Macau business daily, 2015 July 7th

MOP 6.00

Macau suspect arrested in crackdown on illegal Zhuhai bookmaking

Closing editor: Luís Gonçalves

Page 5

Studio City enters MICE race Page 6

Exports of CEPA goods rise 9.8 pct in June

Local residents’ deposits increase MOP17.6 billion in one year Page 4

Year IV

Number 829 Tuesday July 7, 2015

Publisher: Paulo A. Azevedo

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Glass half full

Budgets to be kept to. That’s the general idea. With runaway spending on infrastructure ballooning out of all proportion something had to be done. Amendments to the law governing budget-making will apply to public finance plans for fiscal 2017. Giving oversight to the Legislative Assembly. While the LA will have no power to approve budgets, updates will be submitted more frequently. With transparency, hopefully, enhanced

Public service shuffle A bill establishing a regime for the contracting of public services. It’s expected to pass for legislation by mid-August. And seeks to amalgamate the current two types of non-permanent contracts of public servants into a new contract scheme. The ‘administrative appointment contract’

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Back to the future

Mega metropolis

It was once a famous air route here. Academics Harry Xia and Kevin Yu believe Macau has “clear potential”. To develop a gateway between Greater China and Portugal. Passengers flying from China to Lisbon more than doubled from 2012-14, they say. Giving Macau the opportunity to aggregate flights heading to the Iberian Peninsula

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One fifth of the global economy. A report issued by the Brookings Institute calculates the contribution made

by Pacific Ocean cities. Chinese cities comprise more than half of the world’s biggest metropolises

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More flights for summer

HSI - Movers July 6

Name

Summer’s here. Which means extra flights. The Civil Aviation Authority of Macau (AACM) has approved 127 extra flights for the vacation period.

Following requests from Air Macau and Tigerair Taiwan. Selected destinations include Mainland China, Thailand, Japan, Vietnam and Taiwan

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Gaming www.macaubusinessdaily.com

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Wharf Holdings Ltd/Th

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Want Want China Hol

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Hong Kong & China Ga

-0.50

Link REIT/The

-0.55

CLP Holdings Ltd

-0.61

China Unicom Hong Ko

-5.52

Tencent Holdings Ltd

-5.54

China Resources Land

-6.71

Lenovo Group Ltd

-8.09

Hong Kong Exchanges

-9.55

Source: Bloomberg

First trip abroad

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Macau-based but open to opportunity. Casino operator Galaxy Entertainment Group is reportedly looking north. GEG is among the list of foreign bidders vying for two casino licences in South Korea, according to JP Morgan. Macau junket operator Suncity Group is also reputedly eager. Buy-in for consideration is at least 1 trillion won

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2015-7-7

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2 | Business Daily

July 7, 2015

Macau CTM: 4G services ready by September The city’s dominant telecommunications operator Companhia de Telecomunicações de Macau SARL (CTM) expects that its fourth-generation wireless (4G) telecommunications services can be provided by September this year, public broadcaster TDM Radio reported, quoting vice president of network services at the company Declan Leong Pui Hong. Mr. Leong also noted that the company was still mulling the tariff for the 4G services, saying that he hoped that 90 per cent of the city would have 4G network coverage by the time the services are launched.

Amended budget law to be applied for 2017 public finance plan The Legislative Assembly will have greater access to updates of major public investment plans but the new amendment does not translate into the power for them to approve a budget plan Stephanie Lai

sw.lai@macaubusinessdaily.com

T

he government plans to have the amendment to the law governing budget making to apply to the public finance plan for the fiscal year of 2017, a legal change that aims to enable the city’s Legislative Assembly to have better oversight of the administration’s spending although not the power to approve a public budget plan.

Starting from today, the government is conducting a 45-day public consultation on the amendment of the budget framework law, which aims to list all the budgeted expenditure on major investment plans, especially infrastructure projects that involve multiple years of investments.

“For instance, if the government is to build a bridge now and lists a budget for it, the Legislative Assembly can see if the budget plan they deliver can support the amount [of investment] they need,” the deputy director of the Financial Services Bureau, Daisy Ho In Mui, said yesterday of the proposed amendment to the budget law.

“The Legislative Assembly’s role is to deliberate the budget plan, not to approve it – the government has to explain how they are spending the money to see if the Assembly agrees to it,” Ms. Ho stressed.

Under the amendment, the administration will have to report to the Legislative Assembly the overall budgeted expenditure they need for a project, and the years they need to execute the budget for the project.

Currently, the official disclosure of the annual budget plan only includes regular and capital expenditure without a detailed description of the cost of major infrastructure projects.

Ongoing lag

The proposed amendment comes at a time when the city’s ongoing lag in major infrastructure projects and ballooning budgets plus lack of update of the budget information have been roundly criticised. An example is the Light Rapid Transit (LRT) project, on which a damning report was published by the Audit Commission in January disclosing that the estimated project cost has already surged from MOP4.2 billion in 2007 to MOP14.3 billion five years later.

If the government can see the proposed changes to the budget framework law discussed and deliberated upon by the Legislative Assembly this year the amended law can be applied to the making

The Legislative Assembly’s role is to deliberate the budget plan, but not to approve it – the government has to explain how they are spending the money to see if the Assembly agrees to it Daisy Ho In Mui, deputy director of Financial Services Bureau

of the budget plan for fiscal 2017, the leading officials of the Financial Services Bureau confirmed to media yesterday in a briefing.

The proposed changes to the law also hold that public departments will have to submit a report of their half-yearly budget execution and the related accounting information to the Legislative Assembly before the end of July every year, a task that adds to the existing practice of submitting a yearly budget execution report to the Assembly by every year-end.

Any changes or increase in the overall expenditure budget made for a fiscal year will have to go via the deliberation of the Legislative Assembly, the amendment stated.

The budget allotted for a particular department or a project is also prohibited from being transferred to other departments or uses, the Bureau says.

Another major change the government proposes to the budget law is that no more than 3 per cent of annual budgeted expenses can be reserved for emergency expenses – a difference to the existing rule where there is no upper limit set to the amount of budget reserved for emergency expenses.

Exports of CEPA goods rise 9.8 pct in June

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he city’s exports of goods to Mainland China under The Closer Economic Partnership Arrangement (CEPA) registered a hike of 9.81 per cent last month compared to May this year. This increase

also represents a rebound in exports activity having declined for two consecutive months, the latest official data released by the Economic Service Bureau (DSE) reveals.

Last month, the value of the city’s exports of CEPA

goods to Mainland China reached MOP7.24 million (US$905,000), an increase of MOP646,456 from MOP6.59 million posted in May, after export activity turned south in April to MOP6.96 million from MOP9.78 million in March.

Meanwhile, for the first half of this year, the total value of exports of CEPA goods totalled MOP51.6 million, adding up the accumulated value of the activity to MOP617.3 million since the establishment of the system in January 2004 to June of this year.

In terms of trade in services, the Bureau did not approve any new certificates for ‘Macau Service Supplier’ for local firms to operate their businesses in Mainland China last month. Thus, the total number of such certificates that the government issued to local companies remained at 490.

Some 61 per cent, or 298, of these 490 companies engage in transport services, such as

freight forwarding, logistics, storage and warehousing as well as transport.

In addition, 47 local firms related to medical and dental services were given certificates to operate on the Mainland this year, accounting for 10 per cent of the total.

Other companies issued the certificates to operate in China are primarily involved in conventions and exhibitions, real estate, construction and related engineering services, as well as travel agency business and operating tours, accounting for 8 per cent, 7 per cent, 4 per cent and 3 per cent of the total, respectively, official data reveals.

K.L.

Business Daily | 3

July 7, 2015

Macau

China-Portugal route an opportunity From 2012 to 2014 the number of passengers flying from China’s main airports to Lisbon more than doubled. Academics Harry Xia and Kevin Yu say this represents an opportunity for Macau’s air transportation industry João Santos Filipe

jsfilipe@macaubusinessdaily.com

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acau has “clear potential” to develop as a gateway between the Greater China Region and Portugal. This is the result of the study by University of Saint Joseph academics Harry Xia and Kevin Yu regarding the development of Macau air transportation.

From 2012 to 2014, the number of passengers taking flights from China to Lisbon more than doubled to 45,546 from 21,596 (increasing 110.9 per cent), according to data collected by the authors. This expanding market is said to present Macau with the opportunity to aggregate flights heading to Portugal.

“There is a clear pattern of high volume travel in summer between July and September with steady yearon-year growth between China and Portugal. The peak monthly volume was close to 5,000 while the annual volume reached 45,456 in 2014, which provides enough market potential for Macau to introduce such a route in the near future”, the authors explained.

While in 2012 some 21,596

passengers flew from the airports of Guangzhou, Hong Kong, Beijing, Shanghai Pudong, Shanghai Hongqiao and Shenzhen to Lisbon, in 2013 that number increased to 33,028 passengers (52.94 per cent year-on-year). Finally, last year that number increased to 45,546 passengers, an increase of 37.90 per cent year on year.

During these two years, the airports registering the largest increase were Shanghai Pudong, with a gain of 8,134 passengers in two years, and Hong Kong Airport, with more 7,740 travelling to Lisbon. Concerning the capital of China, Beijing increased in two years the number of passengers travelling to Portugal by 7,008 to 11,622 in 2014 from 4,614 in 2012.

Brazil: a distant possibility

While Portugal is painted as a destination that could be included in the long-term plan for the future of Macau’s air transportation industry, the only Portuguese-speaking country in South America, Brazil, is excluded from the list.

The reason for this, according to the authors, is the lack of passengers travelling from China’s main airports to Brasilia, the capital of the South American country.

“Travel volume between China and Brazil, another important Portuguese-speaking country in South America, is at a relatively low level.

The peak month volume was 170 and annual volume was 790 in 2014, which doesn’t support a dedicated

route between Macau and Brazil at this point”, Mr. Xia and Mr. Yu say.

