Macau business daily, Mar, 9, 2015

MOP 6.00 Closing editor: Luís Gonçalves Number 744 Monday March 9, 2015

Publisher: Paulo A. Azevedo

House of Cards

H

Year III

ard choices ahead. For casino operators and the gov’t. Plunging gaming revenues plus escalating staff costs. They’re affecting the bottom line big time. Encouraging workers to take unpaid leave is becoming increasingly common. But the gov’t says it’s a no-no. Secretary for Economy and Finance Lionel Leong Vai Tac asked the city’s operators not to go this route. Better, he says, to provide paid training or training during working hours. To reinforce his point, Mr. Leong said casino human resources policies will figure prominently in the upcoming concession review PAGE

Drop in temporary residency applications last year

Cash is king

PAGE 2

A light at the end of the tunnel. Despite continuous declining gaming revenues, CE Chui Sai On had good news to report to the Twelfth National People’s Congress (NPC) in Beijing this week.

The government is still able to produce a healthy balance sheet. Better use of fiscal reserves and the development of renminbi business is considered the way to go

PAGE 2

Casinos next for Portugália

Iao Kun revenue declines 64 per cent in February

PAGE 8 Fatal industrial accident on MGM Cotai construction site

PAGE 4 Macau’s smoking control policy “ambiguous”

PAGE 4

Saude! Renowned Portuguese beerhouse chain Portugália is opening in Taipa. A fitting tribute to 90 years in the business. Doors open by the end of the month at the latest. MOP10 million has been sunk into the venture.

Chairman Francisco Carvalho Martins says opening new outlets in casinos is the next goal here

HSI - Movers March 6

Name

PAGE 5

Export re-think Surprising results. China has announced exports grew to a five-year record. It was a weak end to last year. But new data breaks the trend, leaving analysts off the mark www.macaubusinessdaily.com

3

No more Satisfaction

Lenovo Group Ltd

2.34

AIA Group Ltd

2.00

Sun Hung Kai Propert

1.59

Want Want China Hol

0.73

China Mengniu Dairy

0.56

China Mobile Ltd

-1.46

Sands China Ltd

-1.59

BOC Hong Kong Holdin

-1.68

Kunlun Energy Co Ltd

-1.72

China Unicom Hong Ko

-3.03

Source: Bloomberg

Las Vegas Sands is not immune to the gambling slowdown here. And is reconsidering big-ticket entertainment events. Last year’s Rolling Stones concert failed to attract big-stakes bettors. So the strategy now is to invest in Mainland stars, a source told Bloomberg

Page 10

%Day

I SSN 2226-8294

PAGE 9 Interview

Brought to you by

Fitting in Her hobby has become her job. Architect, chef, PR and Production careers have all been put aside for Amanda Ho’s consuming passion. The co-founder of CrossFit XVI and CrossFit Cotai explains her strategy to revolutionise the fitness industry in Macau. In a wide-ranging interview, she tells Business Daily about the challenges a female entrepreneur faces in the local market. And her desire to put real roots down in the community

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2 | Business Daily

March 9, 2015

Macau

CE claims Macau’s finances in fine fettle Meeting with the governor of the Chinese central bank in Beijing on the financial system of Macau, the CE said the city is still able to produce a healthy balance sheet despite declining gaming revenues. Meanwhile, tourism policies are to be reviewed Kam Leong

kamleong@macaubusinessdaily.com

will manage its expenditure within its revenues and in the drawing up of the budget.

According to the Financial Services Bureau (DSF), as gaming revenues started to decline the city registered a fiscal surplus of MOP90.3 billion last year, down 6.2 per cent year-onyear. For this year, the government has set the target for the surplus at only some MOP51.9 billion, while generating some MOP8.3 billion in January.

Tourism polices to be improved

Chui Sai On met with the governor of the People’s Bank of China Zhou Xiaochuan

M

acau Chief Executive (CE) Fernando Chui Sai On said on Friday that the government is still able to produce a healthy balance sheet amid the slowdown of the gaming industry.

The CE met with the governor of the People’s Bank of China Zhou Xiaochuan last Friday whilst attending the Twelfth National People’s Congress (NPC) in Beijing.

He told reporters in a press briefing later that they had discussed the stability of the city’s financial system,

methods to make best use of the city’s fiscal reserves and the development of renminbi business.

He claimed that the Special Administrative Region is able to have a healthy balance sheet as the government has enhanced the financial system with diversified reserves, namely the basic fiscal reserves, foreign currency reserves and surplus reserves.

The CE also stressed in the press briefing that the government is optimistic about the long-term

development of the gaming industry, despite the fact that gaming revenues have been dropping from some MOP38 billion to MOP19 billion monthly.

He claimed that every industry has its ups and downs, affected by internal and external factors. He predicts that the gaming industry still has a healthy and steady growth prospects.

In addition, Mr. Chui said that the fiscal surplus will be posted as budgeted this year as the government

The Chief Executive also met with the chairman of the China National Tourism Administration, Li Jinzao, in Beijing on Friday.

He told reporters that adjustments and improvements will be made to the Individual Visit Scheme (IVS) for Mainland tourists, taking into account the quality of life of local residents.

On his first day in Beijing last Wednesday, the CE said he had assigned Secretary for Security Wong Sio Chak and Secretary for Social Affairs and Culture Alexis Tam Chong Weng to work on a report on the tourism capacity of Macau, which will be submitted to the central government.

Mr. Chui said on Friday that he had discussed the report with the Chinese official, hoping the city’s tourism polices will be improved and adjusted via discussion by the two governments.

According to the CE, the report will include overall tourism issues and management of the borders.

During his press briefing, Mr. Chui revealed that Macau was also approached to extend co-operation with Jiangmen in Guangdong Province although no agreement has been signed so far.

Drop in temporary residency applications last year

T

he Macao Trade and Investment Promotion Institute (IPIM) registered a fall in the applications for temporary residency from both the category of ‘managerial personnel, technical and professional qualification holders’ and those planning making major investments here last year.

The Institute received a total of 436 applications for temporary residency via non-resident managerial personnel, technical and professional qualification holders last year, a

fall of 151 cases compared to the previous year, according to the latest information published by the Institute.

It also received 80 applications for temporary residency last year from those making a ‘major investment’ or committing to enact a ‘major investment plan’ here, a fall of 25 applications compared to 2013.

IPIM did not specify the type of professionals or investment plans made by those applying for temporary residency here.

A total of 506 people, or 277 cases, were successfully approved for temporary residency here last year via applying through their professional qualifications; while 104 people, or 45 cases, were approved for temporary residency via their commitment to an investment plan.

Applicants who have obtained the status of temporary residency and the Macau non-permanent identity card can, after maintaining it for seven consecutive years, approach the local Identification Bureau to apply for a

permanent residency.

Macau’s investment immigration scheme, which required investment of one million patacas in property and 500,000 patacas in fixed deposits, was suspended in April 4, 2007 due to mounting criticism at the time that the scheme had invited rampant property speculation. This scheme had been in effect since April 4, 2005.

More than 23,000 people were granted residency here via application for the investment immigration scheme, data from IPIM shows.

Business Daily | 3

March 9, 2015

Macau

‘Don’t offer unpaid leave’, says Lionel Leong Amid the slowdown of the gaming industry, gaming corporations have started encouraging workers to take unpaid leave. On Saturday, however, the city’s Secretary for Economy and Finance urged operators not to do so, but offer training to workers instead.

Kam Leong

kamleong@macaubusinessdaily.com

S

ecretary for Economy and Finance Lionel Leong Vai Tac has asked the city’s gaming operators not to offer unpaid leave to their workers, but to provide paid training or training during working hours, claiming the operators’ human resources policies will also be considered during the interim review of the gaming industry.

The Secretary told reporters in Beijing on Saturday whilst attending the National People’s Congress (NPC) that the contributions of gaming corporations to manpower is an important task that they should work on as their non-gaming elements. He indicated that this will also be one of the key considerations in the government’s interim review of the gaming industry.

“Don’t offer unpaid leave,

to higher levels and shift to non-gaming positions. “[We will see] whether [the gaming operators] did their jobs well [enough] to perform the contracts, as well as the influences that appeared, such as the nongaming elements,” Mr. Leong told reporters, saying that a study will be conducted prior to the interim review.

thank you. [Offer] paid training and training during work,” Chinese-language newspaper Jornal do Cidadão quoted Mr. Leong as saying.

He claimed that nongaming elements will be increased in the new upcoming casino projects, indicating gaming operators should thus provide gaming workers with training so that they can be promoted

Wynn Macau: not only unpaid leave encouraged Meanwhile, gaming operator Wynn Macau said that it does not only encourage workers to take unpaid leave but also paid vacation.

Last Friday, Business Daily reported that Wynn Macau was texting their employees informing them that unpaid leave was available for workers to apply for, which is the first time

since the financial tsunami in 2008, according to its employee, former secretarygeneral of local gaming union Forefront of Macau Gaming (FMG), Cloee Chao.

Nevertheless, Wynn Macau said in a statement that ‘like all operators during seasonally quieter periods, we encourage our team members to take vacation time, whether paid or unpaid.’

In fact, Wynn Macau is not the only gaming operator to remind workers that leave can be applied for amid the city’s gaming revenue plunge, which has continued for nine consecutive months. Ms. Chao told Business Daily all the gaming corporations have similar policies.

Last Thursday night, Grand Lisboa, the flagship property of operator SJM Holdings Ltd., also released an internal memorandum to

all employees working for the gaming operation suggesting they could apply for unpaid leave even though they are not able to apply for annual paid leave.

‘In response to the eager demand for annual leave from employees, [Grand Lisboa] is conducting a temporary measure from March to the end of June. Despite the accumulated working hours of some workers being not enough to apply for annual leave, they can still apply for vacation to the scheduling department,’ the company wrote in a memorandum provided to Business Daily by a source.

Although it did not mention how many leave quotas would be approved in the notice, it said that the number of quotas will depend on the operational demands of the company.

ANNOUNCEMENT Macau Grand Prix Committee Invitation for the Sponsorship of the Safety, Medical, Rescue and Official Cars for the 62nd and the 63rd Macau Grand Prix The Macau Grand Prix Committee is pleased to invite all interested entities in sponsoring for the Safety, Medical, Rescue and Official Cars for the 62nd and the 63rd Macau Grand Prix, to submit an invitation sponsorship proposal.

