The Financial Stability Board is the global regulator led by Bank of England Governor Mark Carney that is pushing the protecting measures

instruments in the next four to five years as a result of the proposal, using the lower end of the 16 percent to 20 percent proposed range with reference to regulatory RWA.” The IIF and GFMA said the FSB should limit the requirement to a maximum of 16 percent of risk-weighted assets, discourage national regulators from adding their own surcharges and remove a waiver designed for banks from emerging-market economies. The letter is a response to the FSB’s TLAC consultation, which ended on February 2.

The FSB has said it would carry out detailed impact studies before completing the rule in time for the 2015 Group of 20 nations summit.

This further work will allow the FSB to identify a “single specific minimum” requirement.

Timothy Adams, president of the

IIF and Ken Bentsen, chief executive officer of GFMA, outlined 13 potential tweaks to the TLAC proposal in the letter, including a recommendation to reduce the impact of a leverage measurement.

They also outlined concerns about the difficulties of finding enough buyers for the issued securities, given that banks will be restricted from holding the debt of other systemically important lenders.

“The market must have sufficient size and efficiency to provide the resources needed effectively to end too-big-to-fail,” they groups said. “It is important that this issue be considered in the market-impact analysis.”

“Subject to the comments in this letter as to many details, the TLAC proposal should achieve its goals if appropriately modified and implemented,” the groups said.

Bloomberg News

Gazprom to slash 2015 capex by almost US$8 bln The company said this would not affect its plans to build gas pipelines to supply China by the end of the decade Henning Gloystein

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ussia’s state-controlled Gazprom said yesterday it would slash its capital expenditure this year by almost US$8 billion to US$30 billion as political and market developments created a challenging business environment.

With oil prices down by half in the last six months, energy producer revenues have fallen sharply, and Gazprom has also been hit by the political tensions between Russia and Europe over the crisis in Ukraine, which is the most important transit route for Gazprom’s gas to its customers in the European Union.

Gazprom said it would slash its capital expenditure by almost US$8 billion between 2014 and 2015 to

US$30 billion, and down from a peak of an annual average of almost US$44 billion between 2010 and 2013.

“The overall market development does cause some challenges to our business... (but) the considerable reduction of capex allows us to show a very strong cash flow generation,” Andrey Kruglov, Deputy Chairman of the Management Committee and Head of the Department for Finance and Economics, told a webcast.

Despite the cuts, Gazprom said this would not affect its plans to build gas pipelines to supply China by the end of the decade.

Although Gazprom said it was not directly affected by European and U.S. sanctions against Russia, the firm saw

a 60 percent slump in third-quarter 2014 net profit, hurt by the tumbling rouble and after exports were halted to Ukraine over a pricing dispute.

Gazprom is the world’s biggest exporter of natural gas, largely via pipelines to Europe, but also on ships as liquefied natural gas to Asia, and the company is also active in the oil and power sectors.

Looking further out, the company said Asian demand would keep natural gas’s share of global energy supplies stable at almost a quarter over the next 15 years despite stalling consumption in Europe, while oil and coal would lose some global share to renewables and nuclear power.

Reuters

Business Daily | 15

February 4, 2015

Opinion Business

wires

Maintaining growth in India

Leading reports from Asia’s best business newspapers Raghuram Rajan

THE KOREA HERALD

Governor of the Reserve Bank of India

South Korea topped China’s import market last year thanks to strong demand for its semiconductors, auto parts and computer-related equipment, industry data showed yesterday. According to the data provided by the Korea International Trade Association, China imported US$1.96 trillion worth of products last year, of which South Korean goods came to US$190.3 billion. That represented a 9.7 percent of China’s total imports last year, up from the previous year’s 9.2 percent. South Korea kept its top status in terms of market share in China for the second straight year.