However, it is worth mentioning that the study does not count the number of passengers travelling to the Guarulhos International Airport in São Paulo, which registered a total of 39.6 million passengers in 2014, while the Presidente Juscelino Kubitschek International Airport in Brasilia registered a volume of 18.1 million passengers.

4 | Business Daily

July 7, 2015

Macau Brands

Trends

Little Golf Wizard Raquel Dias newsdesk@macaubusinessdaily.com

I

’m one of those people who not only don’t play golf but have a very limited knowledge about the game. I know what a ‘handicap’ is, but barely.

Yes. That bad.

However, and because I do know that golf is a power sport and so many people in the business world do play it I just had to share this gadget.

Zepp Golf is a motionsensing training aid that attaches to your golf glove and, with the accompanying iOS or Android app, helps you analyse and improve your golf swing. You can actually see the swing instantly and in 3D from any angle. It captures over 1,000 data points per second to track parameters including club speed, swing plane, tempo, backswing position and hip rotation.

Although it’s hard to say how cool it would be to use one during a competition it’s fair to say, no-one would be the wiser if you used it for training purposes. The gadget itself is a cute yellow square that won’t attract a lot of attention and fits well in a small bag.

If you’re not that much into sports don’t despair, the company does similar devices for tennis, baseball and softball.

You can find it on www. zepp.com for about MOP 1600 - not that expensive considering how pricey all golf accessories seem to be.

Local residents’ deposits increase MOP17.6 bln in one year At the same time deposits of non-residents increased 18.9 per cent to MOP248.3 billion

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he deposits of local residents increased 3.8 per cent year-onyear to MOP481.8 billion during May from MOP464.2 billion (MOP17.6 billion), according to the monetary and financial statistics for May published yesterday by the Monetary Authority of Macau (AMCM).

The increase was smoother in comparison to the previous month, accounting for 0.2 per cent to MOP481.8 billion from MOP481 billion in April 2015. During the last month, deposits in patacas, Hong Kong dollars and renminbi declined 0.4 per cent, 0.4 per cent and 1.9 per cent, respectively. At the same time deposits in US dollars increased 8.5 per cent.

Meanwhile, deposits by nonresidents jumped 18.9 per cent year-

on-year to MOP248.3 billion from MOP208.9 billion in May 2014. On a month-on-month basis, deposits by non-residents increased 4.1 per cent from MOP238.4 billion in April.

Public sector deposits decreased 3.5 per cent month-on-month in May to MOP118.7 billion from MOP123 billion. Year-on-year, however, there was an increase of 35.6 per cent from MOP87.6 billion in May 2014.

According to AMCM, Macau holds around MOP1 trillion in deposits.

From these deposits the largest share is saved in Hong Kong dollars, accounting for 42.6 per cent for the total saving of the region, while 18.3 per cent is denominated in patacas, 13.6 per cent in renminbi and 21.2 per cent in US dollars.

Loans experienced the same trend as deposits and continued to grow in May 2015. Domestic loans to the private sector increased 22.6 per cent year-on-year to MOP367.1 billion from MOP299.5 billion in May 2014. On a month-on-month basis the increase in May 2015 was 2 per cent from MOP360.1 billion.

External loans increased 16.1 per cent year-on-year to MOP368 billion from MOP317 billion. The increase was smoother from April to May of this year, accounting for 2.6 per cent.

All in all, the loan-to-deposit ratio for resident and non-resident deposits rose 1.3 percentage points to 86.6 per cent in comparison to April 2015.

J.S.F.

Civil Aviation Authority approves 127 extra flights for Summer season

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he Civil Aviation Authority of Macau (AACM) has approved 127 extra flights for the summer vacation, following requests from Air Macau and Tigerair Taiwan.

The AACM explained that the flights were approved to cater for ‘the demand for travel of both Macau residents and tourists who take Macau as a transit point to travel to other places.’

The extra frequencies allowed by the Authority will start today and will

be in service until 31 August, flying to Mainland China, Thailand, Japan, Vietnam and Taiwan. The approved flights include 50 to Bangkok, 20 to Zhengzhou, 14 to Osaka, 13 to Chongqing, 12 each to Danang and Taipei, and 6 to Tianjin.

‘Whenever it is a peak travelling period, especially July and August, airlines usually provide extra capacity to satisfy the travelling needs of passengers. Our Authority will also

Milan Station predicts ‘narrowed’ interim loss

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uxury-branded handbag chainstore Milan Station Holdings Ltd. issued a profit warning yesterday, claiming its interim results for the six months ended June 30 will still record a net loss - but a narrowed one on a yearon-year basis.

‘The Group is expected to record a significant decrease in net loss of the Group for the six months ended 30 June 2015 as compared with the corresponding period in 2014,’ the company wrote in a filing with Hong Kong Stock Exchange yesterday.

According to the handbag retailer, the ‘significant decrease’ in net loss is due to the company achieving a higher margin by direct imports of inventories from European business partners. The reduction in selling expenses and a one-off gain on disposal of property of around HK$12 million (US$1.49 million) has also helped the company to minimise its losses.

Last year, Milan Station recorded a loss of HK$54 million following a loss of HK$38 million in 2013.

K.L.

approve the flights in a timely manner to cope with market demand’, the aviation authority of Macau explained concerning the decision.

In addition to the requests by Air Macua and Tigerair Taiwan, AACM approved the application of Jetstar Pacific to operate twice weekly scheduled services between Haiphong and Macau. This service will commence on 20 July.

J.S.F.

Business Daily | 5

July 7, 2015

Macau Stephen Chau steps in as Smartone interim CEO Stephen Chau Kam Kun will assume the position of Interim Chief Executive Officer (CEO) of Smartone Telecommunications on 1 September. The newly appointed CEO will have a term of 12 months or until a permanent replacement is appointed for the position. He replaces Douglas Li, who resigned from his position as CEO and Executive Director of the Board on April 15. Mr. Chau, 54, was appointed Head of Operations of Smartone in 1993 before being promoted to Chief Technology Officer in 1999.

Public service labour contract bill legislation expected soon The bill, having passed its first reading in 2013, was put on hold pending discussion by the AL sub-committee for four months before the government submitted a new text. It will very likely be submitted for its final reading before August 15 Kam Leong

kamleong@macaubusinessdaily.com

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bill establishing a regime for the labour contracting of public services is expected to pass for legislation by mid-August.

This bill seeks to integrate the current two types of non-permanent contracts of public servants to a new contract scheme called ‘administrative appointment contract’ that includes a severance compensation system for civil workers.

The president of the second standing committee of the Legislative Assembly (AL), Chan Chak Mo, told reporters yesterday following a closed-door meeting of the subcommittee that it is likely to sign the submissions of the bill in the next meeting, so that the bill may be discussed for its final reading before the end of this AL term on August 15.

The bill, having passed its first reading in April 2013, suggested in its original text combining the current fixed-term employment contract and wage-based contract, whilst providing a dismissal compensation equal to up to workers’ three-month salaries.

Following the sub-committee’s feeling that the original text needed improvements, the government submitted new text for the bill in May this year, introducing ‘termless contracts’ for public servants on ‘administrative appointment contracts’, providing a full severance compensation scheme based on the current Labour Relations Law. According to the AL subcommittee head, these public servants’ non-permanent contracts will be transferred to ‘long-term’ contracts once they work for the government for two years and their performances are evaluated as ‘very

satisfactory’ twice. Meanwhile, after they work for the government for three years and are evaluated as at least ‘very satisfactory’ for two consecutive times, their contracts will be transferred to ‘termless’ contracts.

However, Mr. Chan said the city’s prison guards are not included in this new bill as many of them are imported labour.

Following civil servants’ contracts being transferred to ‘termless’ ones, they can claim dismissal compensation of as much as MOP284,400 if they are sacked by the government without reasonable grounds.

The suggested compensation scheme in the bill suggests public servants working for the government between one and seven years can receive 15 daily salary points per year. Meanwhile, 16, 17, 18 and 20 daily salary points will compensate those working for the government for between 7 and 8 years, between 8 and 9 years, between 9 and 10 years, and for more than 10 years, respectively.

In addition, Mr. Chan said the bill will allow the compensation to be calculated monthly if the working tenures of the servants do not reach one year. Meanwhile, the workers will be considered as working for one whole month once they work for more than 15 days in that month.

The cap on the amount of the dismissal compensation cannot be higher than workers’ monthly salary by 12 times. Moreover, the total salary points given for the compensation cannot be higher than 300 points (MOP79 per point based on the current law).

In addition, the bill also suggests that the contracts of these non-permanent workers will

be automatically renewed if the government does not conduct any action 60 days before the end of the original contracts.

The government has not drafted the effective date for the bill if it passes the final reading at the AL. However, the legislator claimed that the sub-committee hopes the bill will be effective from January 1 next year.

Macau suspect arrested in crackdown on illegal Zhuhai bookmaking

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27-year-old Macau resident was arrested by Zhuhai police in a recent crackdown on an illegal bookmaking business via a sports gaming website, according to reports published on Sunday by state-run media China News Service and Xinhua.

The Macau resident was among 49 suspects arrested by the Doumen district bureau of Zhuhai Public Security last month, who also froze over 2 million yuan (US$322,643) of wagers involved in the illegal operation, according to Chineselanguage reports.

The arrested Macau resident, surnamed Lam, was reportedly the ringleader of the suspects, having opened an account on a sports gaming website and using thirdparties to handle the account since February. Through the account, Lam and his partners took wagers of up to around 10 million yuan per week, the reports said.

The reports did not name the full IP address of the sports gaming website but noted that the server of the website was located outside China.

While arrests were made on June 10, Zhuhai prosecutors are still processing the case, the media outlets reported.

S.L.

