Macau business daily, Apr, 3rd, 2015

MOP 6.00 Closing editor: Joanne Kuai Publisher: Paulo A. Azevedo

D

og tired. Prominent animal welfare group ANIMA is to petition the Chief Executive. They want to close the Canidrome. Asia’s only greyhound racing track. Macau (Yat Yuan) Canidrome Co. Ltd.’s concession expires on October 31. ANIMA president Albano Martins condemns the sport. And says it is of insignificant economic value. The petitioners say the land the stadium occupies should be returned to the community. And that they will attend to the future wellbeing of the animals

Year IV

Number 763 Friday April 3, 2015

ANIMA to petition CE

Page

SJM back on top

L

eading the pack. SJM Holdings topped the gaming revenue league in March. Business Daily data assigns it 23.2 pct of the take. The total pie declined 39.4 pct to MOP21.5 billion. Sands China follows, then Galaxy, Melco Crown, Wynn Macau and MGM China

Page 5

3

Bank deposits and money supply declined in Feb while loans went up

Page 2

Birmingham City FC to show operating capital of HK$120 mil by end-May

Page 6

Thailand consumer confidence tumbles

Page 12

Japan’s companies don’t expect inflation to improve

Far horizons

Page 13

When the going gets tough, the tough get going.

Gaming promoter Iao Kun Group announced a net loss of US$60.1 million for 2014. But says it’s much better placed financially to ride the downturn. This year’s objective is to further expand. Mulling opportunities in Australia, the U.S., Vietnam, Korea and the Philippines

Page 6

Getting the ducks in a row Deadline extended. Hong Kong-listed Jimei International Entertainment Group Ltd. has announced a 3-month extension to signing up to a lucrative deal. Via a variable interest entity (VIE) agreement. This would enable Jimei to indirectly participate in the gaming promotion business in a local casino

www.macaubusinessdaily.com

Page 4

Knock, knock...

HSI - Movers April 2

Name

%Day

Want Want China Hol

5.28

China Unicom Hong Ko 3.53 Tingyi Cayman Island

3.06

CITIC Ltd

2.38

China Shenhua Energy 2.16 Henderson Land Devel

-0.81

CLP Holdings Ltd

-0.98

Power Assets Holding

-1.02

China Mengniu Dairy

-1.11

Ping An Insurance Gr

-1.38

Source: Bloomberg

I SSN 2226-8294

Brought to you by

China’s currency has become hypnotic.

Attracting the interest of every analyst these days. The internationalisation process is taking the RMB to the very doors of the United States.

While depreciation against the euro appears imminent

Pages 8 & 10

2015-4-3

2015-4-4

2015-4-5

23˚ 27˚

23˚ 28˚

22˚ 28˚

2 | Business Daily

April 3, 2015

Macau Sam Chan Io to lead Legal Aid Commission Sam Chan Io has been appointed President of the Legal Aid Commission. The decision was published yesterday in Macau’s Official Gazette. The new president, formerly the Vice President of the Commission, will replace André Cheong Weng Chon, who has been appointed Commissioner Against Corruption in the second term of the Chief Executive. Prior to this André Cheong served as Director of the Legal Affairs Bureau. Succeeding Sam Chao Io, Diana Maria Vital Costa has been appointed Vice President of the Commission. The dispatch also announced that Iao Hin Chit replaces Lam Chi Long as a member of the Legal Aid Commission.

Resident deposits down 3 pct in February In February, both bank deposits and the money supply declined.

Nevertheless, total loans were up Kam Leong

kamleong@macaubusinessdaily.com

D

eposits by local residents registered a month-on-month decrease of 2.6 per cent for a total of MOP496.6 billion (US$62 billion) in February due to foreign currency deposits, especially the Chinese yuan, dropping, the latest official data released by the Monetary Authority of Macau (AMCM) revealed yesterday.

According to AMCM, the deposits of Macau patacas (MOP) and US dollars by Macau residents experienced a very slight increase of 0.1 per cent and 1.5 per cent in February when compared to the first month of this year.

However, Chinese yuan deposits fell by 8.7 per cent month-on-month, whilst deposits of Hong Kong dollars decreased 3.1 per cent in February 2015.

In fact, AMCM data indicates that deposits in local banks totalled MOP820.1 billion in the month, of which Hong Kong dollars accounted for the largest proportion at 42.1 per cent, followed

by US dollars at 20.4 per cent of the total. The local MOP currency, however,

only accounted for 19.2 per cent while the Chinese yuan occupied 42.1 per cent of the total.

Although deposits by residents fell, those by nonresidents in the city grew 1.6 per cent month-on-month in February to MP244.7 billion.

In addition, public sector deposits with the banking sector increased 3 per cent month-on-month, amounting to MOP105.8 billion.

Money supply down, too In addition to bank deposits, the city’s money supply, M1 and M2, decreased by some two per cent in February, as currency in circulation grew 8.1 per cent to MOP12.1 billion whilst demand deposits fell 4.5 per cent month-on-month.

M1 refers to that part of the money supply that includes physical coins and currency, as well as readily liquid assets such as on-demand bank deposits, and money held in cheque accounts. M2 is M1 plus all time-related deposits, savings deposits, and noninstitutional money market funds.

According to official data, the M1 supply of the city had decreased to MOP60.8 billion from MOP62.2 billion in the previous month, representing a drop of 2.2 per cent. Meanwhile, the M2 supply totalled MOP481.7 billion, down 2.4 per cent, as compared to the MOP493.4 billion of January.

Nevertheless, on a year-onyear comparison, M1 and M2 increased 5.5 per cent and 5.4 per cent, respectively.

Of the M2 supply, the share of Hong Kong dollars accounted for 50.3 per cent despite representing a decrease of 0.4 per point month-onmonth, followed by the local

MOP currency and national Chinese yuan, at 27.6 per cent and 11.9 per cent, respectively.

The share of US dollars, at the same time, increased 0.3 per cent, accounting for 8.1 per cent of the total.

Yet loans increased Meanwhile, the total loans in the city increased to MOP701.2 billion in February from MOP693.7 billion in the first month of the year, based on AMCM data.

Domestic loans to the private sector amounted to MOP346.2 billion of the total, of which MOP94.2 billion was MOP-denominated while

some MOP224.9 million was denominated in Hong Kong dollars, accounting for 27.2 per cent and 65 per cent of the total.

In terms of external loans, which grew 1.8 per cent month-on-month, more than half of the total – MOP193.6 billion of MOP355 billion - was denominated in US dollars.

The loan-to-deposit ration for residents rose 1.2 percentage points month-onmonth to 60.2 per cent at the end of February, said AMCM, which also indicated that the ratio for both resident and non-resident sectors grew 1.5 percentage points month-onmonth to 85.5 per cent.

business daily available at selected news where it matters

Education and Youth Affairs Bureau distribute MOP1.1 billion in subsidies

T

he Education and Youth Affairs Bureau (DSEJ) distributed approximately MOP1.1 billion (US$137.8 million) during the fourth quarter of 2014 for individuals and private institutions, it was revealed by the Official Gazette.

In terms of private institutions, Pui Ching Middle School received the largest slice totalling MOP48.3

million. This amount involved subsidies for school fees, increasing the ratio of class per teacher or student per teacher, the Mathematics Championship and supporting a competition organised by Pui Ching Middle School promoting the Macau Basic Law. In the list there are many more private institutions including the

Chinese sections of St. Joseph’s Secondary School 5 Macau, which was awarded various subsidies totalling MOP25.5 million. The English Sacred Heart Canossian College was also one of the many institutions to receive subsidies, totalling around MOP23.9 million.

The financial aid distributed by DSEJ also includes MOP168.6 million

for students to buy school books and MOP166.1 million to teachers for professional development, direct subsidy and monetary awards for the years accumulated as teachers in Macau.

In terms of the Continuing Education Development Scheme for the years 2014 to 2016, DSEJ also paid around MOP78 million.

Business Daily | 3

April 3, 2015

Macau Almost 400 taxi violations in March A total of 391 taxi violations were recorded last month, the Public Police Security Force (PSP) announced on Wednesday evening. According to PSP, nearly half of the total prosecuted cases involved taxi drivers overcharging or rejecting passengers, accounting for 91 cases and 102 cases, or 23 per cent and 26 per cent of the total, respectively. In addition, the PSP announced that it had received 865 complaints about noise last month, whereby 266 offenders received a caution, 8 were prosecuted, and the other outcomes remain unconfirmed.

ANIMA to petition CE to close Canidrome The animal protection group does not want the greyhound racing company’s concession to be renewed when it expires at the end of this year Joanne Kuai

Joannekuai@macaubusinessdaily.com

M

acau Society for the Protection of Animals (ANIMA) is to organise a petition requesting Chief Executive Chui Sai On not to renew the concession for Macau (Yat Yuen) Canidrome Co. Ltd. that owns the greyhound racing track. The concession will expire on October 31.

“It makes no sense for the activity (greyhound racing) to continue existing in Macau. This kind of animal cruelty is unacceptable.

There is no economic reason since its contribution to gaming revenue is insignificant. The plot of land belongs to the government and should be returned to the community in Fai Chi Kei,” President of ANIMA, Albano Martins, told Business Daily. “We are committed to having it shut down.”

Greyhound racing at the Macau Canidrome generated gross revenues of MOP306 million in 2014, some 16 per cent less than the year before, according to the latest data from the Gaming Inspection and Co-ordination Bureau (DICJ). The figures also reveal that it takes 0.87

per cent of the total gross revenue from various gaming activities in Macau.

Mr. Martins added that the Canidrome has been paying less percentage of its profits as tax to the government, which is unfair, and ANIMA does not understand why.

Furthermore, since this non-casino gaming activity has been broadcast

by TV, it could easily generate illegal betting over which the government doesn’t have full control, Mr. Martins added.