Sponsorship Procedure: The hereby sponsorship procedure, including the program of the invitation for the sponsorship and all the related documents, are available at the Macau Grand Prix Committee located at No. 207, Av. da Amizade, Edif. do Grande Prémio, Macau, where the hereby sponsorship procedure will take place. The sponsorship procedure can be examined during office hours of the working days and copies of the same can be collected from the date of the publication of this announcement until the 27th of March, 2015.

Deadline and location for submission of the sponsorship proposal: The sponsorship proposal should be submitted to the Macau Grand Prix Committee, which is located at No. 207, Av. Da Amizade, Edif. do Grande Prémio, Macau from the publication date of this announcement until 17:30 hours of the 27th of March, 2015.

Explanation Meeting: Bidders can attend the explanation meeting, which will be held at 10:00 on the 12th of March, 2015, the Macau Grand Prix Committee, located at No. 207, Av. da Amizade, Edif. do Grande Prémio, Macau.

Opening for the sponsorship proposal: The opening of the sponsorship proposals will be held at 10:00 on the 30th of March, 2015, the Macau Grand Prix Committee, which is located at No. 207, Av. da Amizade, Edif. do Grande Prémio, Macau. The bidders shall attend the opening of the sponsorship proposals in order submit any complaints and/or explain any doubts regarding their respective proposals.

Enquiries: For any enquiries, regarding the hereby sponsorship invitation, please contact the Macau Grand Prix Committee through the following telephone numbers: 8796 2210 or 8796 2242.

Macau Grand Prix Committee, 6th of March, 2015.

Coordinator João Manuel Costa Antunes

4 | Business Daily

March 9, 2015

Macau

Angela Leong: Macau’s smoking control policy “ambiguous” The legislator and SJM boss says “airport-style” smoking lounges should be allowed to be retained in casinos Stephanie Lai

sw.lai@macaubusinessdaily.com

L

egislator and executive director of casino operator SJM Holdings Ltd. Angela Leong On Kei estimates that the industry has spent more than MOP2 billion in modifying their air purifying facilities and ventilation systems in order to comply with local smoking regulations whilst the government has been “ambiguous” in its tobacco control policy.

The city’s Secretary for Social Affairs and Culture, Alexis Tam Chon Weng, mentioned in late January that the government proposed delivering an amended proposal to the Regime for Prevention and Control of Tobacco Use within the first half of this year, whereby a proposed rule to enforce a universal smoking ban in casinos is included.

“If the government had implemented a full smoking ban in casinos in the very beginning, then a lot of resources and effort [to comply with smoking control policy] would have been saved,” Ms. Leong said during the Macau Forum programme of public broadcaster TDM Chinese Radio on Friday.

Having expressed support on several occasions for a full smoking ban in casinos in Legislative Assembly sessions before, Ms. Leong argued on Friday that smoking lounges should be allowed to be retained in casino properties while having a full smoking ban in effect.

Angela Leong

Macau’s first tobacco control regime, known as law no.5/2011, was put into effect on January 1, 2012 in which smoking was banned in all indoor public spaces, with the exception of casinos which were given a one-year grace period to ensure at least half the space on their gaming floors were smoke free.

On January 1, 2013, a partial smoking ban in casinos

here was put into effect.

Casinos that have applied for smoking areas – permitted up to fifty per cent of casino floor space – were required to submit a monthly air quality report to the Health Bureau. Throughout the year, not all operators could pass the government’s air quality test, and in the final month of the year the government said it had received suggestions

from the city’s six gaming operators to instal smoking rooms inside casinos, instead of smoking areas that take up half their gaming floors.

The setting up of smoking lounges was in compliance with a new smoking ban rule that came into force on October 6 last year, whereby smoking was only allowed on the main floors of casinos in enclosed smoking rooms that

did not contain any gaming facilities. But smoking is still allowed in VIP rooms.

However, the Social Affairs Secretary, Alexis Tam, has said that the government might not adopt the suggestion of retaining “airport-style” smoking lounges inside casinos in order not to compromise the air quality on gaming floors.

The Federation of Trade Unions, an influential local labour group that has been adamant in proposing a full smoking ban in casinos, told Business Daily that gaming workers did not really oppose the setting up of smoking lounges in casinos.

“The gaming employees don’t really oppose the setting up of smoking lounges. In fact, those [on the mass floors] welcome gamblers smoking in the lounge, while the employees working in VIP rooms also want to have a lounge in place nearby where they work,” union member and legislator Ella Lei Cheng I remarked to us.

“It all depends on whether the companies have good ventilation installed in place near the gaming tables the employees are working at, or whether these tables are placed too near the smoking lounges where the air quality is bound to be a bit worse,” Ms. Lei said.

“The government also ought to release more statistics about how the air quality has been in the spaces near these smoking lounges.”

Fatal industrial accident on MGM Cotai construction site

A

n MGM Cotai construction site worker passed away while receiving treatment at the Government Hospital after being injured on a construction site on Friday morning.

Judiciary Police said the male victim, aged 54, was a non-resident worker from the Mainland. He was found injured after being hit by a concrete tube on the head while a crane was moving the tube but a chain suddenly broke.

According to police, other workers on the site immediately rescued the victim; thereafter, police and fire department officers sent the victim to hospital but he passed away while receiving treatment.

The Labour Affairs Bureau (DSAL) issued a statement on Friday saying that the Bureau has instructed the contractor to stop using all cranes and hoists and make a full inspection of the site, repair the facilities, and enhance the safety awareness of workers.

DSAL further indicated that it would continue investigating the cause of the accident and hold those accountable for legal responsibility in accordance with the law based on the investigation result.

In a written email reply to a Business Daily enquiry, MGM said: ‘MGM China Holdings Limited and construction contractor extend our deepest condolences and sympathy to the worker and to his family. The companies are providing support to the family during this difficult period.’

‘The company has commenced an investigation into the incident and are also co-operating with the government’s independent investigation. Site safety is of paramount importance to the companies and we will continuously strive to enhance occupational health and safety procedures to provide a safe work environment for all of our workers.’

Business Daily | 5

March 9, 2015

Macau

Portugália jumps into Macau market with MOP10 million investment The Portuguese beerhouse chain celebrates its 90th anniversary and will start to operate in Macau by the end of the month, and maybe this week.

João Santos Filipe

jsfilipe@macaubusinessdaily.com

P

ortuguese beerhouse chain Portugália celebrated its grand opening of the company last Friday, and expects to be operational in the territory this week, although some pending legal issues could delay the opening to the end of the month.

The expansion to Macau has been tied to part of the 90th anniversary celebrations of the group.

“Macau is a territory where the Portuguese presence is very strong and it’s a place where Portuguese gastronomy is very much appreciated.

Having considered many destinations to invest abroad, we decided to choose Macau because it offers the best conditions”, Francisco Carvalho Martins, the Chairman of Portugália, said.

The initial investment of the company in Macau is around MOP10 million, with the group leasing a three-storey a building from Macau company Sniper Capital in Taipa.

“We chose this building because of its Portuguese architecture.

That was the main factor for our option because we believe that this building is the best to transmit the values of our company”, Mr. Martins explained.

As a Portuguese beerhouse the company will for obvious reasons target the Portuguese community.

The goal, however, is to attract local residents and many tourists.

“There are a lot of expectations by the Portuguese community in Macau and we hope to serve them as they are used to. But we want to have all kinds of clients, not only Portuguese, but Macau locals and

Chinese tourists”, Martins said.

For the time being the group is only opening one beerhouse but the objective is to expand to other areas of Macau, including the big shopping malls in casinos. The presence in the territory may also be a first step to entering other regions such as Mainland China or other countries.

“We’re considering opening beerhouses in casinos. We wouldn’t travel 12,000 kilometres just to open one restaurant. Our project is to create a local group and that includes opening beerhouses inside the gaming resorts that attract many visitors”, he explained. “We’re considering existing resorts and the new ones

being constructed. At this moment, we’re in touch with the gaming operators and so we prefer not to talk much about it. We’re studying all options”, he said.

At a time when hiring local residents is a problem for every company in Macau, Portugália is no different, especially when competing with big corporations.

“We’ve brought qualified people from Portugal in order to make sure our project Is a success but we’re also hiring local people. We want to create a mixed team with Portuguese people that will transmit the values of the company to the locals and other employees”, he said.

We’re considering opening beerhouses in casinos. We wouldn’t travel 12,000 kilometres just to open one restaurant Francisco Carvalho Martins, Chairman of Portugália

MGTO promotes Macau’s diversity in Guangzhou

Gaming workers wages up 8.2 pct in Q4

M

T

acau Government Tourist Office (MGTO) has joined the Guangzhou International Travel Fair 2015 (GITF 2015) to further expand tourism markets and enhance connections with the Mainland and international travel industry partners.

Starting from March 6, GITF 2015 is hosted by the China Import and Export Fair Complex in Guangzhou for three consecutive days.

MGTO is participating in the exhibition together with 38 industry delegates representing a total of 20 enterprises including hotels, travel agencies and MICE facility companies from Macau.

MGTO’s 180-square metre booth - themed ‘Touching Moments, Experience Macau’ - promotes the rich and diverse tourism elements of Macau by showcasing the Historic Centre of Macau, events and festivals, the newest tourism facilities and products, etc. Personnel are stationed at the booth to provide travel information and distribute promotional leaflets to visitors. Macau trade delegates also discuss business opportunities with their Mainland counterparts.

GITF is recognised as one of the most influential international travel fairs across Southern China and the Asia Pacific Region. Last year, the event attracted a great number of exhibitors

including 753 tourism service providers from 42 countries and regions. GITF 2014 hosted over 100,000 overseas and domestic buyers and visitors in total.

Through the exhibition, MGTO hopes to introduce Mainland citizens and industry partners from various places to the latest tourism development and diverse tourism products in Macau.

Taking the opportunity to promote the positioning of Macau as a World Centre of Tourism and Leisure, the Office seeks to attract more visitors from different markets to experience the unique blend of East-meetsWest culture as well as local customs.

he average monthly salary of gaming workers increased by 8.2 per cent year-on-year, reaching MOP20,860, during the fourth quarter of last year, while wages for dealers also rose 7.7 per cent, reaching MOP18,000, the latest official data released last Friday by the Statistics and Census Service (DSEC) reveals.