Corporate

Summer Escape at Grand Lapa Grand Lapa Macau has just announced its summer package. The offer is targeted at families with rates starting from HK$1,588. The price includes one night’s accommodation, MOP500 flexible daily credits for dining, spa or Kids Co., free Internet access during your stay, complimentary extra bed when booking a suite, welcome drinks at Vasco, full access to swimming pool and resort facilities and 20 per cent discount on

Macau Tower ‘Sky Walk Experience’.

The summer package is valid from July 1 through September 6, 2015.

With its unique location, Grand Lapa offers guests a relaxing resort close by the main business and entertainment districts. With accommodation set over 18 floors, guests have fine views over the city or the verdant landscaped gardens of our resort and a free form, all seasons temperature-controlled outdoor swimming pool.

6 | Business Daily

July 7, 2015

Macau

Galaxy Entertainment reportedly bidding for S. Korean casino licence

Frances Liu, Vice Chairman of Galaxy Entertainment Group

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acau-based casino operator Galaxy Entertainment Group is reportedly among the list of foreign bidders for new casino licences in South Korea, as the local government said recently that it was likely to approve two licences to operate integrated

reports by the end of this year.

The Macau names that appear on the list of bidders for a casino licence in South Korea include Galaxy Entertainment and junket operator Suncity Group, a note from analysts DS Kim and Daisy Lu from JP Morgan

Securities (Asia Pacific) Ltd. revealed.

When asked to confirm the cast of the South Korea casino licence bid, Galaxy Entertainment responded: “While we believe that the best growth opportunities are still in Macau, we are always open to investment opportunities in other jurisdictions and would consider them on a case-bycase basis, so long as they can add value to our shareholder returns. We continue to explore opportunities in overseas markets,” Vice President of Public Relations of Galaxy Entertainment Group, Buddy Lam, replied in a written statement.

South Korea announced earlier this year it would issue around two licences to operate integrated resorts by the end of this year.

The government specified that parties seeking to build and operate resorts must pledge at least 1 trillion won (US$894.32 million) in investment for proposals to be eligible.

S.L. with Reuters

THERE ARE THINGS WE DON’T DO BUT WE DO • Advertising • Branding & marketing consulting • Marketing strategy • Creativity • Design

Studio City enters MICE race

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elco Crown’s Studio City announced yesterday its MICE (Meeting, Incentive, Conference and Exhibition) packages in order to attract new customers and diversify revenues beyond gaming. In a press release yesterday, Studio City, Macau’s upcoming new film-themed entertainment and leisure facility and the second property to open in the Cotai 2.0 movement after Galaxy II, showed its mettle.

Melco Crown says the US$3.2 billion Studio City occupies more than 4,000 square metres of indoor event space with flexible configurations, allowing meeting and event planners to host a variety of events, from exclusive banquets to international conferences.

The Grand Ballroom space, occupying 1,820 square metres, can be configured as three separate ballrooms with banqueting capacity for 650

people and cocktail capacity for 1,500.

Also available are eight individual salons providing meeting and breakout spaces with extensive pre-function areas, many of them with private outdoor terraces for coffee and lunch breaks.

Organisers who want their events to be hosted outdoors have the option of the Studio City Event Garden, which opens on to the tropicalthemed pool deck. Located next to the Grand Ballroom, the Event Garden is suitable for parties, team-building events and pre-event cocktails.

Studio City is scheduled to open this year with amenities like the Golden Reel, claimed to be the world’s first and only figure of 8 Ferris wheel, a pool deck complete with a scenic lazy river ride, world famous nightclub Pacha - plus Gotham City, the world’s first Batman 4D flight simulation activity.

There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life.

Those people and their actions are our inspiration.

•••

info@goldfishmacau.com +853 2833 1258

Business Daily | 7

July 7, 2015

Macau Sri Lanka tourism grows 12 pct in June with Macau, Hong Kong visitors Sri Lanka’s tourist arrivals rose 12 per cent to 115,467 in June 2015 from a year earlier driven by rapid growth from China, Macau and Hong Kong, well above the average, data from the state tourist promotion agency showed. The report stated that arrivals from East Asia increased by over 19 per cent to 26,217 in June, mainly driven by visitors from China, Hong Kong and Macau. South Asia also grew rapidly, largely owing to Indian visitors, increasing 19.5 per cent to 36,972 in June 2015.

High spending Mainlanders dodge HK

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Greater China still attracts 70 pct of Mainland tourists China's international travellers’ spending is expected to increase 50 per cent from US$164 billion last year to US$264 billion by 2019

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hey’re often cited as the next goldmine for the tourism industry around the world and every country wants to have its share of the current and future Chinese tourism boom. The problem is that the large majority of Mainlanders who travel abroad don’t go far. The National Tourism Administration has revealed that 70 per cent of Chinese tourists last year travelled to Hong Kong, Macau or Taiwan.

Three destinations close to the Mainland, with the first two Special Administrative Regions (SAR)of China. In 2014, 109 million Chinese made trips outside the country breaking for the first time the 100 million mark. More than 70 million travelled to these three destinations.

Macau alone received more than 20 million Mainlanders according to the city’s official data, while Taiwan accounted for 3.98 million trips, Taiwan's tourism bureau said.

Both by traveller numbers and spending, Mainland China has been

the world's largest outbound tourism market since 2012, according to Bank of America Merrill Lynch, the South China Morning Post reported. The US bank says the 2013 outbound travel penetration of the Mainland Chinese population was just 7.6 per cent, with 59 per cent of those travelling abroad doing so for the first time. The low base creates tremendous potential as tourist numbers are expected to see rapid growth in the coming years with the increase in disposable income among the country's middle class, which is as big as the United States population, the Hong Kong paper said.

Only Asia

But most worrying for tourist operators around the world is that almost 90 per cent (89.5 per cent ) of all Chinese travellers do not travel beyond Asia. After Macau, Hong Kong and Taiwan, popular destinations are countries such as South Korea, Thailand, Japan, the US, Vietnam and

Singapore. SCMP noted that tourist numbers to Japan tend to fluctuate in line with swings in Sino-Japan relations, although visits to Korea and Japan increased more than 40 per cent last year. Europe is the most popular destination outside Asia but it gets only ‘a drop in the ocean’ attracting 3.5 per cent of all Chinese trips. Even Africa, at 3 per cent, comes second, beating the Americas, at 2.7 per cent. For example, the US started offering Mainland Chinese passport holders multiple-entry visas valid for 10 years, a major boost for overseas travel as well as for the US as a destination.

SCMP says the removal of travel restrictions has been the most important factor in boosting air travel, together with economic growth. Bank of America Merrill Lynch forecasts that the total spending of Mainland China's international travellers will reach US$264 billion by 2019, from US$164 billion last year, a 50 per cent increase.

ong Kong registered a new drop in tourists - particularly high-spending Mainlanders – in June as the once-a-week limit on individual travellers from Shenzhen started to bite, The Standard has reported. Overall visitor arrivals from June 1 to 28 fell year-on-year by 1.9 per cent. Mainlanders are even more significant to Hong Kong than they are here, as they account for 77 per cent of tourist arrivals compared to almost 70 per cent in Macau. June's drop was the second year-on- year monthly fall this year, with visitor arrivals sliding 8.7 per cent in March, The Standard said.

"The decrease has been accelerating," said Secretary for Commerce and Economic Development Gregory So Kamleung.

Under the individual travel scheme, anyone from Guangdong or 49 cities, including Beijing and Shanghai, can visit Hong Kong on their own. Starting April 13, however, Shenzhen authorities tightened terms for permits, limiting a visit to Hong Kong to once a week under the multiple entry scheme amid uproar over parallel trading and the SAR's capacity for tourists being stretched.

Despite a drop in such visitors, the total number of Mainland tourists decreased by only 0.5 per cent from June 1 to 28 thanks to an increase in tourists on other types of visas.

8 | Business Daily

July 7, 2015

Greater China

Government throws developers a l

Online documents showed authorities, through tenders, bought 3,660 housing units from in May for between 2,766 yuan to 3,612 yuan (US$446 to US$582) a square metre Koh Gui Qing

KEY POINTS Volume of unsold housing space at end-May still huge Govt purchases bring benefits, but add to public debt Foray comes at time housing market may be stabilising

D

ismayed by the millions of unsold homes in China’s troubled real estate market, the Chinese government is taking matters into its own hands: by buying some properties and turning them into public housing.

Like a white knight riding to the rescue of distressed developers, a handful of local governments are snapping up thousands of empty homes at hefty discounts and re-selling them to the country’s poorest households.

This cannot be a cure-all for China’s huge supply overhang. At the end of May, according to the National Bureau of Statistics, unsold residential floor space totalled 657 square kilometres - the most unsold space in at least two years, and covering an area nearly the size of Singapore.

Still, the policy getting tested in at least six provinces looks like a win for all. Low-income households gain from a bigger supply of subsidised

homes, the government boosts its poverty alleviation work, developers deplete an oversupply of houses that has dampened prices, and crucially, China’s cooling economy gets a fillip from a healthier property market.

All of this comes with a caveat: government purchases of homes - done with discounts averaging between 10 percent and 52 percent - add to a mountain of public debt and do little to discourage the next housing bubble.

But the potential benefits are alluring, leading authorities in some of China’s worst-performing property markets to experiment with mass purchases of homes.

‘Ghost city’ movement

In the Inner Mongolia city of Erdos, notorious as a “ghost city” after a building frenzy failed to attract buyers and residents, authorities in Dongsheng district bought houses in April and May. “We will watch the situation in the (housing) supply,” said an official at the Dongsheng housing authority who declined to be named. “If there is a need, we will buy again.”

Repeated phone calls to the Erdos government went unanswered The government’s foray comes at a time China’s struggling housing market appears to be stabilising. New home prices edged up for the first time in 13 months in May, suggesting the property market may be bottoming out.

“If the inventory can be gotten rid of more quickly, it will ease the stress on developers’ funding,” said Zhu Jianfang, the chief economist at CITIC Securities.