The head of the city’s leading animal welfare group also believes that after closing the greyhound track the plot of land located in a densely populated neighbourhood of the Northern District of Macau could be put better use, such as a park or car park or even to build public housing.

The government is considering amalgamating Macau’s horse and greyhound racetracks. Last week, during this year’s Policy Address Q&A session Chief Executive Fernando Chui Sai On mooted this in

response to a suggestion by Assembly member Lam Heong Sang that the government build community facilities on the site now occupied by the dog racing track.

Earlier this week, Managing Director and Deputy President of the Canidrome, Angela Leong, said that they have not started discussing renewing the concessions with the government yet, and even if the horse and greyhound racetracks were to be combined many technical issues would need to be resolved. She also said that the historic value of the track should not be overlooked.

However, ANIMA stands firm that the city should put a stop to this sport as hundreds of greyhounds suffer injuries and die (often euthanised even when healthy) every year.

Regarding the future of the dogs should the track close, the ANIMA head said they have this covered.

“We are preparing the second phase of our shelter. We want the government to [allow] ANIMA in the venue [Canidorme] for one year so that we can gradually transfer them to the ANIMA shelter,” said Mr. Martins. “Plan B would be to transfer all the dogs to Portugal.”

A press conference regarding the petition will he held on Saturday at ANIMA’s headquarters in Coloane.

The group will collect signatures directly from citizens and online until July 20. ANIMA is also organising an international roundtable on Macau greyhound racing on July 23 with guests from Mainland China, Hong Kong, Australia and other countries and regions to discuss further steps regarding the closure of the Canidrome, Mr. Martins added.

Sino-Chinese Fund MOP340 mln in subsidies mulls transport & for social housing telecom infrastructure waiting list applicants

T

he China-Portuguesespeaking Countries Fund of the China Development Bank is to put its investment focus on infrastructure such as transport and telecommunications, the Vice-President of the ChinaAfrica Development Fund of the Bank, Wang Yong, said on Wednesday.

According to Chineselanguage newspaper Macao Daily, speaking at an exchange session between Portuguese-speaking Countries and Macao’s entrepreneurs, Mr. Wang said that the investment period for each project will not be more than 10 years, indicating that the most appropriate length of investment is around five years, with another five years for withdrawal.

Mr. Wang said the Fund

will not invest in the real estate market and will not offer business guarantees, stressing that the Fund will comply with a market-based operation mode instead of a supporting mode.

The scale of the Fund, established in 2013, amounts to US$1 billion with initial funding of US$125 million, and seeks to promote business investment by supporting Chinese and Macau companies co-operating with companies from Portuguesespeaking companies in terms of investment.

On Monday, the city’s Secretary for Economy and Finance, Lionel Leong Vai Tac, revealed that Macau is seeking investments via the Fund, hoping to increase the return rate of the fiscal reserves investment of the Special Administrative Region.

T

he government’s temporary subsidies for families on the waiting list for social housing has amounted to nearly MOP340 million (US$42.58 million) for more than 7,300 family applicants since the scheme was established in December 2008, the director of the Housing Bureau, Ieong Kam Wa, said in response to legislator Si Ka Lon’s interpellation.

In his written enquiry, Mr. Si complained that the evaluation period for social housing, as well as the time between each application period, were too long, querying whether the Housing Bureau would consider establishing a related scheme to regulate such issues.

“Social housing is public housing that takes care of the poor. Opening the application

every few years, and the slow process of assessing the applications, will directly affect the immediate support [by the government] for waiting families,” Mr. Si wrote.

However, the Housing Bureau head does not perceive that the Bureau is responsible for the long waiting evaluation that the legislator claimed, citing the latest applications for social housing in 2013 as an example, the results of which were only announced in December 2014. “[The 2013 application] received a total of 6,146 applications. The Housing Bureau had already finished initial evaluation in December 2013, finding that more than 70 per cent of the applicants had not submitted enough documents

or the complete information required. As a result, [the Housing Bureau] could not effectively undertake the related evaluation,” Mr. Ieong claimed.

Meanwhile, in response to the legislator’s question about whether the government will introduce a new measure to protect families in urgent need of housing, Mr. Ieong revealed that the Housing Bureau had started a review of the law related to social housing, indicating a public consultation would be conducted soon.

According to Mr. Ieong, the Bureau will review the conditions of applicants and the related system plus the existing scheme for richer families as well as the management and penalty scheme applicable to social housing.

K.L.

4 | Business Daily

April 3, 2015

Macau

Jimei’s junket deal with local gaming promoter deferred three months The deal, known as a variable interest entity (VIE) agreement, would enable Jimei to indirectly participate in the gaming promotion business in a local casino Stephanie Lai

sw.lai@macaubusinessdaily.com

H

ong Kong-listed Jimei International Entertainment Group Ltd., headed by Macau veteran junket operator Jack Lam Yin Lok, has announced that it is extending the deadline on an agreement by three months that would enable it to indirectly participate in a VIP gaming promotion business in the city.

This announcement was filed with the Hong Kong Stock Exchange after trading hours on Tuesday.

The deal referred to is a variable interest entity (VIE) agreement to be concluded between Jimei and the Macau-incorporated gaming promoter New International Club Ltd., which is the holder of a gaming promotion licence issued by the city’s casino regulator, the Gaming Inspection and Co-ordination

Bureau (DICJ), Jimei announced in the February 3 filing.

The gaming promoter New International Club, whose sole director is local

resident Carlos José Lok, has been discussing a gaming promotion arrangement with Wynn Macau, Jimei’s February 3 filing reads. The filing also notes that New

International Club expected that there will be ‘not less than 30 gaming tables’ in the designated VIP gaming rooms located in Wynn Macau and that the promoter will be entitled to receive ‘not less than 40 per cent of the gaming win/loss generated’ from the gaming tables in the said VIP rooms.

In the Tuesday filing, Jimei said a definitive VIE agreement, originally targeted for execution by March 31, is now extended to June 30.

The company also stressed that no binding agreement on the VIE structure has been entered into by Jimei, New International Club and Mr. Lok. Mr. Jack Lam, who chairs Hong Kong-listed Jimei International Entertainment, is also engaged in the gaming promotion business in eight local casino hotels via the

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

In the Tuesday filing, Jimei International Entertainment also confirmed that the arrangement with Crown Resort Ltd.’s Crown Perth Casino in Australia - which allows junket patrons or players to conduct gaming on the property - commenced operation in February.

Jimei also noted that it will be ‘continuously exploring new business opportunities to expand its gaming promotion business in Southeast Asia’, according to the latest filing.

McMac Co. Ltd. (McDonald’s Macau)

31st March Advertisement.indd 1

3/31/2015 6:44:58 PM

Business Daily | 5

April 3, 2015

Macau

SJM Holdings returns to top of Macau gaming rankings The company founded by Stanley Ho Hung Sun is back at the top of the industry in terms of market share, having been usurped by Sands China in February João Santos Filipe

jsfilipe@macaubusinessdaily.com

per cent of the market, while in February it occupied only 8.6 per cent. Meanwhile, MGM China was relegated to sixth position although it took 10.2 per cent of the market share while in the second month of the year it took 9 per cent.

Encouraging signs in market

S

JM Holdings topped the gaming industry rankings in terms of market share during March, according to the calculations of Business Daily. Despite the fact that industry gaming revenue declined 39.4 per cent year-on-year in the third month of the year from MOP35.5 billion (US$4.45 billion) to MOP21.5 billion, the gaming operator increased its share from 23.1 per cent in February to 23.2 per cent.

Following the company founded

by Stanley Ho Hung Sun comes Sands China, owner of The Venetian. Sheldon Adelson’s company took 21.4 per cent of the market during March but lost first place in relation to February when it reached a share of 23.3 per cent and was at the top of the Macau industry.

Galaxy was also one of the losers of the month, as from February to March its slice of market share was cut from 21.5 per cent to 20.1 per

cent. However, the company founded

by Lui Che Woo, and which is going to open Phase II of Galaxy Macau and Broadway at Macau in May held onto third position.

March was not an easy month for Melco Crown. The company that controls City of Dreams and that is expecting to start operating the Studio City resort by the end of the year reached

a share of 13.9 per cent during March.

However, this means that according to Business Daily calculations the group had lost 0.5 per cent of the market since February when its slice of the pie was 14.4 per cent.

At the bottom of the market share table appear Wynn Macau and MGM China. Steve Wynn’s company recovered fifth place and took 11.2

Despite the 39.4 per cent plunge in gaming revenues, there are some encouraging signs related to VIP gaming, according to a Credit Suisse report.

‘Our junket contacts see some initial signs of bottoming. Credit extension is still cautious but the repayment cycle hasn’t deteriorated further’, the report explains. ‘VIP revenue trends unusually lead the premium mass segment by about three months. If the VIP segment stabilises, premium mass may follow in the next few months’.

Concerning this month, a Deutsche Bank report says that the industry in on track for a 35 per cent decline in revenues.

‘Over the last four years, April, on average, has been down roughly 4.8 per cent from March gross gaming revenue.

Should the average hold firm, April would fall around 35 per cent yearon-year’, the German bank surmised.

Gaming revenues market share August

September

October

November

December

January

February

March

SJM

22.4%

20.9%

23.5%

22.6%

23.6%

21.9%

23.1%

23.2%

Sands China

24.6%

21.8%

23.7%

22.5%

20.7%

20.4%

23.3%

21.4%

Galaxy

21%

22.9%

21.4%

21.5%

20.2%

22.5%

21.5%

20.1%

MPEL

13%

12.7%

14.3%

13.4%

14.9%

14.7%

14.4%

13.9%

MGM

8.9%

10.8%

8.2%

11%

10.5%

10.10%

9%

10.2%

Wynn

10.1%

10.9%

8.9%

9%

10.2%

10.4%

8.6%

11.2%

Total

100%

100%

100%

100%

100%

100%

100%

100% Source: Business Daily

Niraku’s global IPO generates net proceeds of HK$278 mil

J

apanese pachinko operator Niraku GC Holdings, Inc. announced yesterday that it has received net proceeds of about HK$278 million (US$35.9 million) from its global offering, based on the offer price of HK$1.18 per share.