According to DSEC, some 56,608 employees worked in the gaming industry at the end of December 2014, an increase of 3.2 per cent yearon-year. Nearly half, or 44.6 per cent of gaming workers, were dealers while some 26.4 per cent were hand and soft count clerks.

Directors and managers,

accounting for only 3.9 per cent of the total, demand an average monthly salary of MOP49,950.

Meanwhile, job vacancies decreased by more than double in the three months. There were only 841 job vacancies in the industry in the previous quarter, down 57.7 per cent year-on-year, compared to the 1,986 vacancies during the same period in 2013.

The decrease is because the demands for dealers has dropped 83 per cent yearon-year. In the quarter, the industry only had 108 vacancies for dealers, compared to the 1,064 vacancies available in the last quarter of 2013.

K.L.

6 | Business Daily

March 9, 2015

Macau

Women and empowerment Society celebrated International Women’s Day over the weekend. To commemorate this special occasion, Business Daily tracked down a female entrepreneur Amanda Ho, co-founder of CrossFit XVI and CrossFit Cotai. As a Hong Kong woman, she told us why she wanted to start her own business in order to put her roots down here and contribute to the fitness industry in Macau Joanne Kuai

joannekuai@macaubusinessdaily.com

Where did the idea of launching CrossFit come from?

Actually, working out has always been my hobby. It was never my career before. I was an architect and worked in Hong Kong. Later, I worked in Shanghai but I was a bit disappointed by my stay in China. Then my senior assigned me to work on other projects in Singapore. It was better there but still I doubted if I would like to stay in the construction industry since the biggest market is still in China.

In the end, I decided to take a year off and went to study in Le Cordon Bleu (Sydney). I graduated, getting my grand diploma - Diplôme de Pâtisserie and Diplôme de Cuisine - in a year.

Following that, I moved back to Hong Kong where I decided to try something else. And then I joined a PR and production company.

So I was working on a lot of commercial and corporate events.

I focused a lot on production. So, I still use a lot of my architectural skills in decorating and setting up runways and events instead of for buildings.

I moved to Macau because I married a Macanese. I quit everything in Hong Kong. I was bored and lost. Whilst working out in the clubhouse I met my business partner Antonio Barrias. I actually walked up to him and asked him whether he had time to train me. And we started our personal training sessions. That’s how I started telling him about CrossFit and we decided to bring CrossFit to Macau.

Why did you want to bring CrossFit to Macau in the first place?

Macau is surrounded by casinos.

Not a very healthy atmosphere, I can say. A lot of kids working for casinos, to me, is not a very bright future because they are only tempted because of the high salary.

For now, maybe it’s good, but what about 10 years later? They quit school just to handle cards?

I think it’s very negative for the next generation. Macau is such a wealthy city, and the government can invest in the current education system. And try to inspire the next generation to study and enrich their knowledge.

Yes, I was the one who introduced Crossfit to Antonio. When I first met Antonio he had the bodybuilding mentality and style because in Macau there was only one type of training: bodybuilding.

I’d been doing CrossFit for a little while in Hong Kong before moving here. I think Crossfit is fun and effective so I introduced Antonio to my personal trainer in Hong Kong and some boxes (Boxes are gyms where you practice Crossfit with the name coming from the fact that a ‘box’ was traditionally located in industrial type warehouses)

Macau is surrounded by casinos, a not very healthy atmosphere, as far as I can see. People are less active. We want to bring CrossFit to Macau to help people be healthier, fitter and more positive

programme includes Olympic lifting, gymnastics, functional movements, which is own body weight movements, and also high intensity interval training. So, we actually cover everything; the basic goal is don’t lose your functional movements and at the same time try to move weights fast, to be efficient. At the same time, CrossFit trains people to adapt and to expect the unknowable. We’re constantly changing and moving weights fast.

We saw there were no CrossFit boxes here, so we wanted to be the first here. That’s the reason why we want to be the first in Macau.

In Hong Kong, so far there are 13 boxes already. But in Macau, just us right now. We are the first here and we have two (boxes) now.

What’s your point of view on the fitness industry here in Macau? in Hong Kong. And that’s how Crossfit started.

What is CrossFit, and why is it different from other fitness training?

The CrossFit prescription is ‘constantly varied, high intensity, functional movement.’ CrossFit is now one of the biggest sports and proven to be the best fitness programme on Earth. The CrossFit

The general public here focuses more on bodybuilding or working out in commercial gyms. In terms of fitness level, people here are a bit behind compared to Hong Kong. People in Macau are less active from what I can see. Women here are still afraid to work out or even lift weights because they think once they lift weights they would be big and muscular. But that’s not true. Gaining muscle is not that easy.

Now, so far we’ve been here for

a little bit more than a year, and have almost 200 members.

Almost half of them are women.

At the beginning, females were intimidated by our equipment.

They always said ‘No’ to us because we asked them to lift weights. Now we’ve convinced them, and they know that since they’ve been lifting weights they’re a lot more toned and a lot fitter and can actually lose fat a lot easier.

During the pre-opening, what kind of preparation did you do, since it’s a global brand and you need to have a licence?

All of our coaches need to be Level 1 Certified. At the same time, we need to get both boxes affiliated.

When we opened the two boxes, we needed to inform Crossfit headquarters of the affiliation.

Otherwise, it’s illegal. We can’t call our boxes CrossFit XVI or CrossFit Cotai.

All of our coaches are certified CrossFit trainers. As for myself, I have CrossFit Kids, CrossFit Endurance and CrossFit Gymnastics. We try to take as many courses as we can so that we can teach our athletes. It’s a long process and time consuming because of all the government departments’ procedures and everything.

Why did you choose this location?

Actually, it’s pretty hard to find a location in Macau. We got introduced to this place. This place had been empty since the building was put up. I think it’s a very unique place, it’s on the ground floor and we have an outside area as well. Moreover, it’s easy to access a lot of places in Macau. It’s something positive for the residents upstairs. We are a box, and we do exercises. I have confidence people upstairs want us here instead of a supermarket or even a restaurant because that would bring a lot of hygiene problems.

Who are your target clients?

Everyone. Our youngest client right now is 15. Our oldest is 60. Everyone that’s interested in moving and wants to move faster, get fitter, we welcome. We don’t have a real target group. As long as they want to be healthy, we welcome them. Our target group is everyone.

In terms of your marketing strategy, is there anything special about it?

First is by word-by-mouth.

People see results and they pass the message to their friends. The second one is our community. We have a very strong community within our boxes. Both boxes have their own community. Our community is like family and family take care of each other. And

Business Daily | 7

March 9, 2015

Macau

family wants the people around them to be healthy, too, so they pass this message on. That’s how we have our 200 members. And we are growing slowly.

What do you think are the main challenges running a private sports facility like this in Macau?

To be honest, we’ve been along some bumpy roads. First of all it is very difficult to find a good location with reasonable rents.

Secondly, it’s very difficult to have certified coaches here, and last but not least it’s very difficult to avoid people complaining.

Although we teach our athletes not to drop weights, sometimes our athletes want to achieve their new personal records, they might drop weights and that is unavoidable, and once they drop weights, people might complain. These are the challenges and difficulties we face.

Why did you decide to use this membership as your business model?

First of all we need to see how people react and we adapt. The membership we have right now offers more flexibility. At the beginning we offered another package, which deducted sessions [for non-attendance]. But sometimes people might not be able to be here because of all sorts of reasons. We think it’s unfair.

It’s not their choice. That’s why we changed into this full-access package. So even if they cancel it doesn’t really deduct a session.

Anytime they are free, they can come. We want people to enjoy.

Earning money is one of the things but at the same time, we want to benefit people. That’s the reason myself and Antonio wanted to start this business. We want business, while at the same time we want health for everyone. And we want everyone to be fitter and have a better lifestyle in Macau. This is far more important to us.

What were your initial expectations when you opened the box?

The first goal we’ve achieved – one box in Macau and one box in Taipa. Each box has a unique crowd of people: the one in Macau has more locals, more Chinese, a lot of firemen and a lot of policemen; on the Cotai side, more

expats, more students, and more Portuguese. That’s why we want to have a box in Taipa, tapping into the expat market.

Some may assume that you cater more to white-collar workers. Do you agree?

No. We are for everyone. We even have housewife members here in the morning.

It may be a little bit unconventional for a lady to run a fitness business. You’re also the mother of a newborn child. How do you balance your family and your career?

I’m very lucky and grateful to have a good partner. We work out a schedule that fits me perfectly.

I only teach the morning classes so I come to work before my baby wakes up and then rush home before her lunch time and then I can take care of her in the afternoon. For now, it’s the perfect schedule for me. I have a very long day. I start my day from 5:00 am and start working here at 6:30 am and go back before 12:30 pm [noontime] and have my own training and then during the

I want to put my roots down here, that’s why I wanted to start my own business. I have my responsibilities here.

I need to teach classes.

I love seeing my athletes here. They’re all my family.

They are all my babies, too. I see them improving.

I’m very, very happy. It’s tiring but rewarding

afternoon and night I will take care of my child. I have good coaches here to support what I’m doing so I’m very happy right now with this timetable.

Does your family support you?

My husband and family really support me. At the beginning (when I moved to Macau), as I said, I was a bit lost. I had a conversation with my husband. I’m a career woman. I love working; I need to work. My husband suggested “Why don’t you have high tea with friends and go shopping everyday?”. But I don’t have a lot of friends here and I can’t go shopping every day. My husband then said “O.K., you either find a job here or you find something to do here, maybe start a business”. That’s how I decided if I wanted to put my roots down here in Macau, maybe I need to start up something for myself.

That’s how I decided to start up a business instead of working for a company. If it’s your own business, you really need to be responsible for everything. And I think that’s how I grow my roots here. Before I started my business here, I wanted to travel to Hong Kong every two or three days because my family and friends are in Hong Kong. But once I had my boxes here, I only go back at the weekends now. I can’t go back. I have my responsibility here. I need to teach classes. I love seeing my athletes here. They are all my family. They are all my babies, too. I see them improving.

I’m very, very happy. It’s tiring but rewarding.

I’m very lucky that I love my job.

And everything is all balanced so I’m very, very grateful.

What’s the future plan for CrossFit Macau?

Since we have two boxes here, we want to be the fitness platform for some education. We want to bring good coaches from overseas to run seminars here in the future. There are personal trainers that want to take courses. This is one of the plans and we want to expand on that.