THE STAR Analysts are cautiously optimistic about the growth prospects of Bursa Malaysia this year amid a challenging market environment which could mean lacklustre trading activities. CIMB Research, for one, said it expected the exchange holding company to see slower equity income growth against a recovery in derivative income. The brokerage had recently downgraded its rating on Bursa shares to “hold” from “add”. It was positive on the growth prospects of Bursa’s derivative business this year. CIMB Research said it expected the benchmark FTSE Bursa Malaysia KLCI to end at 1,800 points in 2015.

THE TIMES OF INDIA Less than two months remains for people to invest wisely and save some taxes before the financial year ends on March 31. Although tax-planning should be done at the start of the financial year, the reality is that most people prefer to invest during the last three months of January, February and March, when it becomes absolutely necessary to act. Financial planners say that ideally each should plan their tax-saving investments keeping in mind some specific factors like age, income level, risk-taking ability and financial goals.

THE PHNOM PENH POST As Vietnam and Laos negotiate to enter a European Union trade agreement aimed at improving forestry governance, the EU is urging Cambodia to join the scheme. Following an official meeting with the Minister of Agriculture, Forestry, and Fisheries Ouk Rabun in Phnom Penh on January 23, Jean-Francois Cautain, EU ambassador to Cambodia, said the EU would support a Cambodian effort to enter the Forest Law Enforcement, Governance and Trade (FLEGT) agreement. If Cambodia chooses to enter into FLEGT negotiations, it will seek a Voluntary Partnership Agreement (VPA) with the EU.

Reserve Bank of India headquarters

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he global economy’s slowdown has not spared India. Sustaining the growth that it needs to continue to lift millions of people out of poverty will require rethinking its economic-policy approach.

If India is to succeed, it will have to deepen regional and domestic demand, strengthen its macroeconomic institutions, and join in the fight for an open global system. Diminished expectations abroad should not lead India to lower its ambitions.

Fulfilling these ambitions will require efficiency-boosting investments, particularly in infrastructure. Every corner of the country should be linked to domestic and international markets through roads, railways, ports, and airports. Inputs, such as energy, minerals, and water, must be made available at competitive prices. The country should be linked to broader markets through mobile devices and broadband, and access to finance must be made easier, especially for those who traditionally have been excluded.

Plans to achieve these goals are being developed; they must now be implemented.

Moreover, human capital must be improved. This presupposes higher investment in health care, nutrition, and sanitation, so that India’s citizens are healthy and able; education tailored to developing skills that are valued in the labour market; and the creation of jobs in firms that have an incentive to invest in training.

Achieving all of this requires that the bureaucracy focus on serving the economy, rather than – as has too often been the case – vice versa. Promisingly, the political leadership has affirmed its belief in “minimum government, maximum governance.”

Fuelling growth through domestic demand will have to be carefully

managed. As a country that does not belong to any power bloc, India cannot afford to put itself in the position of needing multilateral support – a trap into which even developed countries, like Portugal and Spain, have fallen. There is the risk of overstimulation, with fiscal deficits fuelling large current-account deficits and debts, which suddenly become unsustainable when money gets tight. The few emerging economies that have avoided booms and busts have done so by adhering to sound policy frameworks.

Fiscal prudence is essential.

Whether India needs more institutions to control deficits and monitor the quality of its budgets is a question worthy of discussion. A number of countries have independent organs that pronounce on budgets. These bodies are especially important in providing budgetary estimates, particularly for unfunded long-term liabilities. As the experience of developed countries has shown, long-term fiscal commitments, such as universal pensions and health care, can be easy to make, but difficult to fulfil.

On the monetary side, the Reserve Bank of India should focus on keeping inflation low and stable, ensuring optimal conditions for growth. As it focuses on inflation, however, the RBI must recognize that emerging markets are not as resilient as industrial economies.

They are more fragile, and their households’ economic buffers and safety nets are thinner.

Disinflation, when necessary, cannot be as steep.

The RBI will also have to pay attention to financial stability. This is normally a secondary objective, but it may become central if the economy enters a low-inflation credit and asset-price boom. It

As a country that does not belong to any power bloc, India cannot afford to put itself in the position of needing multilateral support

will be important to remember that the central bank’s role is not to boost stock prices, but to ensure that the economy’s underlying fundamentals and its financial system enable sustainable growth.