Niraku’s offer shares, initially floated as a Hong Kong public offering, have been oversubscribed by about 3.05 times: the pachinko operator has received a total of 2,768 valid applications under the Hong Kong public offering for a total of 91,560,000 Hong Kong offer shares, representing about 3.05 times the 30,000,000 shares initially available for subscription.

Niraku’s offer shares initially offered under the

international offering has only registered a slight oversubscription, the company said.

The company plans to spend 90 per cent of the net proceeds on opening five pachinko halls in northeastern Japan over the next two financial years, as well as investing in the company’s information technology system.

Dealings in the shares of Niraku on the Hong Kong Stock Exchange will begin on April 8.

Niraku is the second pachinko operator listed in Hong Kong following Dynam Japan Holdings Co., a Tokyobased pachinko company that led the way to the city with an IPO there in August 2012.

S.L.

6 | Business Daily

April 3, 2015

Macau

Gaming promoter Iao Kun announces US$60.1 mln loss João Santos Filipe

jsfilipe@macaubusinessdaily.com

G

aming promoter Iao Kun Group Holdings has announced a net loss of US$60.1 million (MOP479.9 billion) for the annual year of 2014. This result was mainly justified by the change in fair value for the acquisition of King’s Gaming, Bao Li and Oriental VIP rooms, which alone accounted for losses of US$60.9 million.

The loss of US$60.1 million represents a very different scenario from the annual results of 2013 when Iao Kun reported a profit of US$5.4 million (MOP43.1 million).

For the year of 2014 Iao Kun generated a total of US$233.8 million in gaming revenues, which is a decrease of 1.3 per cent year-onyear, as the junket company generated around US$236.9 million in 2013 from gaming revenues.

In relation to the fourth quarter of 2014, the company showed a profit of US$5.7 million, while in the same period of 2013 it recorded a loss of US$5.5 million. This change was justified by the company in the conference call about the results by a “higher win rate”.

The anti-corruption campaign in Mainland China has been affecting the number of VIP players coming to Macau to gamble. However, the Chief Executive Officer of the group, Kenny Leong, is hoping that the effects of the crackdown will be over by the end of the year.

“I think the crackdown will continue. But eventually or gradually I would say it will come to an end.

When would that be? I guess it’s anybody’s guess. We’re hopeful that it

may end before the end of the year”, Mr. Leong said when asked about this during the conference call.

“VIP players will eventually return to Macau and for the time being maybe they are doing some betting in the Philippines or maybe going to Korea. But I guess when the crackdown settles down they’ll return to Macau”.

The CEO of Iao Kun is also confident that the company will benefit from the declining [revenues] of the gaming industry as he believes the company is in a comfortable position to endure the rough times.

“There are more operators that are likely to go out of business because they have no capital or they carry a lot of bad debt. Also, there are outside investors asking for their money back.

The goal of the company is to expand during this year while looking at opportunities in Australia, the U.S., Vietnam, Korea and the Philippines

I think this will help us because we’re among the most financially healthy”, he explained. “The big players are not going out of business. They’re just closing some of their VIP rooms.

Instead of having 12 or 13 rooms they may cut the number down to seven or eight”.

For the time being, Iao Kun has given up on listing on the Hong Kong Stock Exchange after its application was denied. The future focus will be on searching for opportunities outside of Macau.

“We’re actively assessing the opportunities outside of Macau.

This is our strategy and our plan for this year”, Leong said. “Australia, the U.S., Vietnam, Korea and the Philippines are all areas we’re looking at”.

Birmingham City FC to show operating capital of HK$120 mil by end-May

T

he jailed former owner of Birmingham City Football Club, Carson Yeung Ka Sing, said on Wednesday that the club could be withdrawn from the English League Championship if it failed to show HK$120 million (US$15.5 million) in operating capital by the end of May, the Court of First Instance has heard.

Yeung, who is now serving six years in prison for money laundering, is seeking to have the court remove receivers Ernst & Young from Birmingham International Holdings Ltd., which controls the football club. Birmingham

International, which took control of the football club in 2009, appointed receivers from Ernst & Young in February to preserve its assets and business.

Yeung’s lawyer told Hong Kong media that if the football club failed to have the HK$120 million in operating capital by the end of next month, the

club would be penalized 10 points in the English League Championship, which could cause its membership to be withdrawn from the league.

The lawyer also noted that Yeung knew some investors that were interested in the football club but they had failed to gain approval from the receivers.

High Court official Mr. Justice Anthony Chan Kin Keung said on Wednesday that Yeung and the receivers had to submit an affidavit to the court in 28 days and that a hearing would be held soon.

Earlier this week, Birmingham International announced in a filing with the

Hong Kong Stock Exchange that the receivers had received five indicative non-binding offers from independent third parties regarding possible acquisition of an interest in the company.

Yeung, who remains a major shareholder of Birmingham International, was sentenced to six years in jail on five counts of money laundering in March last year. He had previously denied charges of laundering HK$721.3 million between January 2001 and December 2007, including cheques from a Macau casino operator and the Neptune Club.

S.L.

Business Daily | 7

April 3, 2015

Gaming

Mongolia considering casinos to diversify economy from mining The casino law will be submitted to parliament for review in the spring session scheduled to begin April 6. One likely location will be Zamyn-Uud on the Chinese border

M

ongolia’s parliament is considering allowing casinos in the country to attract more tourists and reduce the economy’s dependence on mining revenue.

Mongolia, which has a population of 3 million in an area about the size of France that’s landlocked between China and Russia, had US$5.8 billion in exports last year and 83 per cent of that was copper, coal and other minerals. The economy is expected to slow this year as disputes over mining projects have reduced foreign investment.

The casino law will be submitted to parliament for review in the spring session scheduled to begin April 6, Margad Banzragch, tourism department head at the Ministry of Environment, Green Development and Tourism, said in an interview Tuesday in the capital, Ulaanbaatar.

“What is most important is how the casinos can help

boost the economy,” she said.

No more than two casinos will be allowed under the law, said Margad, and to prevent gambling from becoming a social problem, Mongolians won’t be permitted.

While the law doesn’t specify where the casinos

would be built, likely locations include Ulaanbaatar and near the new international airport, said Margad. The airport is being built 54 kilometers (34 miles) south of the capital. Other possibilities are Altanbulag on the Russian border or Zamyn-Uud on the

Chinese border, she said.

Income Inequality “The key issue here is what happens to the revenue that the government earns from this casino,” Jargalsaikhan Dambadarjaa, a political and

economic commentator, said by phone from Ulaanbaatar.

“It needs to be used to decrease inequality in the country, for education or social infrastructure.”

A one-time license fee of 35 billion tugrik (US$17.6 million) would be required of any investor planning to build a casino, said Margad, in addition to taxes that will be determined at a later date.

Another provision would require that the casino make up 15 per cent of the complex.

Hotel and commercial space will make up the remaining 85 per cent, she said. The casinos could create more than 2,000 jobs a supply chain of new business opportunities, said Margad.

Mongolia also plans to adopt a horserace betting law, which is now in draft form, said Margad.

“We’ll use the advantage of our location between countries, and our new airport to attract visitors,” she said.

Bloomberg

8 | Business Daily

April 3, 2015

Greater China

Yuan might devalue against weaker euro The yuan has appreciated 15 percent against the euro while falling 1 percent against the dollar since the beginning of the year

Yuan is the top currency in the European Central Bank’s (pictured) trade-weighted euro basket

T

he chances are growing of a formal devaluation of China’s yuan against a weakening euro, analysts from Germany’s Deutsche Bank, the currency world’s second-biggest player, said in a note.

The note is broadly in line with market talk about the issue in London, the world’s

biggest foreign exchange centre, over the past month.

The world’s biggest currency trader, Citigroup, said last week that the People’s Bank of China might shift its controlled yuan trading bands lower and could move the emphasis away from dollar rates.

“We do not expect any change in China’s currency

policy near term, but if (as we expect) the US$ appreciates markedly further, debate may resurface over whether China’s FX link to the US$ is sustainable over time,” Citigroup said last week.

“Possible near-term weakness in (the yuan) may be intensified if the People’s Bank of China shifts its peg with the dollar to a basket

of currencies.”

The talk comes as China is pushing to have the yuan formally named as a reserve currency through inclusion in the IMF’s Special Drawing Rights (SDR) reserve basket, which is due for its five-yearly review later this year.

China’s unwillingness in past years to swiftly open its economy up to financial inand outflows and the yuan’s resulting slow appreciation against the dollar remains an issue.

But against that is the need of Chinese companies, in an economy losing momentum, to remain competitive against its Asian peers, many of whom have devalued sharply this year. The yuan has appreciated 15 percent against the euro while falling 1 percent against the dollar since the beginning of the year.

“If the euro resumes a downward trend (against the dollar) toward parity and beyond ... it is difficult to see how Chinese authorities will stand by and allow their competitive position to erode further, even if this jeopardises their entry into the IMF’s SDR,” said Deutsche Bank.

China’s big European partners are hoping to take the lion’s share of Chinese capital markets as they open up and the yuan floats more freely.

China is now the euro zone’s biggest trading partner and the yuan is the top currency in the European Central Bank’s tradeweighted euro basket, which determines the single currency’s effective exchange rate.

Data from transaction services organisation SWIFT

Possible near-term weakness in (the yuan) may be intensified if the People’s Bank of China shifts its peg with the dollar to a basket of currencies Citigroup

on Monday showed that offshore centres excluding Hong Kong handled 25 percent of global yuan payments in February, with London playing a key role in driving global yuan adoption.