What about the expansion of the boxes?

Maybe towards (Mainland) China side. Now CrossFit in

About CrossFit Macau CrossFit XVI and CrossFit Cotai are Macau’s first and only CrossFit affiliated gyms. They aim to provide Macau with the most up-to-date techniques and methods, and the most qualified health and fitness service, that includes classes, personal training, seminars and courses.

CrossFit is a core strength and conditioning programme that delivers a fitness that is by design, broad, general, and inclusive. Elements of track & field, gymnastics, weightlifting, and strongman are combined in short intense daily workouts to maximise results for any individual. CrossFit teaches functional movement patterns, or movements found in real life - pushing, pulling, squatting, jumping, throwing, carrying and sprinting.

China is slowly growing. There are two (boxes) in Shanghai, one in Beijing, one in Shenzhen.

Eventually, we may consider something near Macau, near the border. Maybe Zhuhai, maybe Shenzhen, maybe Hengqin. That would be something we consider in the future.

What about for the kids?

We’re planning to offer a Crossfit Kids class to our athletes second generations here. Because CrossFit Kids is a little bit different from CrossFit Adults. You don’t use weights on kids until they are ready to lift weights. So, basically it’s all about games and functional movements. It’s fun so a lot of kids love CrossFit. CrossFit won’t allow you to quit. Once they start, it changes their mentality.

They won’t give up easily so end up studying better. That’s how we want to benefit our second generation.

Our goal in the future is to propose or introduce the kids programme to schools here. It’s a big goal but we’re working towards it slowly. A lot of our members do see a lot of benefits and they feel different and they look different and are happy.

I hope this can expand a little bit more, so more people can join in CrossFit.

8 | Business Daily

March 9, 2015

Macau

Las Vegas Sands may forgo big-ticket concerts in Macau The casino operator is reconsidering big-ticket entertainment events such as a Rolling Stones concert last year that failed to attract big-stakes bettors

Las Vegas Sands may migrate toward Chinese entertainers, such as actor and comedian Dayo Wong

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as Vegas Sands Corp., grappling with a gambling slowdown in the Chinese enclave of Macau, is reconsidering bigticket entertainment events such as a Rolling Stones concert last year that failed to attract big-stakes bettors, said a person with knowledge of the situation.

The world’s largest casino operator, which also hosted

a Manny Pacquiao boxing match in 2014, found such events attracted Westerners living in Hong Kong who got back on the ferry at night to go home. Instead, the company may migrate toward Chinese entertainers, such as actor and comedian Dayo Wong, said the person, who asked not to be identified because they weren’t authorised to speak publicly. Wong performed his

fourth show in the company’s Cotai Arena in October.

Betting in Macau has fallen for nine months as a crackdown on corruption by the Chinese government prompts highrollers to avoid conspicuous consumption. On Thursday, Sands President Rob Goldstein told investors at a JP Morgan Chase & Co. conference to expect cuts to the Las Vegasbased company’s marketing

and entertainment budget. He didn’t provide details.

“We’re not looking to take it apart, the whole structure, but re-examine where those opportunities to run it cleaner and better [exist],” Goldstein said.

Casino revenue in Macau, the world’s largest gambling market, fell 49 per cent to 19.5 billion patacas (US$2.4 billion) in February, the

steepest drop since the government opened the region to foreign operators in 2002.

Sands has focused its Macau operation on the mass market, which has been less affected by the slowdown, Goldstein said.

Wynn Approach The company operates more than 9,500 hotel rooms in Macau, including a Sheraton and Holiday Inn. And its Venetian shopping mall is “performing better than ever,” Goldstein said.

Sands, founded by billionaire Sheldon Adelson, isn’t alone in seeking to cut costs in Macau. Wynn Resorts Ltd. has encouraged staffers to take leave following the usually busy Chinese New Year holiday last month.

“As all operators do during seasonally low periods, we encourage team members to take vacation time, whether paid or unpaid,” Michael Weaver, a spokesman for the company, said in an e-mail. “We’ve not made any substantive changes to our operations in Macau.”

Bloomberg

Iao Kun revenue declines 64 per cent in February As Beijing’s anti-graft policies continue to chip away at the VIP segment and the Chinese economy slows down junket operator revenues plunged 64 per cent year-on-year last month João Santos Filipe

jsfilipe@macaubusinessdaily.com

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ao Kun Group revenue declined 64 per cent year-on-year in February, with rolling chip turnover accounting for US$0.63 billion (MOP5 billion); in February 2014, it pulled in US$1.73 billion (MOP13.8 billion). In Macau, rolling chip turnover is used by casinos to measure the volume of VIP business.

The junket company also revealed last week that the win rate for February was 4.28 per cent. With regard to the first two months of the year, Iao Kun posted US$1.4 billion (MOP11.9 billion) rolling chip turnover, which is a decline of 52 per cent year-on-year in relation to the previous period In 2014, when the gaming promoter cashed in US$3.02 billion (MOP24.1 billion).

The results of Iao Kun Group are in line with the overall trend of the gaming market, which has affected mainly junket promoters and the VIP

market. During the first two months of the year, gaming revenues in Macau decreased 35.1 per cent year-on-year from MOP66.7 billion to MOP43.3 billion. In February alone, gaming revenues dropped to 48.6 per cent from MOP38 billion to MOP19.5 billion. This was the first time since February 2011 that revenues had dipped below MOP20 billion.

As for junkets, Iao Kun is not the only company affected by the decline in gaming revenues caused by the anti-graft policies of Beijing and the slowdown In Mainland China’s economy. Neptune Group announced recently that its profit had decreased 17.3 per cent during the first half of the 2014/2015 fiscal year. In addition, the marketing strategy head of SunCity, Choong Yoon Ming, admitted last week that the company was feeling the impact of the slowdown of the gaming industry.

Steve Jacobs Case: Sands China sanctions ruled

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anctions are to be applied to gaming operator Sands China Ltd. for redacting personal information from about 2,600 documents out of Macau, Clark Country Nevada District Judge Elizabeth Gonzalez ruled on Friday.

The document sections that the gaming corporation was ruled to have improperly withheld were written as part of the termination suit first filed in 2010 by former CEO of Sands China Steven Jacobs.

According to Las Vegas ReviewJournal, Judge Gonzalez ordered Sands China to hand over the redacted documents in addition to paying US$250,000 to different legal charities and covering court cost incurred by Mr. Jacobs.

“We are disappointed in the court’s decision and do not believe

it is supported by the evidence…

Sands China intends to seek review from a higher court,” the newspaper quoted Ron Reese, the spokesman of Sands China’s parent company Las Vegas Sands Corp., as writing in an email in response to the ruling.

Meanwhile, Mr. Jacob’s lawyer, Todd Bice, reckons that the judge’s decision was trying to “level the playing field” by handing down the penalties. “We’ll see whether or not they want to change their course of conduct,” Reivew-Journal quoted Mr. Bice as saying.

In 2010, Mr. Jacobs sued both Sands China and Las Vegas Sands Corp. for breach of contract related to his termination and asked his former employers to turn over some 100,000 emails and other documents.

K.L.

Business Daily | 9

March 9, 2015

Gaming

Paul Phua’s son pleads in World Cup betting case

Elaine Wynn to shareholders: Keep me on Wynn board

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The 72-year-old ex-wife of Chairman and Chief Executive Officer Steve Wynn is embroiled in litigation over control of her 9.4 per cent stake in the company

he son of a high-rolling Malaysian poker player accused of running an illegal World Cup betting operation out of his luxury villa at Caesars Palace in Las Vegas has agreed to a plea deal.

Darren Phua, 23, admitted on Friday to transmitting wagering information and will pay a US$100,000 fine and forfeit US$125,000, his lawyer said in a statement.

He avoids prison under the deal and will return to Malaysia. Darren’s father, Wei Seng ‘Paul’ Phua, the only remaining defendant in the case, is scheduled to go on trial next month.

Paul and Darren Phua were arrested last year after personnel at Caesars Palace became suspicious of the large number of computers a group of guests from Asia had set up in their villas, which the hotel reserves for high-rollers who gamble more than US$1 million a day. Five of the others arrested, from Hong Kong, China and Malaysia, have already pleaded guilty and were allowed to leave the U.S. “As a result of the legal successes in this case, Darren was presented with an opportunity to accept a lesser charge,” his lawyer, Richard Schonfeld, said in a statement. “While we are all confident in the strength of our case and believe we would have ultimately prevailed, this is the best outcome for Darren.”

A federal magistrate judge in Las Vegas on January 30 agreed with the elder Phua that the Federal Bureau of Investigation used false and

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Paul Phua

misleading information to obtain a search warrant for the villa and recommended that the U.S. be barred from using contraband found during the July raid at Caesars Palace.

That recommendation is now before a district judge.

Funds Transfer U.S. prosecutors said in a court filing that through analysis of computers and mobile phones found in the villas they have determined that bets were being processed through the

equipment in Las Vegas and that the actual funds were being transferred to accounts overseas, specifically in Southeast Asia.

If Phua, who arrived in Las Vegas from Macau in June on his US$48 million private jet and who with an associate had a US$60 million credit line at Caesars Palace, can convince the district judge that the government’s tactics violated his constitutional right to privacy, much of the evidence used to charge him may be thrown out.

Bloomberg

laine Wynn is asking shareholders of Wynn Resorts Ltd. to re-elect her to the board, after directors of the casino company declined to nominate her.

Wynn, twice ex-wife of Chairman and Chief Executive Officer Steve Wynn, filed a preliminary proxy statement on Thursday detailing her plan to solicit votes for the annual meeting on April 24.

She is embroiled in litigation with her former husband over control of her 9.4 per cent stake in the Las Vegas-based casino operator.

Last week, the company disclosed that it would not re-nominate Elaine Wynn, who has been a director since Wynn Resorts’ founding in 2002.

“My four decades of experience in the gaming and hospitality business, coupled with my unique knowledge of the company, have been invaluable to the board and the company’s stockholders, and equally important in the continued development of the Wynn brand,” she said in a statement.

In a regulatory filing last week, the board cited Elaine Wynn’s lack of independence under

Nasdaq-listing standards, and the impact of the legal dispute on “the atmosphere in and effectiveness of her participation on the board.”