Too many homes, too few buyers

In Erdos, a coal town battered when a stuttering world economy dented

Taiwan aims to set up first U.S. dollar bond exchange Keen to build Taiwan into a wealth management hub in Asia, regulators have made it easier for bonds to be issued by foreign companies and Chinese banks Faith Hung and Emily Chan

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aiwan is aiming to set up its first exchange to list U.S. dollar-denominated bonds issued by foreign firms, in its latest effort to boost its capital markets and keep in line with global trends, the top financial regulator told Reuters.

Morgan Stanley and AT&T are among those global names that have sold U.S.-denominated bonds in Taiwan, mostly to local insurance firms. However, the Financial Supervisory Commission (FSC) says a bond exchange is necessary to make capital markets more active.

“We’re studying proposals to have insurers take a certain portion of their bond positions to trade... We’re aiming to reach a conclusion late this year,” the FSC chief William Tseng said in an interview late on Friday.

“The point in the future is to set up a secondary market,” he said, adding

KEY POINTS Morgan Stanley, AT&T have sold US$ bonds in Taiwan Says to launch ETF on Formosa bond index next year Says sees US$ - and yuan bonds growing by US$5-US$10 bln for rest of 2015 London already has such a bond exchange.

Taiwan, once criticized for not being open enough to foreign investors, has eased some major financial regulations since Tseng became the FSC chief in 2013.

Taiwan’s yuan-denominated “Formosa bonds,” which are sold by Chinese banks here and the equivalent of Hong Kong’s “Dim Sum

bonds,” have also been growing thanks to the improved business ties with China.

Trade ties across the Taiwan Strait have gathered steam since President Ma Ying-jeou took office in 2008.

For example, Taiwan is now the world’s second-biggest offshore yuan market after Hong Kong, with more than 300 billion yuan in deposits.

The FSC is planning to launch an EFT (exchange-

traded fund) on a Formosa bond index next year, said the top financial regulator, without elaborating.

China Development Bank, the mainland’s biggest development bank, will sell Formosa Bonds in the second half of 2015, a source told Reuters last month.

When being asked if the FSC would approve that, Tseng said “We welcome them (China Development Bank).”

Currently, Bank of China and other big mainland banks have sold Formosa bonds, using their offshore branches.

The top financial regulator expects new issues of U.S. dollar-denominated and yuan bonds to increase

by US$5 billion to US$10 billion by the end of 2015, compared with the current outstanding level of around US$40 billion.

Reuters

Business Daily | 9

July 7, 2015

Greater China June inflation seen edging up

lifeline

m eight developments

Consumer inflation is expected to have picked up but only marginally to 1.3 pct

coal prices, pain was compounded by its housing market, where a supply glut led the mayor to call for a three-year halt in construction last year.

New housing space completed in Inner Mongolia last year was 24 percent less than in 2013, the second-biggest decline among China’s 31 provinces and regions, the Chinese Academy of Social Sciences, a state think-tank, said in May. “It helps to run down the inventory, but not by much,” a broker surnamed Hua said of the government’s purchases.

Analysts warn against betting on a dramatic turnaround.

Developers do not want to slash their profit margins by selling houses to the government at discounts of up to 52 percent - the figure in Inner Mongolia - unless they have to.

“If the market has enough buying power then we would sell to the market,” said an official from a developer that sold homes to the government recently.

“But the market’s buying power has weakened by too much. My feeling is that most part of the housing inventory has not been digested,” he said.

Reuters

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hina’s consumer inflation likely edged up in June as food prices steadied, while producer prices extended their decline well into a fourth year, reinforcing expectations that more support measures are needed to revive sluggish demand.

Indeed, stronger price pressures may not do much to allay concerns about the health of the world’s second-largest economy, where a recent 30 percent slump in its stock market has raised fears about further threats to China’s sluggish economic growth.

Consumer inflation is expected to have picked up but only marginally to 1.3 percent in June from a year ago, compared with May’s 1.2 percent, the median forecast of 40 analysts polled by Reuters showed.

Yet the producer price index, which has been pressured by lower commodity prices and excess capacity at factories, is seen falling 4.5 percent, compared with a 4.6 percent decline in May. That would mark its 39th straight month of declines.

“The sequential decline of food prices has continued in June on seasonality, though at a milder pace, as vegetable prices narrowed the loss and pork prices posted another solid gain,” Wang Tao, an economist at UBS, said in a note.

“In contrast, domestic raw material prices stumbled again, weighed by sluggish domestic production and stuttering global commodity prices,” she said.

With consumer inflation running well below the Chinese government’s 3 percent target for the year, the central bank has room to loosen monetary policy if needed.

Hurt by a cooling property market and slowing growth in investment, manufacturing and retail sales, China’s economy grew at its slackest rate in 6 years in the first quarter, expanding by just 7.0 percent.

Many economists believe it lost further momentum in the spring.

Second-quarter growth data is due on July 15.

Some analysts believe China could lower rates yet again, alongside further reductions to the reserve requirement ratio to ensure the economy grows by around 7 percent for the full year, as targeted by the government.

Reuters

The Asia-Pacific cities making up the biggest economy on Earth Chinese metro economies enjoyed the fastest GDP per capita growth Enda Curran

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sia Pacific cities are driving the global economy.

From the West Coast of the Americas spanning cities including Vancouver, San Francisco and Lima to Auckland, Jakarta and the metropolises of Hong Kong, Shanghai and Tokyo, the 100 biggest metropolitan centres across the region make up one fifth of the global economy, or US$22 trillion worth in 2014.

That’s according to a new analysis by the Brookings Institution, which identified the 100 largest metro economies -- 49 in China, 19 in Japan, South Korea and Taiwan, 12 in North America, seven each in Southeast Asia and Latin America, and six in Australia and New Zealand.

“The Asia-Pacific Metro Monitor reaffirms the shift in global economic growth to the East and South, as Asia continues its path through urbanization and industrialization,” the report’s authors Joseph Parilla and Jesus Leal Trujillo wrote. “As a result, major metro economies remain the engines of the Asia-Pacific economy and its centres for trade and investment.”

Impact of new HK tourism policy unknown In regard to the fallen tourism numbers in June, Hong Kong’s economic official said that it will take a year to see the full impact of the new one trip per week policy for Shenzhen visitors to Hong Kong. Speaking to reporters after the Hong Kong Dragon Boat Carnival, Hong Kong’s Secretary for Commerce & Economic Development Gregory So said that the number of tourists coming under the Individual Visit Scheme had recorded a 5 percent year-on-year decrease in May, and a 10 percent fall from June 1 to 28.

Regulator warns Party bureau chiefs about graft Anti-corruption officials at the China Securities Regulatory Commission (CSRC) warned party chiefs in nine bureaus that they would be held responsible for any graft in their organisations, according to a statement posted on the website of the Communist Party’s internal disciplinary committee yesterday. The warning to nine unnamed bureau chiefs came at a recent meeting in the city of Fuzhou, the statement said. “Party secretaries must completely shoulder responsibility for the fundamental responsibility of building good governance”, the statement said.

Three asset managers commit funds Three Chinese asset managers said yesterday they would commit a combined 210 million yuan (US$33.85 million) of their own capital to buy equity funds, under a concerted effort announced over the weekend by institutional investors to help stabilise China’s tumbling stock markets. China’s Harvest Fund Management Co said it would spend 50 million yuan, Yinhua Fund Management Co committed 90 million yuan, and the asset management arm of Orient Securities will spend 70 million yuan to buy equity funds. The companies’ senior executives and fund managers also pledged to buy fund products.

C.bank approves US$8.1 bln MBS sale Major metro economies remain the engines of the Asia-Pacific economy and its centres for trade and investment Metro Monitor Report

The numbers tell their own story: The 100 biggest metropolitan economies in the Asia Pacific region together accounted for 20 percent of global GDP and 29 percent of global GDP growth in 2014. If they were a single country, they’d be the largest national economy on earth with US$21.9 trillion in output last year.

Chinese metro economies enjoyed the fastest GDP per capita growth.

China’s central bank has given China Construction Bank, the country’s second-biggest bank, the right to sell 50 billion yuan (US$8.06 billion) of mortgage-backed securities, local media Great Wisdom said yesterday.

A panorama of Shanghai

But it’s not all about Asia. Cities such as Portland, San Jose, Seattle and others all outpaced national growth averages in 2014.

“Cities are where the region’s most significant developments—China’s continued liberalization and economic expansion, the rise of Southeast Asia, and the technology-led growth occurring in North America—all come to ground,” the report’s authors wrote. “These dynamics—along with the recent push among national governments to cement trans-Pacific ties—offer the potential for a new era of shared growth and prosperity among cities in the Asia-Pacific region.”

Bloomberg News

Xinjiang lawmaker expelled from CPC Li Zhi, a senior lawmaker of northwest China’s Xinjiang Uygur Autonomous Region, has been expelled from the Communist Party of China (CPC), the CPC’s anti-corruption watchdog said yesterday. Li, former deputy head of the standing committee of the Regional People’s Congress of Xinjiang, was found “seriously violating discipline, faking personal record and cheating the organization with a wrong age,” according to a statement from the CPC Central Commission for Discipline Inspection (CCDI). He was also caught accepting monetary gifts and seeking benefits for others by taking advantage of his posts, the statement said.

10 | Business Daily

July 7, 2015

Greater China Hong Kong shares suffer biggest fall in 3 years Benchmark index closed at a threemonth low yesterday after the biggest one-day fall in three years, as investors worried that the Greek debt crisis could deepen. The Hang Seng index fell 3.2 percent, its largest drop since May 16, 2012, to 25,236.28. The China Enterprises Index lost 3.0 percent to 12,231.43 points. Hong Kong tracks global and regional markets, nearly all of which saw heavy selling after Greeks voted to reject conditions of a rescue package. Stocks in Hong Kong fell across the board, with the Growth Enterprise Market slumping over 14 percent.