Citigroup said it saw the yuan becoming part of the SDR by November this year and that demand and sentiment for it would improve if that were to be the case.

The yuan broke into the top five as a world payment currency in November, overtaking the Canadian dollar and the Australian dollar, SWIFT said in January.

Reuters

U.S. trade office says Chinese may breach WTO rules Industry groups have been cautious about the prospect of launching WTO action against China

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hina’s bank technology restrictions and a draft anti-terrorism law may run counter to the country’s international trade commitments, the U.S. Trade Representative said in a report released.

The U.S. trade office’s regular review of telecommunications trade continued the pressure over initiatives that have upset U.S. industry groups and that the Obama administration has also raised at the highest level with Chinese counterparts.

Rules asking technology suppliers to Chinese banks to divulge source code, pushing China’s state-owned banks

to buy technology from domestic vendors, “may raise substantive concerns” about China’s obligations under a range of World Trade Organization agreements, the report said.

The rules may also have been adopted without sticking to China’s commitments to provide adequate time for public comment on draft measures and to publish final measures, it said.

Rules asking technology suppliers to Chinese banks to divulge source code are pushing China’s state-owned banks to buy technology from domestic vendors

The draft counterterrorism law “has generated serious concerns among U.S. stakeholders and may raise questions with respect to China’s obligations,” the report said.

A senior U.S. Treasury official said on Monday, during a visit to Beijing by U.S. Treasury Secretary Jack Lew, that China had agreed to delay implementing the bank rules.

Industry groups have been cautious about the prospect of launching WTO action against China, which can take years.

USTR said it would continue to press for the bank rules to be suspended and

urge China not to act on the draft counter-terrorism law.

In a separate report, USTR detailed a wide range of other trade barriers U.S. firms face in exporting, including to China, where issues range from increased tariffs on aircraft to foreign investment limits and a ban on U.S. beef.

“China remains among the least transparent and predictable of the world’s major markets for agricultural products, largely because of uneven enforcement of regulations and selective intervention in the market

by China’s regulatory authorities,” USTR said.

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, 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 | 9

April 3, 2015

Greater China

Hong Kong’s pool of yuan deposits shallower

Southern Power Grid executive under probe

China needs to encourage fresh yuan outflows to offshore markets, as the movement of yuan back onshore has accelerated Michelle Chen

Y

uan deposits in Hong Kong contracted for the second straight month in February, a sign that more measures to encourage yuan fund flows from the onshore market may be needed to grow the world’s biggest offshore yuan pool.

The city’s yuan deposits fell 0.9 percent to 973 billion yuan (US$157 billion) in February from a month earlier, when they declined 2.2 percent, the Hong Kong Monetary Authority (HKMA) said.

Last year, yuan deposits in the former British colony increased, but the rise was only 16.6 percent, compared to 46.2 percent in 2013 and 86.9 percent in 2012.

An HKMA spokeswoman told Reuters that the February decline “was mostly from corporate deposits as companies sold more renminbi than buying it”. She said individual customer deposits were relatively stable.

Yuan deposits grew quickly in Hong Kong after China in 2009 allowed cross-border trade to be settled in its currency. However, as a series of pilot programmes kicked off to broaden the channels through which investors could enter China, the pace of expansion for the offshore yuan pool slowed.

China needs to encourage fresh yuan outflows to offshore markets, as the movement of yuan back onshore has accelerated under schemes like Renminbi Qualified Foreign Institutional Investors (RQFII) and the Shanghai-Hong Kong stock connect, market players say.

“Although policymakers have

Biomass-solar power plant begins operation

The movement of yuan back onshore has accelerated under schemes like Renminbi Qualified Foreign Institutional Investors (RQFII) and the Shanghai-Hong Kong stock connect

not shown a preference for flows in one particular direction, the reality is that actual outflows have been much smaller,” HSBC analysts said in a report.

This is because overseas investment has not proved very profitable in the past, amid steady yuan appreciation, a large domestic versus global growth differential, and low interest rates in major G10 markets, they added.

However, the situation is changing as the yuan began to depreciate last year and Beijing is about to roll out more initiatives such as the “one belt one road” that may encourage the yuan to be used more outside of China.

“As China will shoulder the responsibility for most of the financing (for the initiative), it is likely that at least

some of the loans and vendor financing will be provided in yuan,” said Qu Hongbin, HSBC’s China economist.

Meanwhile, Chinese regulators on March 27 said restrictions on domestic mutual funds investing in Hong Kong shares would be eased under the stock connect scheme.

That boosted southbound trading volumes. On Monday, southbound trading reached a record HK$5.593 billion (US$721.41 million).

Since the connect scheme started on November 17, about 41 percent of the northbound quota has been used, but only 15 percent for the southbound, effectively draining a net 86 billion yuan (US$13.88 billion) from Hong Kong’s yuan pool.

Reuters

Copper demand likely moderate Polly Yam

S

than 10 percent from the multi-year lows hit in January. They stood at US$6,036 a tonne yesterday.

“Even now Chinese end users are buying what they need for immediate production. They don’t see prices rising strongly in the near term,” said a Shanghai-based trader at an international trading firm. He declined to be identified as he was not authorised to talk to media.

Chinese banks have also reduced lending to metals firms after an alleged metal financing scam at the port of

Weaker than expected Chinese demand could drag on international copper prices

China’s first power plant producing electricity both from biomass power generation and photovoltaic power generation started its first phase operation yesterday. The Zhejiang Longquan Biomass Power Plant in east China’s Zhejiang Province began operating its two biomass power generators, which boast a total installed capacity of producing 162 million kilowatt-hours of electricity a year. To reach the capacity, the generators need to consume 250,000 tonnes of biomass fuel, which is processed from rural waste. The plant will see the installation of its 1.44-megawatt photovoltaic power generation system later this month.

Pfizer stop selling vaccine in China Pfizer Inc. is ceasing its vaccine commercial operations in China after the government failed to renew its license for a key shot for children, the latest sign of the uncertainties facing international drug makers in the nation. The Chinese import license for the Prevenar-brand vaccine expired last year, the U.S. pharmaceutical company said in a statement yesterday.

It expects a shortage of the product in China before the launch of a newer version, called Prevenar 13, that it already sells in other parts of the world.

Internet agency complains about Google

Chinese banks have also reduced lending to metals firms after an alleged metal financing scam at the port of Qingdao

easonal demand for copper in China is likely to be moderate in the second quarter compared with previous years, with end users holding limited cash as the economy slows, industry sources in the country said.

Would-be buyers such as cable manufacturers appeared to be suffering from cash shortages despite recent measures by Beijing to boost liquidity in the economy, the sources said.

End users in China, the world’s top consumer and producer of refined copper, typically increase purchases around the second quarter to support higher production as the summer approaches.

But this year, many have been reluctant to build copper stocks and have been buying hand-to-mouth, according to traders.

Weaker than expected Chinese demand could drag on international copper prices, which have risen more

Xiao Peng, a senior executive of China Southern Power Grid, is being investigated for duty-related crimes, Guangdong procuratorate announced yesterday. Xiao was deputy general manager and a member of the board of the electricity company, one of China’s two national power grid operators.

He is the second senior executive to come under the anti-graft microscope from the power company this week.

Qi Dacai, who held the same post as Xiao, is suspected of serious breaches of party rules, the Guangdong provincial discipline authority revealed on Monday.

Qingdao came to light in June 2014.

Reflecting weak import demand, premiums for bonded stocks of refined copper in Shanghai have eased to US$60-US$90 a tonne over the cash LME copper prices this week, from about US$90 in early March.

While metals firms are receiving fewer loans from banks, many sellers of refined copper and semi-finished copper products such as rods require buyers to pay cash on delivery, piling pressure on end users, traders said.

“Factories appear very short of cash.

But many sellers have asked for cash this year, different from the two-week payment period in previous years, after some clients defaulted on payments last year,” said a Guangdong-based trader at a large maker of copper rods, used for manufacturing electricity cables and wires.

Reuters

A Chinese Internet agency said yesterday that Google Inc’s decision to no longer recognise certificates of trust issued by the authority is “unacceptable and unintelligible”. Google said on its official security blog on Wednesday that it would no longer recognise the China Internet Network Information Center (CNNIC) certificate authorities, following an investigation into a potential security lapse.

CNNIC, which calls itself a “constructor, operator and administrator of infrastructure in Chinese information society”, responded in a statement on its website that Google should consider user rights and interests.

Beverage king denies plans to buy AC Milan China’s leading drinks maker Hangzhou Wahaha Group has denied rumours that the company is planning to buy Italy’s AC Milan club. Zong Qinghou, the billionaire chairman of the company, said Italian media reports that he was planning to buy up to 75 percent of the Italian club was “an April 1 joke”. Zong, worth an estimated 19 billion US dollars, said he had no plan to follow Wanda’s footsteps into European soccer. AC Milan is currently controlled by Italy’s former prime minister Silvio Berlusconi.

10 | Business Daily

April 3, 2015

Greater China

Yuan enlists Canada to challenge dollar domination

H

ostesses in cocktail dresses and blasts of confetti flanked Chinese and Canadian financial luminaries as they celebrated the yuan’s first beachhead in North America.

The event, held in a cavernous room bathed in red light at the Metro Toronto Convention Centre last week, served to introduce a transaction clearing bank for the Chinese currency less than 500 miles from Wall Street. The new trading hub will allow companies for the first time to settle accounts with Chinese partners during local business hours in the US$5.3 trillion dollar-a-day currency market.

China now has an outpost in America’s backyard to challenge the U.S. dollar’s dominance in global finance, enlisting Canada in its campaign to help put the yuan among the ranks of the world’s reserve currencies. Canada plans to profit on that ambition by facilitating yuan use beyond its own borders, across the continent.