The company’s decision followed multiple meetings and the participation of Elaine Wynn, the company said in a statement Thursday.

“While Steve Wynn is contractually obligated to support Ms. Wynn’s candidacy, the board as a whole accepted the recommendations of the nominating and corporate governance committee’s independent directors,” according to the statement.

Elaine Wynn’s brother, Michael Pascal, was fired from his US$142,000-a-year job as a senior executive host at the company on February 27, she said in her filing Thursday. His wife, Mary Ann, continues to work in player development, earning US$200,000 annually.

Bloomberg

10 | Business Daily

March 9, 2015

Greater China

Exports growth near five-year high Producing a record trade surplus of US$60.6 billion for the month

KEY POINTS Feb exports +48.3 pct yr/yr, vs f’cast of +14.2 pct Feb imports -20.5 pct yr/yr, vs f’cast of -10 pct Feb trade surplus $60.6 bln, vs f’cast of $10.8 bln Combined Jan-Feb exports +15 pct, imports -20.2 pct

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hina’s exports jumped 48.3 percent in February from a year earlier - the strongest in nearly five years that comfortably beat market expectations - while imports slipped 20.5 percent, the General Administration of Customs said yesterday.

That compared with market expectations in a Reuters poll of a rise of 14.2 percent in exports - following a 3.3 percent drop in January - and a 10 percent fall in imports and a trade surplus

of US$10.8 billion.

Analysts tend to look at the combined trade data for the two months to help smooth out distortions caused by the long Lunar New Year holiday, which fell in midFebruary this year but in early February in 2014.

The customs office said local exporters usually make concentrated shipments ahead of the new year, which may have distorted export figures for January and February.

For the first two months

of 2015, exports rose 15 percent from a year ago, while imports fell 20.2 percent.

China’s exports rose an annual 6.1 percent in the whole of 2014, while imports inched up 0.4 percent.

Commerce Minister Gao Hucheng said on Saturday that he expected China’s combined exports and imports to return to growth in March and he was confident of meeting annual trade growth target of 6.1 percent in 2015.

Analysts expect the government to roll out more stimulus steps this year to support the slowing economy, which has been hurt by a property downturn, excess factory capacity and erratic exports.

Despite China’s solid trade surplus, a string of weak data has put some pressure on the yuan against the dollar. But analysts say the yuan’s modest 1 percent fall versus the dollar so far this year may not help exporters much, given that

it has risen against other currencies.

Indeed, a private manufacturing survey showed export orders shrank in February despite a slight pick up in factory activity.

China plans to run its biggest budget deficit in 2015 since the global financial crisis, stepping up spending as Premier Li Keqiang signalled that the lowest rate of growth in a quarter of a century is the “new normal” for the economy.

Reuters

Foreign banks tighten lending rules for state-backed firms The change in policy suggests some foreign banks are preparing for a rise in defaults in China Engen Tham and Lawrence White

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ome banks are adopting stricter lending criteria for China’s state-owned enterprises (SOEs), demanding collateral from some companies they used to deem as safe as government debt, as Beijing tries to reform its bloated firms and the economy slows.

Singapore’s DBS Group, which recently suffered a loss on a bad loan to an SOE-related firm it had assessed as risk-free, plans to launch a ‘decision grid’ to assess the creditworthiness of SOEs, according to draft internal risk guidelines reviewed by Reuters.

A banker at Taiwan’s Chang Hwa Commercial Bank said that from the beginning of this year his bank would only lend to state-owned Chinese companies that provide collateral, in recognition that SOEs were no longer risk free.

Such changes in policy suggest some foreign banks are preparing for a rise in defaults in the world’s second-largest economy, which is growing at its slowest pace in a quarter of a century and where the government is trying to make the state sector more efficient.

KEY POINTS Singapore’s DBS introduces ‘decision grid’ for SOEs Taiwan’s Chang Hwa requires collateral for SOEs from Jan 1 Implicit state support no longer taken as read for SOEs DBS will now lend more conservatively to SOEs seen as receiving less government support, as China plans to prioritise SOEs in strategic sectors.

The January-dated DBS document said: “Not all SOEs receive the same degree of government support. It is our further belief that the differentiation of such support will widen in the future as the government continues to pursue market economy.”

DBS will now divide SOEs into

tiers according to their likely level of government support, with subsidiaries considered more risky than top-level holding companies.

Group companies that are not consolidated into the parent SOE’s financial statements will be evaluated as an ordinary borrower, the decision grid shows.

DBS effectively acknowledges that lenders can no longer take for granted implicit support from above.

“Compared to ordinary corporates, implicit support obtained from the parents of SOEs are subject to higher risks because of the risk of policy and people changes,” the document said.

A DBS spokeswoman declined to comment publicly on the specifics of the policy change.

“It is still business as usual for us in China. With slower regional economic growth, we continue to be disciplined and watchful of risks in

Business Daily | 11

March 9, 2015

Greater China

Commodity imports slow

PBOC comments on M2 growth

China said it would reduce coal consumption as part of efforts to cut pollution

KEY POINTS Iron ore imports down 13.5 pct on mth, up 11 pct on yr Crude oil imports at 6.66 mln bpd, up 1 pct vs Jan

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hina’s imports of commodities eased again in February, as the Lunar New Year holiday week took a bite out of shipping volumes, preliminary customs data showed yesterday.

Customs data showed imports of iron ore at 67.94 million tonnes in February, down 13.5 percent from January, but up 11 percent on the year.

“Steel demand in China slowed in February as some steel mills cut their output level amid economic downturn pressure,” said Hu Xiaodong, an analyst with Nanhua Futures in Hangzhou.

“Construction activities were suspended during the holiday, which dampened the iron ore demand from overseas suppliers. Ore inventories at major ports in China were also staying at a relatively low level.”

Domestic iron ore prices hit a record low on Friday after posting their biggest weekly fall since mid-November, as the government’s anti-pollution battle

all the markets we operate in,” she said in an emailed statement.

Collateral damage The changes at DBS and Chang Hwa are evidence of a broader trend to tighten lending in China among foreign banks, and the practice of demanding collateral is likely to increase so they can recover some value when loans go bad.

Global bank Standard Chartered Plc said on March 4 in its annual results statement it had increased the level of collateral it holds by 4 percent, in response to rising bad loans in China, India and the commodities sector.

“The requirement for more collateral is essential,” said Jiahe Chen, chief strategist at Cinda Securities.

“As the economy falters and SOEs become more market-orientated, there will be more defaults.”

“Perhaps for Chinese banks the government still have some arrangements, but for foreign banks the impact of the market is more severe,” he added.

About 70 percent of loans made in the fourth quarter of last year in China were collateralised, with the borrower typically pledging land or manufacturing plants, according to a survey of 2006 industrial firms published by Professor Jie Gan of the Cheung Kong School of Business.

DBS’s decision to change its risk assessment procedures for loans to SOEs was galvanised in part by a large loss it suffered on a loan to Yantai Penghui Copper, a company backed by the city of Yantai in China’s Shandong province, sources with direct knowledge of the matter told Reuters.

Reuters

threatens to shut more steel mills, cutting demand.

Imports of crude oil totalled 25.55 million tonnes, or 6.66 million barrels per day (bpd), in February, up 11 percent from a year ago, but up only 1 percent from January on a daily basis.

China’s crude imports spiked in December at more than 7 million bpd, as the government and state oil firms took advantage of falls in global prices to build stockpiles.

Copper imports, at 280,000 tonnes in February, slowed by nearly a third from January and were down more than a quarter from a year earlier.

The New Year cut copper arrivals in February, said a trader at a Western producer, adding that his firm had sold some spot copper before the holiday which would arrive in March and April.

Weak imports reflected weak demand in the domestic market, said a trader for a copper end-user, adding many factories in the industrial province

Coal imports 15.26 mln t, down 9 pct vs Jan, down 33 pct on yr Copper imports 280,000 t, down 26 pct on yr Soy imports down 38 pct vs Jan of Guangdong in the south had closed for the holiday in early February.

Coal posted a steep fall, with imports down 9 percent from January at 15.26 million tonnes, and down a third on year.

China, the world’s top soy buyer, brought in 4.26 million tonnes of oilseed in February, lower than the 6.88 million tonnes in January, as crushers scaled down operations during the holiday.

March imports are seen about 4.5 million tonnes as the U.S. sales season comes to an end. China will shift to South American soybeans from the second quarter.

Reuters

Shandong governor asks people not to buy HK milk powder Concerns about the safety of milk powder sold in China has been greater than for most other products since 2008

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he governor of China’s Shandong called on those from the province not to go to Hong Kong for milk powder, so popular with Chinese tourists concerned about food safety that it’s sparked anger among the city’s residents who say local supplies are being sapped.

Guo Shuqing, who led China’s securities regulator before becoming governor in 2012, told a meeting of Shandong delegates to the nation’s legislature that he didn’t want to see too many tourists from the coastal province visiting Hong Kong. Shandong was China’s second-most populous province in 2013 with 97.3 million people, according to the latest data from the National Bureau of Statistics.

“Shandong has a big population and we don’t want to see too many individual tourists creating pressure for Hong Kong,” Guo said yesterday.

“Especially we don’t want to see Shandong people running to Hong Kong to buy milk powder. We promise Shandong people won’t go there scrambling for milk powder.”

Hong Kong residents, who say purchases by Chinese visitors are artificially driving up the cost of necessities, have staged several protests this year, including one on March 1

Shandong has a big population and we don’t want to see too many individual tourists creating pressure for Hong Kong Guo Shuqing, Shandong governor

during which police used pepper spray to control the crowd. Leung Chunying, the city’s chief executive, said in Beijing Friday that he had discussed measures with Chinese leaders for dealing with the issue.

Concerns about the safety of milk powder sold in China has been greater than for most other products since 2008, when contaminated baby formula killed at least six infants and sickened thousands of others.

Bloomberg News

China should remain flexible on M2 growth expectations and not be overly concerned about meeting numerical targets, People’s Bank of China chief Zhou Xiaochuan told a news conference, the official Shanghai Securities News reported. This year’s growth target for China’s M2 - a broad-based measure of money supply - is 12 percent, but will be adjusted according to the needs of economic growth and may be higher, according to a working paper released during the annual full session of the National People’s Congress, the country’s parliament.

