Macau business daily, 2015 July 9th

MOP 6.00

Checking out

Closing editor: Luís Gonçalves

Tear it down. So says Legislative Assembly member Lau Veng Seng of Hotel Estoril and the swimming pool. Build anew, he advocates, constructing extra rooms and increasing the area of the new building.

Other members cherish the memories and oppose its destruction

Year IV

Number 831 Thursday July 9, 2015

Publisher: Paulo A. Azevedo

Page 2

Macau Horse Racing Stumbling It enjoys a monopoly. But Macau Horse Racing Co. Ltd., which runs Macau Jockey Club, is finding it hard going. The enterprise is currently negotiating with the gov’t to renew its concession to run its horseracing betting business. The current contract expires end-August. But losses continue to grow, amounting, last year, to MOP51.25 million. Management continues to explore revenue-generating initiatives Page

2

Poles Apart

Development of reclaimed Zone B a priority Page 4

Page 2

HSI - Movers

Crash spread

Page 8&9

July 8

Name

Empty nesters

The gov’t wants to review the Economic Housing Law. Setting penalty provisions for householders who leave their allocated units vacant. Current law does not facilitate this right. But a fifth of economic housing units remain unoccupied

Page 5

Gaming www.macaubusinessdaily.com

Lower sales in HK & Macau for Bauhaus in first quarter Page 4 New urban areas not dependent upon public opinion Page 5

The battle for primacy begins today. Between the gov’t and casino operators’ diametrically opposed views on the universal smoking ban. The Legislative Assembly is scheduled to start a first-reading debate today. The gov’t is pressing for a full smoking ban on gaming floors including VIP rooms.

Plus the elimination of smoking lounges on mass gaming floors

China’s stock rout is spreading. To the country’s commodities markets as investors rush to raise cash.

Everything from silver to lead and sugar to eggs has tumbled on the Shanghai Composite Index.

Which crashed to a three-month low yesterday. Gov’t measures to stabilise equities are proving futile

Health Bureau defends increase in tobacco tax Page 2

%Day

Link REIT/The

-1.74

MTR Corp Ltd

-1.87

CLP Holdings Ltd

-2.50

Hong Kong & China Ga

-3.02

Lenovo Group Ltd

-3.57

Bank of China Ltd

-6.87

BOC Hong Kong Holdin

-7.27

Industrial & Commerci

-7.56

China Life Insurance C

-8.82

China Overseas Land &

-10.00

Source: Bloomberg

Optimists vs. pessimists

I SSN 2226-8294

A ray of hope. Although not shared by everyone. The latest results for Macau’s gaming revenue have buoyed investors and some analysts. Who believe the gaming market may have finally bottomed out. Morgan Stanley analysts, however, beg to differ. Citing pinched margins and escalating costs. They forecast a drop of 34 pct in revenues this year, with 2016 still in the red

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2 | Business Daily

July 9, 2015

Macau

Macau Jockey Club seeks renewal of horse racing betting contract Macau Jockey Club is negotiating with the government to extend its monopoly on the horse racing betting business here despite losses amounting to MOP51.25 mln in 2014 Stephanie Lai

sw.lai@macaubusinessdaily.com

The Club has failed to make an annual profit since 2005. By the end of last year, it had accumulated losses of about MOP3.88 billion, according to yesterday’s gazetted result.

Declining revenues

M

acau Horse Racing Co. Ltd., which runs the Macau Jockey Club, has confirmed with Business Daily that it is now negotiating with the government to have its concession to run its horseracing betting business extended as its current contract is due to expire at the end of August.

This confirmation follows

the company’s 2014 results published in the Official Gazette yesterday. But the horseracing company declined to reveal further contract renewal details.

Macau Horse Racing Co. Ltd. has held the monopoly on horseracing betting since 1978. The current contract to run the business was renewed by the government about 10 years ago.

But the Macau Jockey Club continued to register losses for last year, which reached MOP51.25 million (about US$6.41 million) according to the gazetted results, up from an annual loss of MOP41.4 million in 2013.

On February 28, Macau Jockey Club’s chief executive Thomas Li Chu Kwan told media that the Club was in talks with South Korea and

Turkey aimed at broadcasting their simulcast races here – a move that the chief executive hoped could help narrow the company’s loss.

While not commenting on the last year’s loss, the Club noted to Business Daily that it will strive to hold more online horse bidding for the city’s horse owners in the upcoming racing season that starts in September.

The city’s gross revenue from horse racing betting has declined by 16.2 per cent year-on-year to MOP306 million in 2014, data from the Gaming Inspection and Co-ordination Bureau (DICJ) shows. Horse racing betting revenue amounted to less than 0.1 per cent of Macau’s overall gross gaming revenue at MOP352.71 billion.

From the data published by the gaming regulator, the betting amount from horse racing declined 16.7 per cent to MOP1.57 billion last year.

Macau Horse Racing Co. Ltd., controlled by gaming tycoon Stanley Ho Hung Sun, is led by Angela Leong On Kei – who is now the company’s vice president on the board.

Ms. Leong is also an executive director of Hong Kong-listed casino operator SJM Holdings Ltd. The gaming operator has licensed a casino near the Club in Taipa, a venue for which gaming equipment maker Paradise Entertainment Ltd. started the provision of gaming services last year.

AL: Full casino smoking ban discussed today

Health Bureau defends increase in tobacco tax

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W

he city’s Legislative Assembly is scheduled to start a firstreading debate on the government’s proposed universal smoking ban in casinos during a plenary session today, which is part of the amendment to the tobacco control regime.