“There is a natural conflict between the U.S. dollar and the Chinese yuan,” said William Zhu, chief executive officer of Industrial and Commercial Bank of China Ltd.’s Canadian unit, the newly named clearing bank. “We should start in Canada.”

Reserve currency The International Monetary Fund will decide later this year whether the yuan should join the U.S. dollar, euro, yen and British pound in its basket of currencies backing its special drawing rights, the asset it offers to supplement nations’ official foreign-exchange reserves.

Inclusion would mean prestige, and an immediate boost in demand for the currency. The last time the yuan was up for consideration, in 2010, it was rejected because the IMF

said the tightly controlled currency was not “freely usable.”

Canada’s clearing bank could help there. It’s the latest of 10 appointed in the last year by the People’s Bank of China, which has established outposts from London to Sydney to boost yuan use abroad.

The Canadian bank comes with an explicit mandate to serve the U.S., where yuan use has been growing

This is actually a replacement of the U.S. dollar, so I would like to say it is a conflict between the yuan and the U.S. dollar, so it is hard for the United States to fully support that kind of issue William Zhu chief executive officer ICBC, Canadian unit

faster than in either the U.K. or Singapore, according to data compiled

by Standard Chartered Plc. ICBC’s Zhu told Canadian lawmakers in February that Canada’s viability as a yuan centre depends on winning flows south of the border.

Greenback replacement “Firstly, we can serve our Canadian clients, then next step our neighbours, including the U.S., Mexico, even the countries in South America,” Zhu said in a March 13 interview at Bloomberg’s Toronto office.

On a trip to China the day before the clearing-bank event, IMF Managing Director Christine Lagarde said the currency “clearly belongs” in the SDR basket. China has advocated for the distinction as part of its broader foreign-policy push for a “multi-polar” world in which the U.S. is just one player, rather than the dominant one.

The dollar’s status as the No. 1 reserve currency is unquestioned. The latest data show it’s used to settle 44 percent of global trade and makes up 63 percent of central bank holdings, according to Society for Worldwide Financial Telecommunications and IMF data.

Exorbitant privilege That position lowers borrowing costs and allows the U.S. to fund imports simply by printing money rather than having to build up foreign-exchange reserves first through exports.

“The U.S. benefits enormously from the exorbitant privilege,” said Chas Freeman, a retired U.S. ambassador who served as former President Richard Nixon’s main Chinese translator when the two countries began normalizing relations in the 1970s.

The yuan expansion could make Canada the continent’s gateway to the world’s second-largest economy

The U.S. doesn’t have a yuan clearing bank officially sanctioned by the Chinese authorities. While the U.S. dollar has long been convertible to the yuan, without a clearing bank, payments to partners in mainland China can’t be settled there.

If the U.S. government were to work with the Chinese to set up a yuan trading hub of its own, it would “in effect be hastening the day when this dollar hegemony would come to an end,” Freeman said.

Continental gateway The currency markets have borne that out.

In 2009, Chinese central bank Governor Zhou Xiaochuan called for using IMF special drawing rights as a reserve alternative. When then-U.S. Treasury Secretary Timothy Geithner said the U.S. was open to the idea two days later, the dollar slid as much as 1.3 percent against the euro within 10 minutes. It bounced back up when Geithner predicted no change in the U.S. currency’s role.

The yuan, which floats against the greenback, only accounts for about 1.8 percent of trade settlement globally and recent data have shown its expansion slowing.

It fell to seventh place in the list of most-used currencies in the global payment system in February, down from fifth in January, according to Swift. A March survey by HSBC Holdings Plc showed about 17 percent of those questioned were using the yuan, also known as the renminbi, to settle transactions, down from 22 percent a year earlier.

At the Toronto event, top industry officials, executives and ministers told hundreds of Chinese and Canadian business people, financiers and currency traders that the clearing bank put growth within reach.

Bloomberg News

Business Daily | 11

April 3, 2015

Asia

Vietnam to pacify strikers with pension changes The government is considering amending the law to give workers the option of receiving their pension as a lump sum when they leave a company or after they retire

V

ietnamese Prime Minister Nguyen Tan Dung’s government will propose amendments to a pension law that has prompted thousands of workers to strike at two factories.

Workers returned to work yesterday at a Ho Chi Minh City factory that employs 80,000 and owned by Taiwanese footwear manufacturer Pou Chen Corp. after the company called on the Vietnamese government to “proactively” deal with workers who called a work stoppage last week. Striking workers have halted production at another facility in southern Tien Giang province that employs 10,000 and which remains shuttered today, according to the company.

The new pension rules will stop many workers from being eligible for lump-sum social insurance payments when they leave a company, delaying pay-outs until they retire. Workers have said they are concerned the money may not be there in the future.

Vietnam’s Communist government restricts large, unsanctioned gatherings.

“We will continue to strike,” Le Van Tin, 30, said outside the plant gate in a suburban district of Ho Chi Minh City Wednesday afternoon.

“Our company does not support us.

It just calls us to get back to work.”

On Wednesday, workers crowded outside the Ho Chi Minh City factory complex, chanting and unfurling banners as police with batons stood

feel this is the only way they can do it. It’s not about working conditions.”

The pension regulations are meant to encourage workers to save more for retirement by not allowing them to withdraw pension contributions before they retire, Deputy Labour Minister Doan Mau Diep said by phone. Under the current law, workers are permitted to withdraw money from their pensions with a penalty that reduces future government retirement payments, he said.

Because of the strike, the government is considering amending the law to give workers the option of receiving their pension as a lump sum when they leave a company or after they retire, Diep said.

Footwear

There is a lack of trust.

Institutionally, nobody represents the interests of the workers Alexander Vuving security analyst Asia-Pacific Centre for Security Studies

by. The company blared a recorded message beckoning workers to return to the assembly lines.

The government is urging workers to end their strike. Premier Dung and ministers have discussed workers’ demands and will propose to the National Assembly changes to the social insurance law, Nguyen Van Nen, chairman of the government office, said at a briefing Wednesday.

Retirement savings “The workers want to raise their voices and speak out on this government policy,” Serena Liu, chairwoman of the Council of Taiwanese Chamber of Commerce in Vietnam, said by phone. “They

Pou Chen called on the Vietnamese government to provide assurances to workers on the social insurance issue and passed workers’ requests to Ho Chi Minh City officials, spokesman Amos Ho said by phone. The work stoppage, which began March 26, may cause some production delays, he said. Striking workers made up about 20 percent of the total workforce, Ho said.

Most strikes in Vietnam are focused on the practices of a company rather than the government. More than 100 Vietnam Airlines Corp. pilots called in sick at the start of 2015 amid discontentment over salaries. Last May, two people died during antiChinese protests at foreign factories.

More 1,000 workers at Levi Strauss & Co.’s factory in northern province of Ninh Binh engaged in a three-day strike in November 2013 to demand better working conditions.

“There is a lack of trust,” Alexander Vuving, a security analyst at the AsiaPacific Centre for Security Studies in Hawaii, said by phone. “Institutionally, nobody represents the interests of the workers. There are labour unions in Vietnam, but they are part of the Communist Party system.”

Bloomberg News

Thai online stock trading surpasses Hong Kong The popularity of online trading is partially due to a lower commission fee Viparat Jantraprap

T

hailand’s military rulers may have thrown a fence around online politics. But in high finance, cyberspace remains unfettered. Internet stock trading has tripled in value as use of mobile devices proliferates among young, tech-savvy retail investors.

Online retail trading surged 239 percent to 1 trillion baht (US$30.72 billion) in February from a year earlier, the latest available data from the stock exchange shows. That was the biggest increase since March 2010.

Those transactions account for over 40 percent of total trading volumes, up from 27 percent in 2012. That ratio exceeds even Hong Kong, where retail online trading accounted for 9 percent of total market turnover in the year ended September 2014.

Transaction volumes have increased as retail investors, which brokers say account for over 90 percent of online trading, returned to the markets after months of anti-government protests which culminated in a military coup on May 22 last year. The benchmark

We expect the use of online trading platforms to increase because of the tech savvy users and the technology Boontip Kritchaikul deputy managing director SCB Securities

SET Index has risen 8.4 percent since the military uprising.

The popularity of online trading is also due to a lower commission fee - 0.20 percent of transaction value versus 0.25 percent in conventional, offline trading. The stock exchange’s launch of a trading app compatible with Apple’s iPhone in 2009 and a second app in 2011 that makes use

of the iPad’s wider screen display have also helped drive growth. There are other trading apps on Google’s Android platform, but they are less popular, brokers say.

“We expect the use of online trading platforms to increase because of the tech savvy users and the technology,” said Boontip Kritchaikul, deputy managing director of Bangkok-based

brokerage SCB Securities. “In terms of the contribution of online trading to total market trading value, we expect it to hit a ceiling of 55 percent by 2020.”

Reuters

12 | Business Daily

April 3, 2015

Asia S.Korean surplus hits fresh record high South Korea’s current account surplus in February hit a record high for a second consecutive month in seasonally adjusted terms as exports rose while imports fell, central bank data showed on yesterday.

The seasonally adjusted current account surplus in February rose to a preliminary US$10.77 billion from a revised US$10.38 billion in the previous month, Bank of Korea data showed. Exports in February rose a seasonally adjusted 2.0 percent from January while imports fell 0.4 percent. In the financial account, Asia’s fourth-largest economy saw a net outflow of US$5.54 billion in February.

Australian job vacancies hit 30-month high Job vacancies in Australia rose 0.8 percent in the three months to February to hit their highest since late 2012, a moderately promising sign of improving demand for labour. Yesterday’s data from the Australian Bureau of Statistics showed total job vacancies rose to 151,700 seasonally adjusted in the February quarter, from 150,500 in the three months to November.