Foreign Ministry believes Greece can stay in eurozone China believes Greece will stay within the eurozone and the region can resolve its current problems, the Foreign Ministry said yesterday, after Greeks voted resoundingly to reject the austerity terms of a bailout. Foreign Ministry spokeswoman Hua Chunying made the comments at a daily news briefing.

Export of civilian drones surges China exported 160,000 units of civilian drones worth 750 million yuan (US$120 million) from January to May, 69 and 55 times of the same period in 2014 respectively. According to customs in the southern city of Shenzhen, where 99 percent of China’s civilian drones are exported from, a “green channel” has been set up to facilitate fast clearance of the product. The Shenzhen-based technology firm DJI, a leading manufacturer of commercial and recreational drones for aerial photography and videography, accounts for almost 70 percent of the market share worldwide, with Europe and North America its biggest customers.

Boost at airport economic zones China will build “model airport economic zones” in pilot cities, the country’s aviation watchdog said. The move is aimed at supporting the development of airports, a new engine for regional growth and industrial upgrading, according to a statement from the Civil Aviation Administration of China (CAAC).

Qualified cities will have an airport that handles at least 100,000 tonnes of cargo or more than 10 million passengers annually, the statement said, citing a document released by the CAAC and the National Development and Reform Commission in June.

Chery hopes to expand production in Brazil China’s automaker Chery hopes to produce 10,000 vehicles in its Brazilian factory this year, and soon expand its production and presence in the country, a top Chery executive said.

Peng Jian, Chery’s president for Brazil, said Chery is working hard to offer new options for Brazilian consumers.

Although Chinese manufacturers have been operating in Brazil for some years, consumers remain relatively unaccustomed to Chinese vehicles, and much more used to the four big players in Brazil: Volkswagen, GM, Ford and Fiat.

Equity deals surge through market chaos Equity fund raising in Hong Kong and Mainland totalled US$20.6 billion in the past three weeks from 89 companies Elzio Barreto and Denny Thomas

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hina’s decision over the weekend to curb IPOs followed a splurge of new share offerings that belied expectations of a slowdown as markets went into free-fall, wiping nearly US$3 trillion off its stock markets in three weeks.

Bankers say the resilience of equity-raising activity in the face of the local market tumble and overseas threats in the form of Greece’s debt crisis illustrates the power of Chinese domestic institutions, which were flush with money going into the turmoil after a year-long stock boom.

It’s also a sign that Chinese institutional investors are stepping up to replace global funds spooked by the volatility after seeing 30 percent knocked off China stocks.

Equity fund raisings in Hong Kong and China totalled US$20.6 billion in the past three weeks from 89 companies, nearly triple the volumes clocked at the New York Stock Exchange, according to Thomson Reuters data, and dwarfing London’s US$1.5 billion.

“It’s pretty encouraging that despite the market volatility, deals still get done,” said a senior Hong Kong-based equity capital market banker who has worked on several fund raisings in the past weeks.

“The importance of mainland Chinese money has been growing.

When that buyer is Chinese institutional money, that’s good because that money is less likely to be heading back to Europe or the U.S. at the first sign of volatility,” the banker said.

When Chinese leasing company Far East Horizon Ltd last week tapped investors for US$581 million to finance its entry into China’s fastgrowing hospitals business, it mostly

targeted mainland funds, one person involved with the fund raising said.

“It became an easy sell,” the person added. “We didn’t go to the 200-odd global funds, instead approached the Chinese funds who wanted to be part of the story. The global names were more cautious, given Greece and the China market volatility.”

Nearly two-thirds of Far East Horizon’s placement came from Chinese investors. The company declined to comment on the deal. A similar deal two years back would have drawn mostly international funds.

Secondary shares sales are expected to continue despite the measures to curb IPOs, albeit at a slower pace, bankers said.

Hong Kong valuation

Hong Kong IPOs are not included in the Chinese measures. Some large ones, including China Reinsurance Corp’s US$2 billion listing and bad debt manager Huarong Asset Management’s US$3 billion offer, are on course with no signs of delay, people familiar with the deals said.

Secondary share placements in Hong Kong have stayed strong because the benchmark stock index had, before yesterday, fallen just 4 percent over the same three weeks.

Investors have been more receptive to buying Hong Kong share offerings as a result of that lower volatility and because mainland stocks with a second listing there - known as H shares - trade at a discount to their China-listed A shares. That discount widened to about 26 percent yesterday as Hong Kong stocks tumbled nearly 4 percent on fears the Greek crisis will worsen.

KEY POINTS HK, China equity raisings $20.6 bln during market fall That’s nearly triple NYSE equity raising and 13 times London 89 companies raised equity in HK, China in the three-week period Bankers say this shows strength of Chinese institutional buyers China to slow mainland IPOs to help stop sell-off Bankers say that for companies with a clear purpose for the issue proceeds and compelling business case, Chinese investors have been willing to invest regardless of market conditions.

Investors haven’t demanded deeper discounts, and no Hong Kong IPO has been delayed or pulled.

Fund management units of large Chinese banks and insurers, China’s bad debt managers and large conglomerates such as Fosun International Ltd are among the domestic investors who have been participating in the capital raisings, people familiar with the matter said.

Fosun declined to comment.

Tony Chu, a portfolio manager at RS Investments in Hong Kong, warned that there could, however, be limits to investors’ sang-froid.

Reuters

Business Daily | 11

July 7, 2015

Greater China

President Xi to travel to Russia to hold key meetings Xi will hold bilateral talks with Putin in their eighth such meeting since Xi became president in 2013 Kelly Olsen

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hinese President Xi Jinping, Russian President Vladimir Putin and other leaders will discuss the threat the Islamic State group poses in Afghanistan at a Eurasian security summit in Russia this week, a Chinese official said yesterday.

Xi travels to the Russian city of Ufa for a summit on Thursday and Friday of leaders of the Shanghai Cooperation Organisation (SCO), which groups China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

It will be preceded by a meeting of leaders of the BRICS group of emerging economies -- Brazil, Russia, India, China and South Africa.

“Due to the spill over effect of the Islamic State terrorist activities, Afghanistan now faces a grim security situation,” Chinese vice foreign minister Cheng Guoping told reporters.

SCO leaders “will certainly have in-depth discussions on the Afghan issue”, he added. “And they will talk further about how to respond to the security situation there.”

China is seeking business interests in Afghanistan and is sensitive to any

The summit will begin procedures for India and Pakistan to join the Shanghai Cooperation Organisation as full members after their candidatures were approved last year

spill over of Islamic-inspired extremism from the country, which has a short border with its mostly Muslim western region of Xinjiang.

Afghanistan’s militant Taliban are seeking to halt defections to IS after

some insurgents adopted its flag to rebrand themselves as a more lethal force as NATO troops depart the country.

Last month the Taliban warned the leader of IS group against waging a parallel insurgency in Afghanistan, after reported clashes between militants loyal to the two groups.

Afghanistan has “observer” status in the SCO, along with India, Iran, Mongolia and Pakistan, according to the group’s website.

Security co-operation

The summit will begin procedures for India and Pakistan to join the group as full members after their candidatures were approved last year, Cheng said.

The acceptance of the nucleararmed rivals -- which have fought three wars since independence from Britain in 1947 and jockey for influence in Afghanistan -- would mark the SCO’s first expansion since its inception in 2001.

Cheng shrugged off any concerns over their tense relations, saying membership “will not only help the

organisation become better but will also play a productive role in promoting friendly relations between the two countries”.

He also said that China remained on guard against the East Turkestan Islamic Movement (ETIM) it says foments unrest in Xinjiang among the region’s ethnic Uighurs, though many analysts outside China have questioned whether any large scale organisation of the kind exists.

“It has participated in some terrorist activities of the IS,” he said of ETIM. “China is concerned about that and we will also maintain security cooperation with relevant countries.”

Besides the group summits, Xi will hold bilateral talks with Putin in their eighth such meeting since Xi became president in 2013. Xi visited Russia in May to witness a vast military parade at Red Square to commemorate the defeat of Nazi Germany in 1945.

“The Chinese and Russian leaders have established a very good working relationship and personal friendship,” Cheng said, adding: “As permanent members of the (UN) Security Council a sound relationship between these two countries plays an important role in promoting world peace”.

He said they will discuss bilateral relations, including economic cooperation and “specific cooperation projects”, without elaborating.

Russia -- which invaded Afghanistan in 1979 and occupied it for a decade -- has strengthened ties and trade with China since coming under Western sanctions for its actions in Ukraine.

Russia became China’s top crude supplier in May for the first time in a decade, Bloomberg News reported last month, as Moscow seeks new markets for its oil.

AFP

Push to save market may affect brokers The risk is a repeat of the market bust of 2007 and 2008 that sent brokerages into the doldrums

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hina’s emergency measures to save the stock market risk creating another victim: the nation’s brokers.

Securities firms will suffer the most from steps unveiled at the weekend, according to Bank of America Corp.’s head of China equity strategy David Cui. Doing their “national service” by purchasing shares to support the market may hit brokers’ earnings and balance sheets, Cui said in a note yesterday.

Interference by policy makers may put the industry’s business model into question even as the buying operations provide some short-term support to shares on the mainland, China International Capital Corp. said.

The concerns about the long-term impact of the new government measures were reflected in the brokers’ share prices in Hong Kong, where China’s emergency measures are less supportive.

Guolian Securities Co. plummeted as much as 42 percent in the worst major Hong Kong debut this year.

Citic Securities Co., the industry giant, declined 15 percent in Hong Kong, where Haitong Securities Co. plunged 18 percent, its biggest decline

since it listed in April 2012. In contrast, Haitong’s Shanghailisted shares were up 3 percent.

“The more new measures announced by the Chinese government mean there are more problems behind the market,” said Castor Pang, head of research at Core Pacific Yamaichi in Hong Kong.

Twenty-one leading brokerages have pledged 120 billion yuan (US$19 billion) for a stock-purchasing fund and the central bank may provide liquidity for the industry.