Asian free-trade talks to finish by Dec China hopes to finish talks on creating an Asian free-trade bloc estimated to cover 28 percent of the world economy by the end of this year, the country’s trade minister said on Saturday. Gao Hucheng said on the side-lines of China’s annual session of parliament that China would work hard to wrap up talks for the RCEP, or Regional Comprehensive Economic Partnership, before the end of this year. Gao said China was closely monitoring and assessing the impact of the TPP deal on global trade, and that the Chinese government welcomed any trade framework that was open and transparent.

10-year visas agreement with Canada China and Canada just reached an agreement on granting visas to each other’s citizens, with the validity period of up to 10 years, Foreign Minister Wang Yi said here yesterday. Wang made the remarks at a press conference on the side-lines of the annual session of the National People’s Congress, China’s top legislature. The new visa policy will take effect today, he said. Wang also told that last year China signed visa exemption or facilitation agreements with 24 countries.

Same-day A-shares trade disallowed Top securities regulator Xiao Gang said the country is not planning to re-instate same-day “T+0” trading for A-shares, the official Shanghai Securities News reported. The re-introduction of the rule would help protect investors by allowing them to quickly exit falling stocks, thereby hedging investments, but is also seen as a move that could cause volatility. In January, China approved trials of “T+0” trading and options trading on certain exchange-traded funds. There has been speculation in state media that Beijing was planning to re-instate “T+0” on the A-share market.

Working on a wider anti-corruption network China would work with other countries to build a wider and tighter net of international anti-corruption cooperation, Foreign Minister Wang Yi said yesterday. Anti-corruption is a never-ending struggle and China would never relent its efforts in overseas hunting for suspects and recovering of their illegal assets, he said.

12 | Business Daily

March 9, 2015

Asia Myanmar forecasts budget deficit Myanmar has forecast a continued budget deficit of 5.22 percent of the gross domestic product (GDP) in the next fiscal year of 2015-16, exceeding the target of 5 percent of GDP deficit recommended by the International Monetary Fund (IMF). A consultation workshop of the 2015-16 pre-state budget has called for bringing the budget deficit growth under control to enable it does not exceed 5 percent of the GDP, official media reported yesterday.

Trade bill no impediment to Pacific deal A delay in finalizing legislation to streamline the passage of trade deals through the U.S. Congress should not push back the timetable for completing a Pacific trade deal, a senior State Department official said. Under Secretary for Economic Growth, Energy, and the Environment Catherine Novelli said even if lawmakers do not vote on so-called fast track legislation until April, it will not stop negotiators from pressing ahead with the 12-nation Trans-Pacific Partnership (TPP). New Zealand Trade Minister Tim Groser said on February 26 the deal had to be finished by mid-year.

Hitachi to pay 9.5 euros per Ansaldo share

Japan’s Hitachi will pay Finmeccanica 9.5 euros for each share in the Italian firm’s rail business Ansaldo STS after a dividend distribution adjustment to a previously agreed deal, the companies said in a joint statement. Last month, Finmeccanica agreed to sell its rail business to Hitachi as the Italian aerospace and defence group seeks to cut debt and focus on its core business. The companies agreed at the time that Hitachi would pay 9.65 euros for each Ansaldo STS share, but that figure will be adjusted after the board of Ansaldo proposed paying out a dividend on 2014 earnings of 0.15 euros a share.

Indonesia sees economic growth at 5 pct Indonesia’s economy will grow 5 percent or slower in the first quarter, Finance Minister Bambang Brodjonegoro said. Indonesia’s gross domestic product expanded 5.02 percent for the full year in 2014, and the economy grew a slightly better than forecast 5.01 percent in the fourth quarter from the same period a year earlier. Indonesia’s economic growth slipped to its weakest in five years in 2014 as weak exports and investments dragged, underlining the challenges facing the country’s new President Joko Widodo.

India to face rate decision clashes Government and Reserve Bank of India might position at opposite sides of the economic strategy Neha Dasgupta and Manoj Kumar

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aving agreed last week to formally adopt inflation targeting as a guiding star for monetary policy, India’s government and central bank remain at odds over how crucial decisions are made.

Both sides support the setting up of a Monetary Policy Committee, as first officially proposed in 2014 when a different government was in power, and Reserve Bank of India Governor Raghuram Rajan was just four months into the job.

But, say officials with knowledge of the various proposals, the two sides disagree over everything else - the size of the committee, its composition and whether the central bank chief would have the final say, in the form of a veto.

“There is no convergence,” said one senior policymaker familiar with the issues.

Rajan triumphed this week by binding Prime Minister Narendra Modi’s 10-month-old government to a monetary strategy built around

inflation targeting, following a trend at other major central banks in both developed and emerging market economies.

And on Wednesday, just days after the government presented its first full budget, the RBI unexpectedly lowered its policy rate for the second time this year, backing efforts to revive growth as inflation cools.

The RBI governor, who takes advice from his deputies and a panel of external advisers, said the external advisers were not consulted for the latest rate cut.

Going forward, Rajan, a defender of central bank independence and former International Monetary Fund chief economist, will have to seek common ground with a government that wants its own appointees to have a role in deciding rates.

“Conflict between the RBI and finance ministry cannot be ruled out,” said one finance ministry official.

Currently, there appears to be harmony on the big issues. After

ministers welcomed Wednesday’s RBI rate cut, Rajan gave cautious support for the 2015/16 budget presented by Finance Minister Arun Jaitley days earlier.

“This is a good beginning and we are going to be watchful,” Rajan said.

Holding onto operational independence could be easier for Rajan when things are going comparatively well. For now inflation is falling, the current account deficit is nowhere near the parlous state it was in 2013, the rupee is stable, and the economy, while weak in parts, is picking up momentum.

Politics of committee-making Monetary policy committees have become the norm among major central banks in the world, but how one would work in India is still uncertain, as officials have only held preliminary discussions of proposals.

The government will need to pass through parliament an amendment to

Thai Airways may sell assets to cover 2015 losses Simon Webb and Khettiya Jittapong

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hai Airways International PCL will sell some of its 15.5 billion baht (US$481 million) of noncore assets to cover any losses this year from one-off hits for cutting its fleet and workforce, the company’s president said.

A sharp drop in fuel costs should save Thailand’s national carrier around 16 billion baht in 2015 and return it to operating profit for the first time since 2012, Charumporn Jotikasthira told Reuters in an interview.

But a return to operating profit might not be enough to cover the costs of restructuring, said Charumporn, a former head of the Stock Exchange of Thailand appointed in December by the military junta which seized power last May. “We have our holdings in other companies, we have land, hotels ... we can sell if we need to,” he said.

The airline was singled out as the first of the country’s major state companies to undergo reform by the junta. It has suffered seven consecutive quarters of operating losses due to bloated costs, tough competition and the battering

that the tourist industry took during political protests in Bangkok.

The airline also has debt of US$5.9 billion, the highest among southeast Asian airlines, according to Thomson Reuters data.

Non-core assets that could be sold include a 39 percent stake in budget carrier Nok Airlines and 23 percent of jet fuel distributor Bangkok Aviation Fuel Services.

Charumporn also aims to cut costs and capacity by around 20 percent. The company will sell planes to reduce its fleet to 77 from 101 jets by the end of 2015, he said, incurring impairment charges. He declined to detail the expected charges.

A voluntary early retirement programme would incur another charge of around 5 billion baht in 2015, he said.

The company will stop flying some models, including Airbus 340s and Boeing 747s, he said. Streamlining the fleet to eight types of aircraft from 11 could save around 6 percent of total costs, he said.

Thai Airways will cut routes

throughout the year and reassign aircraft to ensure a higher percentage of seats filled on remaining routes, he said. The target for 2015 is 80 percent versus 68.9 in 2014.

Financial performance should benefit more from the cost cutting in 2016, he said.

More changes would come to management this year, he added.

Three of nine board members would retire and the company is seeking a new chief financial officer.

Thai Airways may go to the equity market to raise fresh funds after turning two quarters of profits but would not recapitalise until restructuring was complete, he said.

Charumporn said he did not think a change in government would impact his plans. The junta has said it will call an election in early 2016.

“Whichever government would need to go this way, there is no other choice,” he said. “It’s better to let us recover, after recovery, that’s another story.”

Reuters

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

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Business Daily | 13

March 9, 2015

Asia A government’s active role in monetary policy-making risks undermining the central bank’s independence and might result in conflict of interests in terms of broader economic priorities Radhika Rao, economist, DBS Singapore Reserve Bank of India Governor Raghuram Rajan

the RBI Act to clear any changes to the central bank’s objectives, officials said.

Any signs of government influence in the central bank’s decisions would worry investors, given India’s history of high spending, which if accompanied by low interest rates could lead to a surge in inflation and deepening debt problems.

“A government’s active role in monetary policy-making risks undermining the central bank’s independence and might result in conflict of interests in terms of broader economic priorities,” said Radhika Rao, an economist at DBS in Singapore.

Investors recognise the merits of reducing the influence of a single individual, even one as trusted as Rajan, and would welcome change at an institution regarded as conservative and hierarchical.

But they wouldn’t want to see India’s central bank coming under the kind of political pressure suspected of taking place in South Korea and Indonesia, for example, or suffering a controversy like one presently gripping Turkey.

Although the RBI is not statutorily independent, as the governor is appointed by the government, it currently enjoys broad autonomy in setting rates.

Things could be different once an MPC is established.

A panel appointed by the central bank has proposed a five-member committee, composed of the RBI Governor, the deputy governor, a central bank executive director and two external members picked by the central bank.

A government-appointed commission, however, has recommended a seven-member panel composed of the RBI Governor, an executive member of the RBI board, along with five external members picked by the government, of which two would be selected in consultation with the RBI. In addition, the government would send a non-voting representative to policy meetings. The commission also recommends that the RBI governor gets veto power over the committee’s

decisions though it should be followed by a public statement.

Some government officials oppose giving the governor veto power, however, while many in the RBI view it as essential if government-appointees are included in the committee.

“If internal (RBI) members are in majority, there is no need for governor to have veto power. If external powers have majority, governor should be given veto power. Otherwise, the central bank’s independence will be compromised,” the policymaker familiar with the RBI’s discussions said.

Chief Economic Adviser Arvind Subramanian declined to address the veto issue when asked by reporters: “We haven’t got to that stage yet.”