That left vacancies up 6.3 percent on the February quarter of last year. Vacancies in the private sector edged up 0.3 percent in the quarter to 138,300 - again the highest reading in 30 months.

GPIF consider governance in investments Japan’s trillion-dollar public pension fund said on Thursday that, aside from looking at investor returns, it could consider factors like corporate governance, when deciding on stock investments. The Government Pension Investment Fund, the world’s biggest pension fund, decided in October to double the allocation for share holdings in its 137 trillion yen (US$1.1 trillion) portfolio, while slashing investments in low-yielding government bonds, in line with a push from Prime Minister Shinzo Abe for greater returns and risk-taking.

Line reviving IPO plans The popular messaging app launched in the aftermath of Japan’s earthquake and tsunami, is set for an initial public offering as early as this year, a report said yesterday, after shelving plans for a listing in 2014. The leading Nikkei business daily reported that the company has applied to trade its shares in Tokyo -- and may launch a separate New York listing -- in a sale that could value it at more than US$8.0 billion. A Line spokeswoman said the company would not comment on the Nikkei report, which did not cite sources.

S. Korean economy showing signs of recovery The South Korean economy is showing faint signs of recovery as key economic indicators rebound and activity in asset markets is on the rise, said the country’s finance minister yesterday. Finance Minister Choi Kyung-hwan said key indicators had bounced back recently, including activity for all industries which rose 2.5 percent on a monthly basis in February which more than recouped a 2.0 percent fall in January.

Retail sales also rose 2.8 percent in February on-month, recovering from a 2.8 percent decline in January, Choi said.

Thai consumer confidence hits 9-month low A drop in consumer prices in the first quarter has given the central bank room to cut rates again Kitiphong Thaichareon and Orathai Sriring

C

onsumer confidence in Thailand fell for the third straight month in March, a university survey showed yesterday, as low commodity prices and worries over the stumbling economy crimped domestic demand.

The consumer confidence index of the University of the Thai Chamber of Commerce fell to 77.7 in March from 79.1 in February.

The March reading is the lowest since June 2014, when confidence was rising as Thais hoped for a pick-up in the economy after an army coup the month before that ended a long period of destabilising political unrest.

But the military government has struggled to revive the economy as exports remain weak and domestic demand subdued.

Low commodity prices have hurt exports, a key economic driver, and cut farmers’ income and purchasing power. The economy grew just 0.7 percent last year, the lowest since flood-hit 2011.

“Consumers were not confident about the economy and there are signs that confidence will fall further,” Thanavath Phonvichai, an economics professor at the university, told a briefing, adding this was itself a negative sign for growth.

“Nobody is talking about an upside,” he said, adding the university was revising its economic growth forecast again.

Record high household debt He said the economy might grow around 3 percent this year, rather than the 3.5-4.0 percent it had predicted.

The military-backed government is aiming for 4 percent growth this year, driven by public spending, although that has been slow so far.

Private consumption, which accounts for half of gross domestic

KEY POINTS Index at 77.7 in March vs February’s 79.1 Mood hurt by low commodity prices, drought Weak exports, uncertainty over economic recovery also factors No sign of economic recovery – professor

product (GDP), has been curbed by household debt, at a record high of 85.9 percent of GDP at the end of 2014.

Sudthanom Phusanaphat, a government employee, said: “The economy is OK, but I’m so indebted I have little left to spend.”

Last month, the Bank of Thailand unexpectedly cut its policy interest rate but by a close 4-3 vote, suggesting policymakers are struggling with the need to spur growth without adding

to high household debt burdens.

While a drop in consumer prices in the first quarter has given the central bank room to cut rates again, most analysts expect no change when it reviews policy on April 29, as further easing would do little to encourage indebted consumers to spend.

The consumer price index fell for the third straight month in March, down 0.57 percent from a year earlier.

Reuters

Indian factory activity accelerates New orders rose in March

M

anufacturing growth accelerated in March after a jump in demand even though firms pushed up prices at the fastest rate in four months, a business survey showed yesterday.

The HSBC Manufacturing Purchasing Managers’ Index, compiled by Markit, rose to 52.1 in March from 51.2, confounding economists polled by Reuters who expected a slight dip to 51.0.

Any reading above 50 indicates growth. For Indian manufacturing, March is the 17th straight month of expansion.

“Momentum is building in manufacturing as the sector begins to build up a head of steam. Stronger expansions of output, new orders and stocks of purchases all contributed

to a higher PMI reading in March,’ said Pollyanna De Lima, economist at Markit.

New orders, which highlight underlying demand, rose to 53.2 in March from 51.9 in February. Firms’ employment levels remained steady last month.

“Faster increases in incoming new work, buying levels and backlogs, however, indicate that the subdued labour market is likely to recover in coming months,” De Lima said.

Costs rose at their fastest rate since August but firms were able to pass some of that on to customers.

A return of inflationary pressures could increase expectations that the Reserve Bank of India will not cut interest rates at its policy meeting on April 7.

A Reuters poll found most

economists said the benchmark rate will be left at 7.50 percent on April 7, but cut by 25 basis points by the end of June.

The RBI has cut rates twice this year at unscheduled meetings as consumer inflation fell to well within its comfort zone.

The latest Reuters poll of stock market analysts found that government reforms covering land purchases and the implementation of a goods and services tax would benefit manufacturers the most.

The GST would transform Asia’s third-largest economy into a single market, streamlining a myriad of state taxes in a bid to make it easier to do business. A land acquisition bill would make it easier for firms to buy land.

Reuters

Business Daily | 13

April 3, 2015

Asia

Japan companies’ inflation expectations unchanged

Firms expect consumer prices to rise an average 1.4 percent a year from now

Stanley White

BOJ Governor Haruhiko Kuroda has repeatedly said there’s a high chance of meeting the central bank’s 2 percent inflation target some time around fiscal 2015

J

apanese companies’ inflation expectations in the Bank of Japan’s March tankan survey were largely unchanged from the previous survey, a sign that inflationary pressure may not be increasing as quickly as the central bank expects.

The data on inflation expectations comes one day after the March tankan survey on business sentiment showed that big companies plan to cut capital expenditure in the fiscal year that began on Wednesday due to worries demand will not pick up.

The results are likely to exacerbate lingering worries that the BOJ’s massive quantitative easing programme and the government’s economic reforms are not enough to guide prices to the central bank’s 2 percent inflation target.

“The economy has not deteriorated to the point where more monetary easing is needed, but things are not proceeding as smoothly as the BOJ expected,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co.

“The BOJ is likely to fudge the timeline for its price target, and given the circumstances this would be a sensible decision.”

Companies expect consumer prices to rise an average 1.4 percent a year from now, unchanged from their projection three months ago, the BOJ tankan survey showed yesterday.

Firms polled said they expect consumer prices to rise an annual 1.6 percent three years from now, also unchanged from the December survey.

Five years, from now companies expect consumer prices to rise an annual 1.6 percent, just below the previous survey’s 1.7 percent.

Gathering information

KEY POINTS Consumer prices still seen up 1.4 pct a year from now Survey showed manufacturers’ sentiment unchanged in March BOJ argues that inflation will pick up later this year Economists say more time needed for demand to pick up

The BOJ started the survey on corporate price expectations from the tankan in March 2014 to gather more information on inflation expectations, key to its stimulus programme.

However, the results so far have suggested that its massive purchases

Reuters

Australia’s inflation gauge stays benign Underlying inflation was seen running at a tame 2.2 percent

A

private-sector gauge of Australian inflation lifted off a five-year trough in March as petrol prices rebounded, but core inflation moderated further suggesting there was room for a further cut in interest rates as early as next week.

The TD Securities-Melbourne Institute’s monthly measure of consumer prices rose 0.4 percent in March, from February when it had been unchanged in the month.

The annual pace ticked up to 1.5 percent, from 1.3 percent, but stayed well below the floor of the Reserve Bank of Australia’s (RBA) target band of 2 to 3 percent.

1.5 pct

Australia’s annual consumer prices

of government debt, real estate investment trusts and exchange traded funds have not convinced the corporate sector that prices will rise quickly.

BOJ Governor Haruhiko Kuroda has repeatedly said there’s a high chance of meeting the central bank’s 2 percent inflation target some time around fiscal 2015.

Many private sector economists disagree, saying the decline in oil prices and falling real wages will delay an acceleration in inflation.

The BOJ launched quantitative easing two years ago as part of Prime Minister Shinzo Abe’s pledge to kickstart a listless economy and prevent a return to deflation, which strangled growth for 15 years.

Quantitative easing has lowered bond yields, weakened the yen and helped the stock market rise, but some economists say more structural reforms are needed to raise Japan’s potential growth rate and strengthen domestic demand.

The central bank holds its monthly policy meeting on April 7 and markets are wagering it will follow up a February easing with another quarter point cut to 2.0 percent.

Interbank futures imply around a 60 percent probability of a move next, and are fully priced for 2 percent by May. Importantly, the TDMI survey showed it was not just lower energy prices that were pulling down cost pressures with measures of underlying inflation also easing in March.

The trimmed mean was flat in the month, while the annual pace slowed to 1.6 percent from 2.0 percent in February. Inflation excluding fuel,

fruit and vegetables fell 0.2 percent in March and dragged the annual rate down to 1.9 percent from 2.3 percent.

Annette Beacher, chief Asia-Pac macro strategist at TD Securities, said the survey suggested the official consumer price index (CPI) rose just 0.1 percent in the three months to March, for an annual pace of only 1.2 percent.

Underlying inflation was seen running at a tame 2.2 percent. The CPI report is due out on April 22.

For March alone, the TDMI gauge showed a sharp bounce in petrol prices following much bigger falls in previous months, while fruit and vegetables and tobacco also added to inflation.