India will run a current-account deficit for the foreseeable future, which means that it will need net foreign financing. The most stable form of financing, foreign direct investment, has the additional benefit of bringing in new technologies and methods. But India should not be railroaded into compromising its interests to attract FDI. For example, India’s requirements for patenting a medicine are perfectly reasonable, regardless of what the international drug companies say. But India must ensure that its policies are transparent, and that contractual disputes, especially over taxation, are quickly resolved. Efforts to ensure this have already begun.

Finally, as a country that does not export vital natural resources and is dependent on substantial

commodity imports, India needs an open, competitive, vibrant system of international trade and finance. India’s energy security, for example, depends not on owning oil assets in remote fragile countries, but on ensuring that the global oil market works well and is not disrupted. Strong, independent, multilateral institutions that can play the role of impartial arbiter in facilitating international economic transactions are in India’s interest.

For now, the international monetary system remains dominated by the frameworks implemented by developed countries. Though this is slowly starting to change, there is a growing need for a rapid overhaul. As developed countries struggle with slow growth and large debt burdens, their interest in an open global system can no longer be taken for granted. Indeed, their policymakers’ attention is likely to turn inward amid growing demands for protectionist measures.

Responsibility for keeping the global economy open may thus fall on emerging countries like India.

That is why these countries must press for quotas and management reforms in multilateral institutions and inject new agendas, new ideas, and new thinking into the global arena. India can no longer simply object to proposals by developed countries; it must put its own proposals on the table. Our research departments, universities, and think tanks have to generate ideas that India’s representatives can use.

India can continue to thrive if it invests in physical and human capital and pursues prudent fiscal and monetary policies.

But this strategy also requires India to embrace its place on the international stage.

Project Syndicate

16 | Business Daily

February 4, 2015

Closing China to consolidate GMO supervision

Online population hits 649 mln in China

More efforts will be put into genetically modified organism (GMO) study and supervision, and the education of the public about GMO knowledge amid safety concerns, an official said yesterday.

“GM technology is very promising and we must stand on top of GM research as China has quite limited agricultural resources,” said Han Jun, deputy head of the office for the central leading group on agricultural work. Thanks to a group of outstanding scientists, China has attained a leading position in GM rice and corn research, according to Han.

China’s netizen population, the world’s largest, had reached 649 million by the end of 2014, driven by the popularity of surfing the Internet on smartphones, a report showed yesterday. The number of people accessing the Internet from mobiles totalled 557 million by the end of last year, up 56.72 million year on year and accounting for 85.8 percent of the total online population, showed the report by the China Internet Network Information Centre (CNNIC). According to the CNNIC, there were 31.17 million new Internet users in China last year.

Two weeks, three dethronements

After surpassing Li Ka-shing last week, Alibaba’s Jack Ma was dethroned yesterday as China’s richest by a solar magnate

The second spot on China’s richest list was held by Dalian Wanda Commercial Properties Co Ltd’s Wang Jianlin (pictured) and his family

A

libaba Group Holding Ltd’s Jack Ma is no longer China’s richest man, according to a report yesterday, with the top spot snatched by Li Hejun, a solar energy entrepreneur whose Hanergy Holding Group Ltd has come under fire for its intragroup dealings.

E-commerce tycoon Ma and his family slipped to No. 3 in China, and No. 34 globally, on the Hurun Global

Rich List, with a personal wealth of US$24.5 billion. He was pipped by Li with a net worth of US$26 billion.

The No. 2 spot was held by Dalian Wanda Commercial Properties Co Ltd’s Wang Jianlin and his family.

Li’s Hanergy Group has been the subject of analyst concern over what the Financial Times last week called “unconventional practices” between

the firm and its US$19.7 billion Hong Kong-listed subsidiary Hanergy Thin Film Power Group Ltd. Most of the subsidiary’s reported revenue since 2010 came from equipment sales to its parent and a large chunk of contracts were unpaid as of 2013, the FT reported.