Reuters

14 | Business Daily

March 9, 2015

International No more short-term debt for Greece The European Central Bank will not agree to Greece issuing more short-term debt because that would be tantamount to it illegally financing the Greek government, ECB Executive Board member Benoit Coeure said in an German newspaper interview on Saturday. Echoing comments from ECB President Mario Draghi, Coeure told the Frankfurter Allgemeine Sonntagszeitung in comments the ECB would not allow Greece to raise a limit on issuance of short-term debt so that leftist Prime Minister Alexis Tsipras can avert a funding crunch.

Wall Street more convinced of June rate hike Many of Wall Street’s biggest banks are more convinced the Federal Reserve will raise interest rates in June after a strong February jobs report pointed to sustained economic growth and as the jobless rate hit a more than 6-1/2 yearlow. Nine of 16 primary dealers, or the banks that deal directly with the Fed, said they expect a June lift-off date, compared to 10 of 19 who predicted the rate hike in a February 6 poll. All but one expect more than one rate hike in 2015.

Paris Club chief in Cuba to discuss debt The chief of the Paris Club of wealthy creditor nations met Cuban finance officials in what he believed was an unprecedented official visit to Havana to discuss the Communist-led country’s debt. After previous negotiations had stalled in 2000, Cuba and the Paris Club have moved swiftly in the past year toward negotiations over a total debt that Paris Club President Bruno Bezard estimated at US$15 billion to US$16 billion, with France being the largest of the 15 creditors. Bezard said he believed his visit was the first ever to Cuba for a Paris Club leader.

Microsoft sues Kyocera over cell phones Microsoft Corp sued Kyocera Corp for patent infringement, alleging the Japanese company’s Duraforce, Hydro and Brigadier cell phone lines violate seven Microsoft patents. Microsoft asked a Seattle federal judge to impose a U.S. sales injunction against Kyocera’s infringing products, according to the lawsuit. A Kyocera representative could not immediately be reached for comment.

Kyocera’s phones run on the Android operating system, developed by Google Inc. Microsoft has secured patent licensing deals with numerous Android handset manufacturers in recent years, including Samsung Electronics Co Ltd, LG Electronics Inc and HTC Corp.

Largest U.S. shopping mall proposed A Canadian company that owns the largest mall in the United States is proposing a more massive Florida shopping complex that could feature a ski slope, sea lion shows, and a manmade lake where patrons can take submarine rides. Edmonton-based Triple Five Worldwide, started by Iranian rug retailer Jacob Ghermezian, would still need to buy and rezone the 200-acre (80-hectare) tract several miles away from downtown Miami. The project’s cost is estimated at US$4 billion, according to Miami-Dade County Mayor Carlos Gimenez.

Newcomers jump into activist investing The world’s 14 top activists have on average US$16 billion to deploy in full throttle fights, while the newcomers often have less than US$100 million Svea Herbst-Bayliss

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he largest new field of activist investors in years is shaking up corporate America, seeking to tap into billions of dollars in available capital and inspired by the outsized returns of brand-name agitators like William Ackman and Carl Icahn.

The surge could force more companies into costly battles with shareholders over leadership, spinoffs, and buybacks, though some of the new entrants risk being brushed off if corporate boards find they lack good ideas or firepower.

“Everyone wants to be an activist these days. Everyone wants that capital,” said Damien Park, head of consulting group Hedge Fund Solutions.

In the last five months, some 45 hedge funds launched their first ever activist campaigns, according to data from research firm Activist Insight, up from 26 new entrants the same period the previous year, and 15 the year before. The October through March period is traditionally the most active season, coming in the run-up to companies’ annual meetings, usually held in the spring and early summer when boards are elected.

Among the newcomers are firms like H Partners, Chieftain Capital, Isaac Capital, Vertex Capital, Jet Capital and Heng Ren Investments, some of which are taking on big names in the corporate sphere.

H Partners and Chieftain, for example, are pressuring beddingmaker Tempur Sealy to change

This is like playing sports where you can’t simply copy your rival’s playbook and hope to replicate success if your team can’t execute well Wesley Hall, Kingsdale, CEO

its leadership, while Jet Capital is complaining about “poor capital allocation” at SunCoke Energy.

They join more established hedge funds that are also promoting activist campaigns, including Kyle Bass’ Hayman Capital and David Tepper’s Appaloosa Management, which are pushing for former Goldman Sachs banker Harry Wilson, who had been a part of the Obama administration’s auto task force, to join General Motors’ board.

Activism has picked up dramatically since the 2008 financial crisis, but it has been popular before including in the 1970s to late 1980s when financiers including Carl Icahn and Nelson Peltz were called corporate raiders for their strong-arm tactics

used to replace top management and improve value for shareholders.

The surge comes as activist funds outpace traditional long-short-equity rivals’ returns, and draw inflows: Activist funds gained an average 6.3 percent in 2014 -with Ackman returning 40 percent- crushing the average fund’s 3.5 percent increase, Hedge Fund Research data show.

To be sure, an investor who simply tracked the Standard & Poor’s 500 index in 2014 would have gained 12 percent.

Last year, 71 dedicated activist funds that oversee US$119.2 billion in assets took in a record US$14.2 billion in new money, nearly three times the US$5.3 billion they pulled in 2013, HFR said. Meanwhile, about US$135 billion in money is sitting on the side-lines earmarked for activist strategies, according to advisory firm Kingsdale Shareholder Services.

Still, with less expertise, fewer connections and less cash, some of the newcomers risk falling flat.

The world’s 14 top activists have on average US$16 billion to deploy in full throttle fights, while the newcomers often have less than US$100 million in assets, Activist Insight said.

“There will inevitably be opportunists who are trying to ride a momentum moment,” said Richard McGuire who runs US$3 billion Marcato Capital Management. “But maybe some of them have a good nose for good ideas and I wouldn’t be as quick to dismiss them.”

Reuters

UK finance minister planning ‘diverted profits tax’ There have been reports that finance minister would come up with some popular and eye-catching measures in his budget

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ritain’s finance minister, George Osborne, is planning to introduce a new “diverted profits tax” targeting multinational companies judged to have shifted profits overseas to avoid tax, the Sunday Times newspaper reported, citing government sources.

The 25 percent levy, more than corporation tax which is set at 20 percent, would be part of the annual budget due to be presented to parliament by Osborne on March 18, the newspaper reported.

Google Inc, Amazon.com Inc and Facebook Inc are among companies that have been widely criticised in Britain for tax avoidance and that could potentially be affected by the new levy, according to the Sunday Times.

The budget will be Osborne’s last

before a national election on May 7 in which his Conservatives face a tight contest with the main opposition Labour Party. Polls suggest the two parties are neck-and-neck, while the picture is complicated by a surge in support for several smaller parties.

Against that backdrop, there have been reports that Osborne would come up with some popular and eyecatching measures in his budget, while remaining focused on fiscal austerity aimed at reducing a still-massive budget deficit.

The Financial Times reported earlier on Saturday that Osborne wished to “pull a rabbit out of a hat” and Treasury officials had been asked to present him with options.

However, Osborne wanted any preelection giveaway to be cost-neutral to fit with the overall fiscal strategy.

The Sunday Times report also said Osborne was in talks with junior coalition partners the Liberal Democrats about raising the threshold from which people pay income tax, a measure that would reduce the tax bill for hundreds of thousands of people.

The threshold, currently set at 10,000 pounds (US$15,035), is due to rise to 10,600 pounds in April but the newspaper reported Osborne wanted to raise it by a further 200 pounds in addition to what was already planned.

The Treasury could not immediately be reached for comment. Details of the budget are not supposed to be made public before they are revealed to parliament, although it is not unusual for snippets of information about what is planned or what is under discussion to be leaked to the press.

Reuters

Business Daily | 15

March 9, 2015

Opinion Business

wires

Living the Saudi dream

Leading reports from Asia’s best business newspapers

Anas Alhajji

Chief Economist at NGP Energy Capital Management

PHILSTAR Merchandise exports likely increased sharply in January from the same period last year due to a low base and the recovery in export markets, a foreign bank said in a report.

“A low base is likely to support a sharp rebound in exports, but the sequential recovery is likely to be more modest,” UK-based investment bank Barclays said in a research note. The bank has forecast a 16.8-percent growth in outbound shipments in January, a reversal of the 3.2-percent contraction recorded in the same month in 2014.

THE KOREA HERALD South Korea’s weighty corporations will hold their shareholders meetings starting this week, where minority stake owners and the national pension fund operator are expected to gain a bigger voice, market watchers said yesterday. The assembly for shareholders began last month, but big-name companies, including Samsung Group and Hyundai Motor affiliates, have scheduled the meetings in the coming two weeks, mostly on Fridays that have been duly named the “super” day of shareholders. According to announcements, 738 listed firms are scheduled to hold the meetings by the end of the month.

BANGKOK POST The Bangkok condominium market performed more poorly than expected in the first three quarters of 2014 due mainly to political tensions, but a recovery started to take hold in the fourth quarter as confidence among developers and consumers alike improved in line with a return of political stability. This year the number of units is expected to grow by another 10%, with a focus on higherpriced condos because high household debt levels have curbed purchasing power at the lower end of the market.

THE JAPAN NEWS The nation’s three megabanks are to form a comprehensive tie-up separately with the Asian Development Bank to support infrastructure investment for emerging Asian nations, it has been learned. Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp. and Mizuho Bank, which will continue to extend financing to emerging nations, are expected to give advice on business management to the governments and public enterprises of such countries through the tie-up, sources said. The tie-up between the ADB and the Japanese banks is seen as targeted at the projected Asian Infrastructure Investment Bank (AIIB), an initiative spearheaded by China, they said.

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audi Arabia wants it all: to salvage OPEC, achieve income diversification and industrialization, and preserve its market share in crude oil, petroleum products, petrochemicals, and natural gas liquids (NGLs).

Whether the Saudis succeed will be determined largely by the shale-energy industry in the United States.

The US shale revolution divided OPEC according to the quality of its members’ crude oil. Exporters of light sweet crude – such as Algeria, Angola, and Nigeria – lost nearly all of their market share in the US, while exporters of sour or heavier crude, including Saudi Arabia and Kuwait, have lost little.