Those were offset in part by falls in alcoholic beverages, rents and clothing.

Reuters

14 | Business Daily

April 3, 2015

International

U.S. board may delay sweeping accounting rule Russia says currency situation normalised The governor of Russia’s central bank, Elvira Nabiullina, said yesterday that the bank’s forex repo instrument had fulfilled its function and that the situation on the currency market had normalised.

Nabiullina told journalists: “We think that the situation on the currency market has normalised. Forex refinancing as a mechanism has fulfilled the function that we set, to give additional foreigncurrency resources based on our forecast for the balance of payments.”

World food prices continue to fall Global food prices fell in March as global supplies for most commodities, including cereals and meat, remained robust, the United Nations food agency said yesterday. The U.N. Food and Agriculture’s (FAO) price index, which measures monthly changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 173.8 points in March, 2.6 points below its reading in February. FAO’s raised its forecast for world cereal production in 2015 to 2.544 billion tonnes, 2 million tonnes above the February forecast of 2.542 billion tonnes.

Swap FX debt fatal for Polish banks Poland’s central bank governor has criticised a regulator’s proposal to allow holders of mortgages denominated in Swiss francs to convert the debt at the historical exchange rate saying it would be “fatal” for lenders. “I think this proposal would be fatal for banks.

In any case difficult to accept. For us it would mean getting rid of almost half the currency reserves,” Marek Belka told Rzeczpospolita daily in an interview published yesterday. He also said that Poland should not help banks with government money to deal with the more than 550,000 Poles who incurred Swiss franc debts.

For U.S. companies, the rule change would replace an array of industry-specific guidance with a single principle for recognizing revenue across various industries Dena Aubin

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he board that sets accounting rules for U.S. public companies proposed a one-year delay in sweeping new rules that would change the way companies recognize revenue, one of the most important numbers in corporate financial statements.

The revised timeline from the U.S. Financial Accounting Standards Board (FASB) calls for the rules to take effect for public companies starting in 2018 and for non-public companies in 2019.

FASB spokeswoman Christine Klimek said the board proposed the delay to give companies more time to prepare for the rules. Some companies that need new systems to implement the rules do not yet have necessary software, she said.

FASB said it would seek public comments for 30 days before deciding on the timeline.

The new standard for revenue recognition was approved in May 2014 as part of an effort to align U.S. accounting rules, called Generally Accepted Accounting Principles, with international rules known as International Financial Reporting Standards (IFRS) used in over 100 countries, including

the European Union.

For U.S. companies, the rule change would replace an array of industry-specific guidance with a single principle for recognizing revenue across various industries.

Generally, revenue will be recognized when a company transfers control of goods or services.

The accounting change calls for more judgment on the part of managers of U.S. companies in recognizing revenue, while international companies that

currently lack detailed rules on when revenue should be booked would have more guidance.

Rule-makers had worked for years to align the U.S. and international standards so that investors could more easily compare financial results from companies in all parts of the world.

Accounting experts had said the rule change would present a logistical challenge for companies. The change calls for extensive disclosures and requires many businesses to change their book-keeping practices and technology systems.

The International Accounting Standards Board, which writes the IFRS international rules, said it has also decided to propose some “targeted clarifications” in the second quarter or thereafter to its own version of the new revenue recognition standard that is due to come into force in 2017.

There would be a public consultation on the changes, it said.

“The IASB expects to discuss whether any change should be made to the effective date of the standard at its board meeting towards the end of April,” the London-based body said.

Reuters

World Bank may be blind to harm of financial investments The International Finance Corporation directed about 63 percent of its US$17 billion of commitments in the last fiscal year to financial intermediaries Anna Yukhananov

Sistema posts US$5.3 bln net loss Russian services conglomerate Sistema said yesterday it made a US$5.3 billion net loss in the fourth quarter of 2014 compared to US$47.7 million in profit a year earlier due to the loss of oil company Bashneft. The company said revenues fell 29.5 percent to US$3.9 billion and adjusted operating income before depreciation and amortisation declined 56.4 percent to US$616 million.

Playtech to buy trading platform Playtech Plc, an online gaming technology company, said it would buy a majority stake in TradeFX Ltd, a provider of trading platform and payment services, for an initial cash payment of 208 million euros (US$224.4 million). The company said it would buy a 91.1 percent fully-diluted stake in TradeFX, with an earn out payment of up to 250 million euros based on future performance.

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he World Bank’s private sector arm may be doing more harm than good when it invests in private equity firms, banks and other financial intermediaries, global development group Oxfam said in a report.

In one project indirectly sponsored by the bank’s International Finance Corporation (IFC), 164 villagers in Cambodia lost their plots and thousands of others suffered when a Vietnamese company expanded plantations to their land.

In another high-profile case, the IFC’s own watchdog criticized a loan to the largest bank in Honduras, whose clients included a palm oil company tied to land disputes and killings.

“By channelling funds through third parties, the IFC loses control of how the money is eventually spent,” Oxfam said. “It has little proof of positive development outcomes.”

The IFC directed about 63

percent of its US$17 billion of commitments in the last fiscal year to financial intermediaries in developing countries, to leverage its money to reduce poverty and boost economic growth.

Oxfam said more investments are likely to run into problems as the World Bank takes on riskier projects, including infrastructure and lending to conflict-affected states.

The IFC said it takes Oxfam’s findings “very seriously” and was already working to address the cases, many of which occurred before 2012, when the institution revised its social and environmental standards.

Since then, the IFC said, it has expanded its staff of specialists on safeguards, visited risky projects more often and audited financial clients every year to ensure they have good systems for managing environmental and social risks.

But Oxfam said the reforms have been insufficient, because the IFC

still misses major risks or does not share enough information about investments.

For example, in 2012 the IFC invested US$15 million in a New York-based private equity fund that in turn invested in the Santa Rita hydroelectric plant in Guatemala.

But the investment was not classified as “high risk,” which would have prompted greater scrutiny.

According to Oxfam, the IFC only switched the project’s risk category in October, when communities affected by the dam complained about violence and displacement and lodged a formal complaint with the IFC’s watchdog.

The IFC said the cases highlighted

by Oxfam show the institution must constantly work to improve its approach to lending and make “course corrections” as it goes along.

“We are part of the solution, but we know that we can always do better,” it said.

Reuters

Business Daily | 15

April 3, 2015

Opinion Business

wires

The trials of Asian democracy

Leading reports from Asia’s best business newspapers Yuriko Koike, Japan’s

Former defence minister and national security adviser, was Chairwoman of Japan’s Liberal Democratic Party’s General Council and currently is a member of the National Diet

THE PHNOM PENH POST Phnom Penh casino NagaWorld has announced that gross gaming revenue (GGR) rose 48 per cent year-on-year for the first quarter of 2015, largely on the back of returns from VIP clients. Nagacorp, the Hong Kong stock exchangelisted parent of NagaWorld, said in an unaudited report released that gross gaming revenue rose to US$113.5 million in 2015’s first quarter from US$76.9 million in the corresponding period last year.

Revenues for the mass market, made up largely of Southeast Asian clients, grew only 8 percent to US$47.9 million, while earnings from VIP clients grew a massive 101 percent to US$65.5 million.

THE STRAITS TIMES The days of double-digit salary increases may be at an end here as Singapore employers look to reign in the strong wage growth of the last three years and offer nonfinancial incentives to attract and retain employees, says recruitment specialist Robert Half. According to the 2015 Robert Half Salary Guide for Singapore, employees in finance and accounting, banking and financial services and technology roles are more likely to receive wage rises below the 10 per cent or more many positions commanded in previous years. Companies more cost conscious.

THE JAKARTA POST State electricity company PLN has said that its plan to hold the prequalification tender for the procurement of liquefied natural gas (LNG) aims to accelerate a 35,000 Megawatt (MW) power plant construction project. PLN’s director for strategic procurement and primary energy, Amin Subekti, said the company would hold a tender not only to ensure smooth power plant construction but also to secure its gas supply. Amin said the gas procurement’s prequalification stage was ongoing. PLN would auction not only the supply of gas but also its transportation.

THE KOREA HERALD Hyundai Motor Group, the world’s No. 5 auto giant, said yesterday that its sales in the United States jumped in March on aggressive marketing and a recovery in the world’s largest economy, with its flagship Hyundai Motor Co. setting a monthly sales record. Hyundai Motor sold 75,019 units in the U.S. last month, its largest monthly tally ever. The March figure also represents a whopping 12 percent rise from a year earlier, the automotive group said. The sharp rise in U.S. sales was driven by strong demand for the Genesis and Elantra sedans.

The figure of Lee Kuan Yew as a model for the Asian countries is highlighted by the author

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hese are times of trial – literally in the courts – for a growing number of Asia’s democracies. The list of major national political leaders in the region who have faced, or are about to face, criminal charges has grown so extensive that it is plausible to wonder whether democracy itself can survive in a number of these countries.

Perhaps the gravest allegations have been levelled at Bangladesh’s opposition leader Khaleda Zia, who has been charged with murder in a case going back many years. India’s former prime minister, Manmohan Singh, who lost power less than a year ago, is being questioned by prosecutors in connection with allegations of corruption in the privatization of coalmines under his government. Following a military coup that overthrew her democratically elected government, Thailand’s former prime minister, Yingluck Shinawatra, is facing charges of official malfeasance over rice subsidies.

Then there is the longrunning saga of Malaysia’s opposition leader and former Deputy Prime Minister Anwar Ibrahim. His conviction on sodomy charges will effectively ban him from politics for five years, at a moment when the opposition is posing the most serious challenge to Malaysia’s ruling United Malays National Organization (UMNO) since the country gained its independence from the British Empire in 1958.

Moreover, Anwar’s daughter has now been detained for questioning the integrity of her father’s trial in a speech in the Malay parliament, in which she is an elected member in her own right.