Hanergy Thin Film Power Group will “expand our customer base and

Monetary policy to take wait-and-see mode

Singapore blocks overseas gambling websites

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hina is likely to hold off major monetary policy decisions before more complete economic data indicates growth momentum, said Switzerland’s largest bank UBS yesterday.

Economic data in January and February is likely to be distorted by low season activity and the shifting timing of Chinese New Year, which will fall on February 19 this year. Thus, credible assessment of the underlying growth momentum is impeded, said Wang Tao, chief China economist with UBS. March data will be the best touchstone and could set the direction of macro policies for the next couple of quarters, according to UBS. China’s central bank has taken a neutral stance to ensure adequate liquidity and to stabilize the fixing price of the yuan in the foreign exchange market, UBS said.

UBS predicts that this year will see more liquidity provisions, including a required reserve ratio (RRR) cut, together with a modest depreciation of the Chinese yuan against US dollars by year end with more two-way volatilities.

Xinhua

diversify our source of revenue” and the majority of contracts owed had been repaid, the company said in a filing to the Hong Kong Stock Exchange last week addressing the FT report.

Just one of the world’s top 20 wealthiest people came from Greater China though it minted more billionaires than anywhere else in the past year.

Hong Kong magnate Li Ka-shing was at No. 16 with a net worth of US$32 billion, while the rest were mainly from the United States. Microsoft Corp founder Bill Gates topped the list with US$85 billion, beating Mexico telecoms tycoon Carlos Slim.

Still, Greater China, with 430 billionaires, accounted for more than anywhere except the U.S., which had 537. The next closest was India with a distant 97.

Alibaba’s Ma partly dropped on the list after his company’s stock price fell more than 13 percent in the past week, sending shares to a three-month low, in the wake of disappointing quarterly results on Thursday and an unusually public spat with a Chinese regulator.

China’s real estate, manufacturing and technology industries were the chief creators of wealth, the Hurun report showed. Richard Liu, chief executive of JD.com Inc, Alibaba’s biggest rival in e-commerce, saw his wealth quadrupled to US$6.7 billion after leading his firm to a New York listing in 2014, becoming the biggest gainer of the year.

China’s domestic stock market rally also accounted for some of the new billionaires in China, Hurun said.

Reuters

CNOOC targets up to 15 pct output growth

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ingapore has begun blocking access to overseas gambling websites after legislation imposing a sweeping ban on remote betting went into effect, the government said yesterday.

The Remote Gambling Act passed through parliament in October and took effect on Monday, giving the government broad powers to block access to overseas gambling portals as well as stop electronic payments to their operators.

A spokesman from the home affairs ministry told AFP that “several hundred remote gambling websites have been blocked”. Popular gambling websites based abroad such as Paddy Powers, ibcbet. com and sbobet.com were not accessible on Tuesday afternoon from Singapore, one of Asia’s most wired states. “Viewing and using this website at your current location is prohibited due to its regulatory rules,” said a message when ibcbet.com was accessed via a Singapore IP address. Under the law, exemptions can be granted for locally based online gambling operators that follow strict rules and operate on a non-profit basis. Lottery operator Singapore Pools told local media it would apply for the exemption.

op Chinese offshore oil and gas producer CNOOC Ltd targeted an up to 15 percent increase in output this year but will slash capital spending for the first time since 2010 in response to the plunge in oil prices.

An over 50 percent slide in crude prices since June due to slowing global demand and growing U.S. shale output is putting a heavy burden on oil companies around the world. The slump has wiped billions of dollars from their stock market values in recent months, and squeezed the spending of many oil majors.

In a filing with the Hong Kong bourse yesterday, CNOOC said its capital expenditure will fall 26-35 percent to 70 billion to 80 billion yuan (US$11.19 billion-US$12.79 billion) this year. The spending cuts are deeper than some analysts’ estimates of 8 percent.

Other major Chinese oil firms PetroChina and Sinopec are also expected to unveil lower budgets for 2015 when they release their annual results in late March.

AFP

Reuters