Because almost all crude oil produced by the Gulf States is sour, and most of the global surplus is sweet, any production cut by Saudi Arabia and its neighbours would not drive prices back up and rebalance the oil market. The only way to do that – and prevent an OPEC breakup – would be to reduce the production of light sweet crude, including by US producers, which would thus lose market share. If this occurred, oil prices could be expected to rise again relatively quickly.

If, however, Saudi Arabia remains more committed to its strategic development objectives, low oil prices could persist. Since the 1970s, several OPEC members, led by Saudi Arabia, have worked to diversify their industrial base by promoting sectors with a comparative advantage, such as petrochemicals, and building megarefineries to enable the export of value-added products. At the same time, to boost revenues, they expanded exports of NGLs, which are not counted in OPEC quotas.

But just when these countries were beginning to achieve success, the US shale revolution emerged, threatening all three of their main strategic objectives.

The key to the competitiveness of Saudi Arabia’s petrochemical industry was its use of natural gas and ethane, which was far less expensive than the oil product naphtha on which its global competitors depended.

Now that the US is producing massive amounts of low-price natural gas and ethane, Saudi Arabia’s competitive advantage – and market share – is beginning to deteriorate.

The same goes for refining.

Since the US does not allow exports of crude oil, the shale revolution pushed down the US benchmark price, the West Texas Intermediate, relative to international crude prices, sometimes with differentials as wide as US$20. US refiners took advantage of lower prices to increase their exports of petroleum products – so much so, that they are now threatening the market share of Saudi refineries in Asia and elsewhere.

Likewise, US companies have increased NGL production considerably, enabling the country to slash its liquefied petroleum gas (LPG) imports and expand its NGL exports significantly. As a result, Saudi Arabia has lost market share to US producers in Central and South America.

But the recent collapse in oil prices could change this dynamic. In refusing to cut its own production, Saudi Arabia seems to be hoping that low oil prices will drive down investment in US shale energy, undermining production growth there.

Low prices may already have contributed to delays in America’s decision to begin exporting crude

The decline in prices is creating serious challenges for Iran, the Kingdom’s main rival in the region, as well as for the unstable, oil-dependent economies of Russia and Venezuela

oil, as well as to the political viability of US President Barack Obama’s veto of the Keystone XL pipeline, intended to transport oil from the Canadian tar sands to the Gulf of Mexico for export.

Add to that the delay in the opening of the Mexican energy sector, and it seems that low oil prices could amount to a net gain for the Kingdom.

Though Saudi Arabia’s motivation in not cutting production was probably almost entirely economic, low oil prices could also offer distinct political advantages. Most notably, the decline in prices is creating serious challenges for Iran, the Kingdom’s main rival in the region, as well as for the unstable, oil-dependent economies

of Russia and Venezuela. None of these countries has adequate savings to cushion the blow of reduced revenues.

Under these circumstances, it seems likely that Saudi Arabia will continue to refuse to cut oil production, leaving prices low until market forces trigger a rebound. And even then, the price increase could be limited. After all, game theory dictates that, once the surplus is eliminated, the dominant producer must prevent oil prices from rising high enough to cause it to lose market share again. That means that Saudi Arabia will try to compel non-OPEC countries, mainly in North America, to keep oil-production increases commensurate with growth in global demand.

In short, it is in Saudi Arabia’s interest for oil prices to rise high enough to sustain its own economy, but not so high that they can sustain significant increases in non-OPEC supply. In order to keep prices in this ideal range, Saudi Arabia may even increase production again.

This strategy is not without risk. In the short run, excessively low prices could trigger political instability in some oil-producing countries, driving up prices. Similarly, delays in upstream investment, especially megaprojects, could push prices above the ideal level in the medium and long term.

But perhaps the biggest risk lies with the US shale-oil industry.

Over the next few years, US producers are likely to retrench, focus on sweet spots, improve technology, reduce costs, and increase production once again.

At that point, Saudi Arabia’s current strategy may no longer be adequate to sustain its market dominance.

Project Syndicate

16 | Business Daily

March 9, 2015

Closing Shenzhen-Hong Kong link to include ChiNext

More Chinese cities to have legislative power

The Shenzhen-Hong Kong stock connector scheme will include representative stocks from the main board, the small, medium-sized enterprises board and the ChiNext growth board, the general manager of the Shenzhen Stock Exchange said yesterday. “We initially will select some ChiNext stocks with relatively high market value, relatively stable performance, that are relatively good, with relatively active trading, and with burgeoning industries at the centre,” said Song Liping, on the sidelines of the annual session of the National People’s Congress, the country’s parliament.

A total of 284 Chinese cities may have the power to make local laws, according to a draft revision to the Legislation Law, tabled for reading at the on-going national legislative session (pictured) yesterday. So far only 49 cities have legislative power, including 27 provincial and autonomous regional capitals, four cities in special economic zones and 18 cities selected by the State Council.

Although the bill expands legislative power to 235 more cities, it imposes strict limitation in a bid to avoid overlapping and maintain the unity of the legal system.

Hotel investors battle for yield as sector heats up With travellers still keeping an eye on costs the higher yields right now are in the budget sector

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nvestors are expected to pump more money into buying, converting or building hotels in 2015 than in any year since the start of the global financial crisis, with a focus on budget and ‘buzz’.

In a sector enjoying the benefits of economic recovery and growing traveller numbers, yields are attractive compared to alternative real estate like office, industrial or retail.

But investors say there are signs of overheating in some areas, making it more challenging to hit target returns that are typically around 6.5 to 7.5 percent.

That is forcing them to seek out niches and jump on new trends like lifestyle hotels, serving a generation of travellers looking for a hip place to hang out, not just somewhere to sleep.

Typically featuring smaller rooms, local-themed design and buzzy lounges, lifestyle covers both luxury and budget classes and includes hotels such as Starwood’s W, IHG’s Indigo, Citizen M, and Moxy. Hilton, Best Western and Germany’s Steigenberger

are among those recently announcing new brands in this space.

Watching costs Prestige ‘trophy’ hotels in cities like New York, London and Paris will continue to be in demand, executives at the Berlin conference said, as institutions or high net worth individuals seek assets that will still be standing in 50

Saudi Arabia tops India as largest weapons importer

years’ time.

But with travellers still keeping an eye on costs, the higher yields right now are in the budget sector. Chains such as Marriott say growth in their room numbers will be mainly at the economy end.

Consultants Christie + Co suggest those seeking higher yields should consider southern Europe such as Portugal, Italy, Greece and Spain, where budget hotels

can account for up to 58 percent of supply and where assets are often in need of some work. In a report, it said prime hotel yields can vary between 14 and 18 percent in Greece.

Another consultancy, HVS, said high prices in cities such as London and Paris were leading investors to look at hotels in smaller towns and cities. That is especially visible in Britain,

where occupancy rates and revenue per available room in cities such as Manchester and Edinburgh have been rising as consumers take more mini-breaks.

“Asset-light” The branded hotel groups have been moving to an ‘assetlight’ strategy in recent years, leaving it to others to own the hotel real estate, while they manage them under franchise or lease contracts.

Property giant Jones Lang LaSalle predicts US$68 billion in hotel real estate transactions in 2015, a 15 percent increase on 2014, and the best year since 2007.

Of that around US$24.7 billion is expected to be invested in Europe, the Middle East and Africa, with North American and Chinese investors set to be the major drivers.

According to a report by HVS, investment volumes in European hotel real estate rose 83 percent in 2014. Investors from North America, looking increasingly at Europe as prices rise at home, accounted for 26 percent of the total investment on the continent, up 13 percentage points from 2013, it said.

Even Qatar Airways is getting in on the act, announcing the purchase of the Sheraton Skyline at Heathrow airport, which it will rebrand as the Oryx, as part of the airline’s plans to expand in travel-related business.

Reuters

More cooperation with Russia China to speed up drafting hina vowed yesterday to plough ahead on of anti-corruption law

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audi Arabia became the largest importer of defence equipment last year, surpassing India, consultants IHS Inc. said.

Inbound shipments jumped 54 percent in 2014 when Saudi Arabia also became the top trading partner with the U.S., the biggest exporter, IHS said in a report yesterday. Saudi Arabia will import 52 percent more defence equipment this year, to US$9.8 billion, it said. The Boeing Co. was the top company exporter last year, followed by Lockheed Martin Corp. and Raytheon Co., according to the report.

Global defence trade rose for a sixth consecutive year to US$64.4 billion, with demand from emerging economies for military aircraft, IHS said. Saudi Arabia and the United Arab Emirates, the fourth-largest importer, spent US$8.6 billion on defence systems last year, more than Western Europe combined, IHS said.

India and China followed Saudi Arabia in the list of top importers. Russia’s exports are expected to drop from a record in 2015 with major programs closing and falling oil prices affecting clients such as Iran and Venezuela.

economic and diplomatic cooperation with Russia despite Western sanctions against Moscow over the conflict in Ukraine, stressing their relations are based on “mutual need”.

“The practical cooperation between China and Russia is based on mutual need, it seeks winwin results and has enormous internal impetus and room for expansion,” said Beijing’s foreign minister Wang Yi. As well as sanctions, Vladimir Putin’s Russia is facing a sharp decline in its ruble currency amid an economic crisis fuelled largely by plunging oil prices.

Both countries are permanent members of the United Nations Security Council, where they have in the past jointly used their veto power against Western-backed moves such as in the civil war in Syria.

Wang told reporters on the side-lines of the National People’s Congress, China’s Communistcontrolled parliament, that Beijing and Moscow will “continue to carry out strategic coordination and cooperation to maintain international peace and security”.

Wang’s comments signal that Putin can count on continued Chinese economic and diplomatic support.

hina plans to develop national legislation to fight corruption, according to a report delivered by top legislator Zhang Dejiang yesterday.

The country will also work out revisions to the Law on Administrative Supervision, said Zhang, chairman of the National People’s Congress (NPC) Standing Committee, while delivering a work report at the annual session of the top legislature.

Making an anti-graft law is in line with a decision on rule of law adopted by the Communist Party of China Central Committee in October last year.

The anti-graft legislation should be introduced as quickly as possible and the system of sanctions and prevention improved with the goal being a mechanism which means “officials dare not, cannot and do not want to be corrupt,” according to the decision.

The top legislature is mulling imposing harsher punishment on those committing crimes of embezzlement and bribery.

The plan for making an anti-corruption law is part of the NPC’s efforts to advance legislation in key areas to promote economic and social development.

Bloomberg News

AFP

Xinhua

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