China’s way of supporting the stock market is not something investors want to see Castor Pang, head of research, Core Pacific Yamaichi

Initial public offerings are on hold -- robbing brokers of revenue.

Stabilization fund

Chinese officials are struggling to prevent a market meltdown that could derail the economy as millions of individual investors lose money on leveraged stock purchases.

“The end result of the market stabilization fund is for brokers to take on many over-valued stocks on their book and potentially damage

their earnings and balance sheets down the road,” said Cui. Excluding banks, the Shanghai Composite Index is trading at 31 times trailing earnings.

The largest securities firms will use 15 percent of their net capital to establish the market stabilization fund. In addition, they have pledged to refrain from selling their own holdings until the Shanghai Composite Index exceeds 4,500.

As part of the emergency measures, the central bank said it would provide liquidity for China Securities Finance Corp., which offers margin financing loans to brokers.

While the government didn’t give specifics, Bank of America said it expected the central bank would provide temporary support for margin finance but wouldn’t buy stocks itself or provide open-ended support to the stock market.

Bloomberg News

12 | Business Daily

July 7, 2015

Asia KEY POINTS Fitch downgraded Japan in April, outlook stable Japan’s debt-GDP ratio worst among major economies Japan’s govt shunned spending cuts in fiscal programme Moody’s worried about gov’t growth expectations

Fitch says Japan’s fiscal plan unlikely to lower debt A lack of binding spending targets in the government’s plan also leaves room for spending to rise further, the ratings agency said Stanley White

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apan’s public debt burden is likely to remain high under a new fiscal framework approved last month as the government’s structural reforms will not boost economic growth and tax revenue significantly, Fitch Ratings said yesterday.

Japan’s fiscal plan relies almost entirely on achieving high economic growth to increase tax revenue, but there is little room for the economy to accelerate as it is already near its potential growth rate, Fitch said in a statement.

Rival ratings agency Moody’s Investors Service also expressed concern that structural reforms could take longer to boost growth than the government expects.

A loss of fiscal discipline could harm Japan’s economy by putting upward pressure on bond yields and complicate the Bank of Japan’s purchases of government debt under its quantitative easing programme.

“The strategy focuses on enhancing growth through structural reforms as the guiding principle for fiscal

consolidation,” Fitch said in a statement.

“Many of the planned reforms are positive for enhancing productivity and encouraging investment, but Fitch believes that the government’s expectations of their effect on growth are highly optimistic.”

Fitch Ratings downgraded Japan’s credit rating in April by one notch to A, which is five notches below the top AAA rating, after the government failed to tighten fiscal spending to offset a delay in a sales tax increase.

The outlook is stable.

Japan’s new fiscal guidelines approved last month maintained an earlier target of returning to a primary budget surplus in fiscal 2020 and then lowering the debt-GDP ratio, which is the worst in the world at around twice the size of Japan’s US$5 trillion economy.

The government also said it would try to limit annual spending growth to 1.6 trillion yen (US$13.05 billion) for the next three years but said this could change depending on the economy.

“This benchmark is subject to economic and price trends, indicating leeway to increase spending further should output growth weaken,” Moody’s said in a statement.

Moody’s rating on Japan is A1, which is four rungs below the highest rating. The outlook is stable.

Japan’s government aims to keep GDP growth above 2 percent in real terms and 3 percent in nominal terms with reforms designed to encourage investment in robotics, IT and increase productivity.

Both Fitch and Moody’s said these steps are encouraging but are unlikely to trigger an immediate increase in growth that the government is counting on to meet its fiscal discipline targets.

Reuters

Manulife shelves Singapore REIT IPO as markets swoon Stock flotation plans have also been pulled or delayed in Europe S.Anuradha and Anshuman Daga

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anada’s Manulife Financial Corp shelved its S$569 million (US$420 million) IPO of a real estate investment trust in Singapore yesterday, the first major Asian offering outside China to be pulled due to deteriorating global markets.

The postponement of the IPO, which had been slated to be Singapore’s biggest in a year, came as Greeks overwhelmingly rejected conditions of a rescue package from creditors on Sunday and as China rolled out an

unprecedented series of steps to prevent a full-blown stock market crash.

“In light of increased volatility in the equity capital market, the IPO of Manulife US Real Estate Investment Trust has been delayed. Depending on market conditions, the IPO is expected to proceed at a later date,” Manulife said in a statement emailed to Reuters.

The books for Manulife’s REIT IPO were scheduled to close last Friday but demand did not materialise amidst the Greek crisis, Thomson Reuters

IFR cited a source as saying.

Asian stocks and the euro stumbled further yesterday, and while China shares jumped on government rescue steps they recouped only some of recent steep losses.

Stock flotation plans have also been pulled or delayed in Europe. In China, authorities orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, a tactic authorities have used before to support markets.

This year had already been a slow one for IPOs in Southeast Asia, hurt by weakness in Malaysia’s economy and currency and as Singapore has lost much of its appeal with investors favouring Hong Kong and China.

Bankers said the latest market volatility might affect issues in the pipeline.

These include an IPO from Malaysian helicopter operator Weststar Aviation Services and a Singapore REIT offering from China’s

Kailong, comprised of business parks in Shanghai.

Manulife had been aiming to sell 694.4 million units, including cornerstone units, at S$0.82 each.

Cornerstone investors included Malaysia’s Fortress Capital Asset Management Sdn Bhd, Japan’s Nikko Asset Management Asia Ltd, and the Oman Investment Fund.

DBS was the sole financial adviser. Both DBS and JPMorgan acted as book runners.

Reuters

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Business Daily | 13

July 7, 2015

Asia Abu Dhabi bank targets Asian banks

Myanmar trade union pressures over wages

Banks in the United Arab Emirates have enjoyed several quarters of bumper earnings as the economy has flourished Tom Arnold

KEY POINTS Eyes Malaysia, Indonesia, Algeria, Jordan, Morocco Targets return on equity at top of 15-18 pct range The bank recently failed in its bid for Citigroup's Egypt retail business

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bu Dhabi Islamic Bank (ADIB), which recently failed in its bid for Citigroup’s Egypt retail business, is targeting acquisitions in 2016 in Asia, the Middle East, and North Africa, its chief executive said.

Tirad al-Mahmoud said the bank was looking in Malaysia and Indonesia, as well as Algeria, Jordan and Morocco, although the remainder of 2015 was not the right time for deals in part due to slower economic growth in the United Arab Emirates (UAE).

“This is a time to let things settle down and (instead) we will be looking to do deals in 2016,” he told reporters at a media event.

Several UAE banks have been seeking to expand abroad against a backdrop of intense competition at home.

ADIB was one of several bidders for Citigroup’s Egyptian retail business.

It lost out to local lender Commercial

Concerned about margin hit from price competition International Bank (CBI), whose bid was “very aggressive,” according to Mahmoud.

He said ADIB’s overseas expansion could involve acquisitions in the retail space or growing its own corporate business.

The bank last year completed the purchase of the retail business of Barclays in the UAE, helping create one of the largest ATM networks in the country.

Banks in the UAE have enjoyed several quarters of bumper earnings as the economy has flourished.

But Mahmoud said “tailwinds were not as strong as they used to be” as economic growth had eased.

Business activity growth in the non-oil private sector slowed to a 22-month low in June, partly because of the start of the Muslim holy month of Ramadan, while Dubai residential property prices are forecast to fall 10-20 percent this year.

Return on equity across the local banking industry was expected in the region of 15-18 percent, Mahmoud said, adding he hoped ADIB would be at the top end of that range.

The bank’s return on average shareholders’ equity was 18.4 percent in 2014, according to a recent financial presentation.

But Mahmoud said there was a “bit of irrational exuberance” among banks in pricing of products.

Years of low interest rates have led banks in the UAE to cut the price of loans and other products in an effort to compete.

“The risk we run is destroying shareholder value if we continue this senseless price competition but so be it, that’s the market,” he said. “My biggest concern is erosion of margins and erosion of returns on capital for the industry as a whole.”

Reuters

Australian inflation gauge remains benign in June

S.Korean foreign exchange bank deposits edge down Foreign exchange bank deposits in South Korea fell for a second month in June, central bank data showed yesterday, as some public institutions dipped into their deposits for payments, including import fees. Total deposits edged down US$80 million to US$64.7 billion as of the end of June, the Bank of Korea said in a statement, bringing the overall amount to the lowest since March this year. Dollar deposits rose US$0.6 billion in June to US$40.0 billion while those denominated in the yuan fell US$0.6 billion to US$18.5 billion last month.

OECD upgrades Bangladesh rating The Organisation for Economic Cooperation and Development (OECD) has upgraded its rating for Bangladesh, in a move that should make it easier for local entrepreneurs and banks to secure credit, the country’s central bank governor said. Atiur Rahman said the decision was made at a meeting of the Swiss Export Credit Agency last week, which he attended. He said the OECD, an international group that promotes policies aimed at improving the economic and social well-bring of people around the world, had raised its country rating for Bangladesh by one notch to 5 from 6.

Bank of Japan keeps rosy view of regional activity

The annual pace of non-tradable inflation stood at 2.0 per cent, compared to 2.5 per cent in January

The Bank of Japan yesterday maintained its upbeat assessment on regional sectors of the economy, saying they are recovering thanks to a pick-up in output and tightening job markets. In a quarterly review of regional activity, the BOJ raised its assessment for the northernmost Hokkaido region and left intact the views for the remaining eight areas, citing robust private consumption that is allowing more firms to raise prices.

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private-sector gauge of Australian inflation remained subdued in June and comfortably below official targets, offering scope for the central bank to lower interest rates again this year if needed.

The TD Securities-Melbourne Institute’s monthly measure of consumer prices rose 0.1 percent in June from May, when it increased by 0.3 percent. The annual pace ticked up to 1.5 percent, still well under the Reserve Bank of Australia’s (RBA) target band of 2 to 3 percent.