Each of these politically

tinged trials has different origins, of course. And each was or will be conducted in court systems that vary greatly in terms of their development and independence. Yet all of them have called into question, to varying degrees, the rule of law and the prospect for a democratic future in each country.

Singh’s questioning by government prosecutors is perhaps the least worrying case, because India’s democracy is rock-solid, and its judiciary is fearsomely jealous of its independence.

His supporters at home and abroad should have no fear for his rights, or that his case will become some political plaything to keep the opposition Congress party down. Indeed, the politically shrewd Prime Minister Narendra Modi is far too smart to even contemplate attempting to distort the investigation of Singh for partisan gain.

Sadly, fidelity to judicial independence and the rule of law cannot be guaranteed as thoroughly in the other cases.

Bangladesh, the world’s fourth largest Muslim democracy, has historically had a patchy record in this regard, suggesting scope for political intervention in the case against Zia, if only by officials eager to curry favour with Prime Minister Sheikh Hasina.

Indeed, the two leaders’ mutual loathing is long and legendary. Each has been Prime Minister, and both have sought, while in office, to use the courts to keep the other out of power, even out of politics altogether – seemingly without regard to the cost. The murder charges levelled against Zia have already spurred protests,

and could incite massive civil disturbances if a trial actually takes place, jeopardizing the economic success that the country has had under Hasina’s rule. And yet government prosecutors who are ultimately responsible to the prime minister are pressing ahead with the case.

Shinawatra’s looming trial in Thailand and Ibrahim’s repeat conviction in Malaysia lack even the fig leaf of judicial independence. Shinawatra’s overthrow by the military was clearly a bid by the country’s generals to end by force the electoral lock that she and her brother, Thaksin Shinawatra – himself a former prime minister who was deposed by a military coup in 2006 – have had on Thailand for almost 15 years.

So now the generals and their allies in the Bangkok elite seem determined to turn back the clock; Yingluck’s looming trial appears to be a signal that the Thaksins’ popularity rules out anything more than “managed” democracy in Thailand. But the current quiescence of the pro-Thaksin forces should not encourage anyone to think that the military can suppress Thai democracy forever or without a fight.

Sadly, Malaysia may soon become prone to the same type of violent protest and economic decline that have gripped Thailand in recent years. Here, it seems clear that UNMO’s political interests have been allowed to dictate that the country’s key opposition leader should be tried on charges that no real democracy that embraces the rule of law would even consider levelling, and convicted on evidence that no truly independent court would accept.

Political leaders in Thailand and Malaysia, and in other countries in the region, frequently tout the model pioneered by Singapore’s founder and long-time leader Lee Kuan Yew, who died this month. Yet the path on which both countries have embarked was not Lee’s path. Yes, Lee’s system enabled him to remain in power for 31 years, and he did use the civil – not criminal – courts to harry his opponents.

All of them (trials of Asian politicians) have called into question, to varying degrees, the rule of law and the prospect for a democratic future in each country

But Lee, more importantly, also relied on elements of democratic contestation to ensure that meritocracy triumphed over patronage.

This formula underpinned the rapid consolidation of good government, based on rigorous standards of official conduct that limited the elite’s arbitrary power. Putting one’s opponents in the criminal dock seems unlikely to produce a similar result.

Project Syndicate

16 | Business Daily

April 3, 2015

Closing Moody says China has time, space for reforms

HK residential transactions in March up

Considerable fiscal and external buffers provide time for structural reforms to gain traction, global rating agency Moody’s Investors Service said yesterday.

“Fiscal and monetary reforms are underway. But the fundamental restructuring and rebalancing process will be a multi-year endeavour, extending into the second half of this decade,” Moody’s said in a report.

Following the global financial crisis, China’s economic growth has slowed and systemic leverage has risen, casting a shadow on China’s economic prospects. During the annual session of the National People’s Congress Premier Li Keqiang pledged a “new normal” of slower and sustainable economic growth, it noted.

Hong Kong Land Registry said yesterday that it received 4,329 sale and purchase agreements for residential units in March, down 28.2 percent from February but up 37.8 percent year-on-year. The total value of these agreements was 31.8 billion HK dollars (US$4.1 billion), down 22.1 percent compared to February, and up 54.9 percent year-on-year, the Land Registry said. Including all other types of buildings, there were 6,211 agreements in March, 22.9 percent less than February, and 48.4 percent more than March last year. The total value of all property sales in March was HK$57.2 billion.

Shanghai makes trillion-yuan stock bet backed by debt Traders have opened 2.8 million new stock accounts in just the past two weeks

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hanghai traders now have more than 1 trillion yuan (US$161 billion) of borrowed cash riding on the world’s highest-flying stock market.

The outstanding balance of margin debt on the Shanghai Stock Exchange surpassed the trillion-yuan mark for the first time on Wednesday, a nearly fourfold jump from just 12 months ago. The city’s benchmark index has surged 86 percent during that time, more than any of the world’s major stock gauges.

While the extra buying power that comes from leverage has fuelled the Shanghai Composite Index’s rally, it’s also sending equity volatility to fiveyear highs and may accelerate losses if a market reversal forces traders to sell. Margin debt has increased even after regulators suspended three of the nation’s biggest brokers from adding new accounts in January and said securities firms shouldn’t lend to investors with less than 500,000 yuan.

“It’s like a two-edged sword,” said Wu Kan, a money manager at Dragon Life Insurance Co. in Shanghai, which oversees about US$3.3 billion. “When the market starts a correction or falls, it will increase the magnitude of declines.”

In a margin trade, investors use their own money for just a portion of their stock purchase, borrowing the rest from a brokerage. The loans are backed by the investors’ equity

Leverage cannot rise forever. The more the stock of margin debt climbs, the greater the risk of a disorderly unwinding of leveraged positions once net redemptions begin to accelerate holdings, meaning that they may be compelled to sell when prices fall to repay their debt. The Shanghai Composite rose 0.4 percent at the close yesterday.

Bubble concern Chinese investors have been piling into the stock market after the central bank cut interest rates twice since November and authorities from the China Securities Regulatory Commission to central bank Governor Zhou Xiaochuan endorsed the flow of funds into equities. Traders have opened 2.8 million new stock accounts in just the past two weeks, almost on par with Chicago’s entire population.

The outstanding balance of the margin debt on China’s smaller exchange in Shenzhen was 502.5 billion yuan on April 1. That puts the combined figure for China’s two main bourses at the equivalent of about US$242 billion. In the U.S., which has a stock market almost four times the size of China’s, margin debt on the New York Stock Exchange was about US$465 billion at the end of February.

For BNP Paribas SA economist Richard Iley, the surge in Chinese margin purchases is among signs of a bubble fuelled by individual investors. More than two-thirds of new investors have never attended or graduated from high school,

India’s banks too exposed to infrastructure

HSBC’s Southeast Asia banking head exits

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entral bank governor said yesterday the country’s push to build infrastructure should not come at the expense of financial stability, adding banks already had too much exposure to the sector.

Instead, Governor Raghuram Rajan said, India needed to find new sources of funding for infrastructure so that debt levels remained “moderate”.

The comments, at a financial event organised by the Reserve Bank of India that was attended

by Prime Minister Narendra Modi, come as the government says it wants US$1 trillion invested in infrastructure in the five years to 2017, with half of the funding coming from private companies.

“The nation has enormous financing needs in infrastructure, and far too many of our banks already have too much exposure,” Rajan said.

Funding for infrastructure is expected to pose a challenge to India, whose banks, especially state-owned lenders, continue to struggle with non-performing loans.

The gross bad loans ratio at banks could rise as high as 5.7 percent by March 2016 from 4.5 percent last December, rating agency ICRA estimates.

Reuters

BNP Paribas, economist, Richard Iley

according to a survey by China’s Southwestern University of Finance and Economics.

“Leverage cannot rise forever,” Iley wrote in a report last month. “The more the stock of margin debt climbs, the greater the risk of a disorderly unwinding of leveraged positions once net redemptions begin to accelerate.”

Bloomberg News

China to open water markets to foreign investors

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ou Chen Chang is leaving the bank after 10 years to “pursue other opportunities,” according to an internal memo obtained

by Bloomberg.

Wan Thonh Chow became head of banking for Singapore and Southeast Asia on April 1, the memo says. Chow, who was previously the deputy head of banking for Southeast Asia, will be based in Singapore and report to Asia-Pacific banking co-heads Martin Haythorne and Che Ning Liu. The changes at HSBC come as banks grapple with a decline in deal making in Southeast Asia.

The value of announced acquisitions has fallen to US$24.6 billion in 2015, a 42 percent decline from a year earlier, according to data compiled

by Bloomberg. That compares with a 47 percent gain for Asia Pacific as a whole.

Chang, who joined the bank in 2004 from Citigroup Inc., declined to comment when reached on his mobile phone.

Alvin Lim, who was previously head of banking for Singapore, has been appointed as head of banking advisory for Southeast Asia, the memo also states.

hina will give foreign companies more access to invest in large water projects as Beijing looks for ways to finance a massive infrastructure programme aimed at tackling chronic shortages.

China, desperate to maintain basic selfsufficiency in food and energy, is trying to make better use of its scarce and heavily polluted water.

To do so it needs to recruit private capital to finance several multibillion-yuan spending plans to clean up lakes and rivers and improve pipeline infrastructure.

China’s National Development and Reform Commission (NDRC) said on its website (www. ndrc.gov.cn) yesterday that it will allow qualified investors, including foreign and international joint ventures, to bid for and construct water projects.

However, China will continue to place limits on foreign investment, with the NDRC saying the nation would favour Chinese private investors as partners when it came to running joint projects with local governments. The construction of urban water supply and drainage networks will also be limited to majority-owned Chinese enterprises, it said.

Bloomberg News

Reuters