The central bank holds a policy meeting today and is thought almost certain to keep rates steady after having cut to an all-time low of 2.0 percent in May. Still, some investors suspect policy might need to be eased again, in part to offset weakness in business investment at home and economic uncertainty in China, Australia’s biggest export market.

Interbank futures imply around an 86 percent probability of a move

by December.

“We expect tomorrow’s RBA

The Confederation of Trade Union of Myanmar (CTUM) has urged factory employers to make concession over the workers’ minimum wage issue, suggesting them to take economic opportunities over the next two to three years into consideration in determining the wage, an official report said yesterday. Calling on factory employers to cooperate with the workers to boost productivity instead of disputing the proposed minimum wage, the CTUM suggested that the move would help them adapt to the country’s changing situation in the years ahead.

Board meeting to pass without much excitement, with the statement to be a cut and paste of last month, keeping explicit forward guidance off the table,” said Prashant Newnaha, a rates strategist at TD Securities.

Yesterday’s TD-MI survey suggested inflation would be no hurdle to a move. The trimmed mean of the CPI edged up just 0.1 percent in the month while the annual rate of 1.4 percent was down from 2.4 percent at the start of this year.

Inflation excluding fuel, fruit and vegetables slowed to a 1.3 percent annual pace.

There has also been a marked moderation in non-tradable prices, those for goods and services not determined by international competition. That was a notable shift as home-grown inflation has been stubbornly high for some years.

For June alone, the biggest rises came in petrol, fruit and vegetables and new dwelling purchase by owner-occupiers. These were offset by price falls in holiday travel and accommodation, newspapers, books and stationery and furniture and furnishings.

Reuters

Tablet sales in Vietnam rise Sales volume of media tablets in Vietnam in the first five months of this year totalled nearly 582,000, up 34 percent on-year, German market research firm GfK announced yesterday. According to GfK findings, the average price of media tablets declined by 30 percent from US$367 last year to US$259 this year.

Although the number of brands catering to the Vietnamese market reduced from 56 to 49, the remaining players have introduced 20 more new models - from 278 to 298. Another emerging trend is the rising popularity of smaller screen sized media tablets.

14 | Business Daily

July 7, 2015

International London mayor urges cutting top tax rate to 40% London Mayor Boris Johnson called on Chancellor of the Exchequer George Osborne to cut the top rate of income tax to 40 percent in his budget Wednesday, the first by a majority Conservative government since 1996. “There are plenty who think this would be a good idea,” Johnson wrote in yesterday’s Daily Telegraph newspaper. He said former Chancellor “Nigel Lawson has recently argued that the top rate should go back down to 40p and many Conservatives agree. I am among them.”

Varoufakis quits as Greece enters new showdown with Europe Euro-zone leaders are due to meet today for an emergency summit on Greece

Tanzanian lawmakers pass disputed petroleum bill Parliament approved a legal and regulatory framework for developing its nascent hydrocarbons industry, after days of contentious debate. East Africa has become a new oil and gas frontier after a string of discoveries that producers hope to exploit to supply energy-hungry Asian markets. Tanzania estimates it has more than 55 trillion cubic feet of natural gas but has yet to make oil discoveries. Under the terms of the bill, energy companies will pay a 12.5 percent royalty for oil and gas production in onshore or shelf areas and 7.5 percent for offshore output.

Shoreline plans to buy Africa energy assets Shoreline Group, a Nigerian company with interests from oil production to rope-making across six African countries, plans to sell US$2 billion in debt to buy crude and gas assets on the continent, which may include purchases in Equatorial Guinea and Tanzania.

The debut issue of as much as US$500 million of five- to seven-year Eurobonds will probably happen before the end of the year, Chief Executive Officer Kola Karim said in an interview in his office in Lagos on June 2.

Rolls-Royce cuts profit forecasts

Journalists follow outgoing Greece Finance Minister Yanis Varoufakis yesterday

Y

anis Varoufakis quit as Greek finance minister, a move intended to help speed talks with creditors after voters rejected further austerity and escalated tension over the country’s place in the euro.

Varoufakis announced the decision in a blog post early yesterday, saying there was “a certain preference” among European creditors that he no longer be involved in negotiations.

The economist had sparred openly with counterparts including Wolfgang Schaeuble of Germany.

His abrupt resignation followed victory in Greece’s Sunday referendum with a larger-thanforecast 61 percent of the vote for the “no” campaign he backed along with Prime Minister Alexis Tsipras. With euro-area governments signalling it’s up to Greece to offer proposals, Varoufakis’s absence may help lower

And I shall wear the creditors’ loathing with pride Yanis Varoufakis, Former Greece’s Finance Minister

the temperature in its efforts to avoid an exit from the euro zone and secure a new bailout from European partners.

“I consider it my duty to help Alexis Tsipras exploit, as he sees fit,

German industrial orders fall less than expected The firm cut profit expectations for the third time in nine months yesterday, increasing the challenge for its new chief executive. Shares in the 131-yearold company dropped as much as 10 percent after it also scrapped a plan to buy back 1 billion pounds (US$1.6 billion) of shares halfway through the programme. Rolls-Royce has been struggling for some time with a drop in demand from energy customers for its marine equipment following a plunge in oil prices. But the firm said yesterday its aircraft engine business was also suffering during a switch from its Trent 700 engine to the newer Trent 7000, with fewer of the legacy engines being sold than anticipated.

Economic growth slowed to 0.3 percent in the first quarter

I

ndustrial orders fell less than forecast in May as a modest rise in foreign demand took the sting out of a decline in domestic bookings, the Economy Ministry reported yesterday.

Orders for goods made in Germany decreased by 0.2 percent on the month, the data showed. That was better than a Reuters consensus forecast for a 0.4-percent drop.

Foreign demand inched up 0.2 percent while domestic demand

dropped by 0.6 percent. A sectoral breakdown of the data showed demand for intermediate goods jumped by 1.3 percent while orders for capital goods dropped by 0.8 percent and bookings for consumer goods declined by 1.2 percent.

The April data was revised up sharply to an increase of 2.2 percent from an originally reported 1.4 percent rise. That was the strongest increase since December.

the capital that the Greek people granted us through yesterday’s referendum,” said Varoufakis, 54, referring to the body of euro-area finance chiefs that led aid talks. “And I shall wear the creditors’ loathing with pride.”

Time is running out for Greece to secure a new deal to save its economy from outright collapse. Banks have been closed for a week and may run out of cash within hours unless the European Central Bank extends an emergency lifeline.

Euro-zone leaders are due to meet today for an emergency summit on Greece a day after German Chancellor Angela Merkel and French President Francois Hollande hold talks in Paris on a common position. The Frankfurt-based ECB is also due to evaluate its next moves yesterday; Tsipras’s banking decree expires at midnight, and will probably need to be extended without a quick decision from the lender.

“Our immediate priority is to restore the Greek banking system,” Tsipras, 40, said in a speech after the referendum result. “I’m confident that the ECB fully realizes the humanitarian side of the crisis in our country.”

The referendum asked Greeks whether they would accept the terms set by creditors in exchange for financial aid, including curbs on early retirement and sales-tax increases.

European leaders are showing no immediate willingness to compromise.

They firstly want to wait to see what proposals Tsipras will offer to keep Greece in the euro, according to a European government official with knowledge of crisis strategy.

The referendum result was a source of joy for many Greeks and Syntagma Square turned into a raucous street party on Sunday as “no” supporters gathered to celebrate. Some danced to music playing from speaker phones, while others took selfies with the crowds in the background.

Bloomberg News

Combined for April and May, bookings jumped by 2.7 percent compared to the two previous months.

“Industrial orders in the spring are pointing sharply upwards,” the ministry said, adding that demand from abroad was strong.

“Economic activity of the manufacturing sector in Germany is picking up slightly,” it said.

German economic growth slowed to 0.3 percent in the first quarter, but many economists expect it to grow faster in the April-June period.

Economist Stefan Kipar from BayernLB said the outlook for the coming months was looking good.

“But we’ll have to wait and see how the factor Greece will bite,” he added.

Greeks overwhelmingly rejected conditions of a rescue package from creditors on Sunday, throwing the future of the country’s euro zone membership into further doubt and deepening a standoff with lenders.

Reuters

Business Daily | 15

July 7, 2015

Opinion

China risk story just getting started, wires while Greece nearly over Business

Leading reports from Asia’s best business newspapers

Clyde Russell Reuters columnist

THE TIMES OF INDIA The government is set to rework the way it does free trade agreements (FTAs), moving to a more liberal regime on routing of third-country goods, as it revives its push for bilateral deals to corner a greater share of the export market. Rules of origin are at the heart of these agreements as they are meant to check routing of third-party goods via countries with which an agreement is signed. India has insisted on a system where at least 30-35% value addition takes place in a country with which it signs a trade agreement.

THE STAR Borneo Oil, which is expected to commence gold mining activities soon in a second area in Pahang (Malaysia), plans to invest an additional RM40mil to step up its mining operations in the state. According to executive director Raymond Teo Kiew Leong, land clearing is underway and mining equipment is being mobilised to facilitate the mining of alluvial gold and tailings at Bukit Ibam, Rompin district, in the current quarter.

“An extensive exploration and drilling programme is being planned for the area with regard to its lode gold potentials,” he told.

THE PHNOM PENH POST Cambodian rice exports for the first half of 2015 followed an upward trajectory compared to the same period last year, as growing demand from China for white rice and the European Union’s growing appetite for parboiled rice buoyed exports. Rice export totalled 283,825 tonnes for the first six months this year, an increase of almost 60 per cent compared to the same period last year, as reported by the Secretariat of One Window Service for Rice Export Formality. White rice made up 47 per cent of these exports, followed by fragrant rice at 44.50 per cent.

THE AGE Lacklustre earnings growth, low returns on equity and the explosion of self-managed superannuation schemes could prompt the major banks (in Australia) to sell all or parts of their wealth businesses, global bank Citi predicts. Citi analyst Craig Williams noted that the banks’ wealth arms, largely acquired in the early 2000s, had not become “the fast growing, low capital intensive earnings stream” the lenders had expected. Bank customers, Mr Williams concluded, had opted for more flexible or cheaper wealth solutions. ANZ Banking Group and National Australia Bank were the most likely to explore options for their wealth arms.

W

hat’s the bigger risk? Greece leaving the euro zone in a messy debt default or China continuing to pump money into its faltering stock market while trying to boost the rest of the economy through cheap debt?

While Greece is probably ahead in the news headline count, especially in the developed world, the main impact from the weekend rejection by Greek voters of the terms of a new bailout is likely to be short-term market volatility.

This can be seen in crude oil, with West Texas Intermediate futures dropping as much as 4.4 percent and Brent futures falling as much as 1.6 percent early yesterday.

The euro currency and stocks outside of China also stumbled as the Greek vote against austerity brought the Mediterranean nation closer to a debt default and leaving the single currency.

But the declines were relatively modest and probably reflected the reality that Greece is just 0.25 percent of the global economy, and accounts for a tiny 0.5 percent of the euro zone’s total exports.

The debt Greece owes is largely to multilateral institutions such as the International Monetary Fund and the European Central Bank, with only a small amount owing to private creditors.

This means that even a Greek default and exit from the euro shouldn’t pose a systemic crisis for the global financial system, even if does inflict pain on the Greek public and lead to some kind of emergency aid to maintain public services.

China efforts Of far more importance to the rest of the world is China’s

The Beijing authorities probably still have more to do in the monetary and fiscal policy front if they want to restore confidence to China’s markets

efforts to stabilise its equity markets after three weeks of declines wiped out some 30 percent of the value.

The Shanghai Composite Index jumped almost 8 percent at the opening on Monday, before paring gains to trade around 3 percent higher after a couple of hours trading.

The rally came after extraordinary policy moves at the weekend, which saw brokerages and fund managers pledging to buy massive amounts of stocks, boosted by liquidity injections from the state-backed margin finance company and ultimately the central bank.

While the initial reaction would be more or less what the authorities hoped for, the more prickly question is whether the market can be stabilised or whether retail investors will lose confidence in the measures and resume selling.

The balance of risks would appear to be tilted in favour of further de-leveraging by China’s domestic investors, which means any stock market rally may struggle to last.

The caution in the market can also be seen by the decline in both Shanghai steel futures and Dalian iron ore futures, with rebar dropping 5 percent to a fresh record low and iron ore slumping by its four percent daily limit.

While there may be a bit of concern over Greece in those price declines, it’s far more likely that Chinese investors are taking a dim view of the likely trajectory of the economy, and marking

down the key commodities related to construction and infrastructure spending. […]

More stimulus Overall, the implication is that the Beijing authorities probably still have more to do in the monetary and fiscal policy front if they want to restore confidence to China’s markets, and drive economic growth to meet the 7 percent annual target.

Given their recent actions, it’s reasonable to expect that this is exactly what the authorities will attempt, which may end up being positive for commodity import demand in the next few months.

But it also means China will once again be relying on cheap money to boost its economy, and not all of that money will be spent wisely, thereby upping the risks of poor infrastructure and residential housing investments.

While Greece appears to be progressing its end game after several years of rolling crisis, China is still relatively early in its attempt to transition its economy away from heavy industry and exportled manufacturing toward consumer-driven growth.

China’s default position so far has been to resort to pushing credit and liquidity whenever the economy loses steam, and it appears to be going down this path once more.

If anything, the lesson for Beijing from Athens is that eventually the underlying issues will have to be addressed, and the longer it takes, the more painful it becomes.

Reuters

16 | Business Daily

July 7, 2015

Closing Outbound travel fuels boom in China’s online travel service

China-listed firms rush to file trading halts as markets slump

Online outbound travel is a fierce battlefield with China’s travel agents competing for a share of the market after a surge in outbound tourism, according to a recent report. Outbound travel is the single largest segment in China’s 33.26 billion yuan (US$5.44 billion) online travel market, accounting for 45.1 percent of all transactions, according to research firm Analysys. The number of outbound tourists has grown seven times since 2001 to surpass 100 million last year, fuelling a rise in the number of travel agencies. More companies are moving online fuelling a boom in China’s online outbound travel services.

The number of Chinese-listed companies seeking to halt trading in their shares has surged since the country’s bourses began a precipitous plunge in the middle of last month, prompting concern some firms are trying to escape the turbulent markets.

Over 700 firms listed in Shanghai and Shenzhen equivalent to around a quarter of the firms on the two exchanges - have issued requests to suspend trading or extend trading halts since a June 12 peak, according to an analysis of company filings. The number of firms that have requested trading halts or extensions is around double the number for all of April.

Malaysian ringgit hits 16-year low on political uncertainty Prime minister accused of failing to properly address allegations that hundreds of millions of dollars had been transferred into his personal accounts

M

alaysia’s ringgit hit a 16-year low yesterday on growing political uncertainty following allegations that a probe into a state investment fund found hundreds of millions of dollars were transferred into the prime minister’s personal accounts.

The currency dropped 0.8 percent to 3.8088 against the greenback in Kuala Lumpur, the lowest level since May 1999.

The currency was fixed at 3.8 to the dollar in 1998 during the Asian financial crisis after it slumped 35 percent the previous year.

The peg was dropped in 2005.

Malaysian stocks were also down 1.3 percent, in line with regional markets that have been roiled by the Greek debt negotiation saga.

The Wall Street Journal reported on Friday that government investigators had uncovered nearly US$700 million that moved through government agencies, banks and companies linked to state-controlled investment fund 1Malaysia Development Bhd (1MDB).

It said the funds ended up in the accounts of premier Najib Razak, who chairs the advisory board of 1MDB which he launched in 2009.

Malaysia’s attorney general said Saturday that a task force would investigate the allegation, which Najib has dismissed as “political sabotage”.

1MDB has said it had never provided any funds to Najib,

GM auto sales in Mainland flat in June

G

and the premier has in the past persistently denied any wrongdoing.

Both Najib and 1MDB have also said that previous leaked documents had “reportedly” been tampered with, and that the documents cited by the WSJ had not been verified.

The prime minister, under pressure after being accused of failing to properly address

allegations that hundreds of millions of dollars have gone missing from deals involving 1MDB, earlier this year ordered government auditors to examine the fund’s books.

Ooi Chin Hock, a dealer with M & A Securities, said the cloud over the prime minister and his failure to respond specifically to the allegations were causing uncertainty.

“Weak oil and commodities prices, along with an unexpected slowdown in exports of Southeast Asia’s third largest economy, is also putting strain on the ringgit,” he told AFP. “Investors’ confidence has been shattered. Unless we settle the political issue involving Najib and 1MDB, the ringgit could slide lower.”

Nicholas Teo, an analyst at CMC Markets in Singapore, said the Greek “No” vote on austerity measures had also played a part in the ringgit’s plunge.

“It’s a knee-jerk reaction coupled with the WSJ report,” he said.

Malaysia’s main opposition parties have demanded an emergency sitting of parliament to discuss Najib’s future amid calls for the prime minister to step down temporarily until the investigations are completed.

Najib is also struggling to fend off a persistent campaign for his ouster by influential former prime minister Mahathir Mohamad.

National economy shows ‘positive changes’

Beijing names preferred chief for China-led bank

C

B

eneral Motors Co vehicle sales in China were roughly flat for June as broad price cuts introduced earlier in the year failed to boost demand.

GM and its Chinese joint-venture partners sold 246,066 cars in June, virtually unchanged from the same month a year ago, the U.S. automaker said in a statement yesterday.

That compares with a 4 percent year-onyear drop in May sales and a 0.4 percent dip in April, when the automaker switched to reporting retail sales rather than wholesale data for China.

GM has largely failed to counteract sluggish auto sales so far despite slashing prices on 40 models in May by up to 20 percent, as China’s economy grows at its slowest rate in 25 years.

The automaker also faces rapidly shifting tastes among Chinese consumers, now showing a pronounced preference for small, affordable sport-utility vehicles.

In the first six months of the year, GM sold 1.72 million cars, up 4.4 percent from a year earlier.

hina’s economy is showing some positive changes as recent government measures gradually gain traction, but policymakers cannot lower their guard against headwinds crimping growth, the National Bureau of Statistics said yesterday.

China’s economic performance remained within a “reasonable range” and economic growth was basically stable, Sheng Laiyun, the bureau’s spokesman, said in remarks published on the bureau’s website.

“The improvement in main indicators is still initial and we cannot lower our guard against the downward pressure on the economy,” Sheng said.

“Arduous efforts are still needed to consolidate the foundation of economic stabilisation and ensure the achievement of the full-year growth target.”

Activity in China’s factory sector expanded slightly in June while growth in the services sector sped up, official surveys showed, offering some signs that the economy may be starting to slowly level out after a raft of support measures.

China is due to release second-quarter gross domestic product data on July 15.

Reuters

Reuters

AFP

eijing yesterday named a former vice minister of finance as its preferred candidate to head the China-led Asian Infrastructure Investment Bank (AIIB), a potential rival to the Washington-based World Bank.

“The Chinese government has officially nominated Jin Liqun to be China’s candidate for the presidency of the AIIB,” the finance ministry said in a statement.

He is effectively certain to be appointed as Beijing will initially have a 26.06 percent share of the votes at the bank, giving it veto power over the choice of the president, which requires a 75 percent majority.

The AIIB has been viewed by some as a rival to the World Bank and Asian Development Bank, and the United States and Japan -- the world’s largest and third-largest economies, respectively -- have notably declined to join.

Beijing will be by far the largest AIIB shareholder at about 30 percent, according to the legal framework signed by 50 founding member countries last week.

AFP