The government-backed draft bill spells out a full smoking ban on gaming floors including VIP rooms, and the elimination of smoking lounges on mass gaming floors.

The setting up of the smoking lounges was in compliance with a new smoking ban that came into force on October 6 last year, whereby smoking is only allowed on casinos’ main floors in enclosed smoking rooms that do not contain any gaming facilities. Smoking is currently allowed in VIP rooms.

The draft bill amends the tobacco control regime, known as law No.5/2011, which also entails an increase in tobacco tax and a ban on the sale of electronic cigarettes.

hile the Legislative Assembly is about to discuss the proposed amendment to the smoking control law, the Health Bureau has issued a statement saying that the move to increase the tobacco tax is a ‘win-win’ measure for the city’s finances and the health of residents.

In a press statement, the Health Bureau said the number of cancers induced by active and passive smoking occupies 17 per cent of the total number of cancer cases here annually;

while the economic loss induced by smoking was estimated at MOP4.74 billion in 2013.

According to the government proposal, the amount of tax imposed on each cigarette is to be raised from the current MOP0.5 to MOP1.5. The proposed threefold increase in tobacco tax means the levy occupies about 70 percent of the retail price of a packet of cigarettes, which the government says meets the World Health Organization standard.

Business Daily | 3

July 9, 2015

Macau Government pledges to allocate more resources to special education The government will allocate more resources to the training of specialists and teachers to meet the needs of special education, said the Secretary for Social Affairs and Culture, Mr. Tam Chon Weng.

He stressed that the government would strive to serve students better with special needs in education and that the education departments should be well prepared to allocate resources in the medium and long term. During a visit to a special education school in Coloane on 6 July, Mr. Tam had the opportunity to listen to staff members voice the challenges and difficulties they faced in their work.

Lau Veng Seng urges demolition of Estoril swimming pool A member of the Legislative Assembly believes the area can be best used if the land where the swimming pool is placed is combined with the new Hotel Estoril building João Santos Filipe

jsfilipe@macaubusinessdaily.com

L

egislative Assembly member Lau Veng Seng said yesterday that the government should demolish Hotel Estoril and the swimming pool to use the land for a new edifice. His voiced his opinion during a meeting of the Cultural Heritage Council that took place yesterday in the Tourism Activities Centre.

“Taking into account the activities the government wants to develop in the building, the area available is not large enough. Considering as well the restriction in terms of the height of the building to avoid blocking the

view of the Guia Lighthouse the best solution is to erect a new building combining the area of the existing building and that of the swimming pool”, Lau Veng Seng said.

“In Macau, there are different opinions about the façade of the Estoril Hotel building. But our concern should also be how to best use the land available. While it is difficult to reutilise the swimming pool the area can be used to construct extra rooms and increase the area of the new building”, the Cultural Heritage Council member posited.

During the Policy Address for

2015, the Secretary for Social Affairs and Culture, Alexis Tam, announced that the Hotel Estoril building would be used to develop a youth recreational and art centre. In addition to rooms for studying, dancing and reading, the building is expected to house Macau Conservatory, which includes the schools of Theatre, Dance and Music.

Concerning the swimming pool area, the government, represented by the Chief of Office of the Secretary for Social Affairs and Culture, Lai Ieng Kit, is planning to change the type of water in it so that it can be opened to the public all year round.

At the moment, due to the type of water used the swimming pool can only open during the bathing season.

During yesterday’s meeting of the Cultural Heritage Council one of the hot topics concerning this project was the reutilisation of the façade and structure of the building. While some said everything should be demolished, others consider the building to be part of the collective memory of Macau.

José Lau Chit Meng also said that the building should be demolished. He justified his opinion by the fact that the structure of the existing building is too old and degraded.

4 | Business Daily

July 9, 2015

Macau Brands

Trends

Roger Vivier Raquel Dias newsdesk@macaubusinessdaily.com

W

hen a designer goes against the current, then that’s a motive to praise him.

Even if you don’t like what he/she is doing that much, you do have to respect the audacity of daring to swim against the tide. For some time now round pumps have been replaced by a more proper, slightly pointy toe.

You can see it in all major designer windows. From the Jimmy Choos to the Diors, everybody is going back to the ‘New Look’ era.

Everybody anticipates the Roger Vivier brand, now owned by Diego Della Valle, who is doing a major revival of the late 60’s square pump with a square buckle on top.

The shoes come in different heel-size and beautiful colours, from pastels to metallics.

Back in his day, Vivier was known for his extravagant footwear design, and he did a lot of work for Dior in the 40’s and 50’s before launching his own label.

Vivier might have passed away in 1998 but in our humble opinion the brand was really revitalised by this bold move.

Go to any boutique in Hong Kong and you’ll see that most colours and sizes are sold out. Fast fashion brands are starting to imitate the trend, which is also a good sign. Maybe in another two seasons we won’t see anything but square colourful pumps on all ladies’ feet.

Development of reclaimed Zone B a priority

T

he government will prioritise the development of urban reclaimed Zone B to accommodate the city’s judiciary offices once it fixes the final planning for all five reclaimed zones, said acting deputy director of Land, Public Works and Transport Bureau Cheong Ion Man yesterday.

Zone B, a strip of reclaimed land of 49 hectares located south of the Macau Peninsula, stretches all the way from near the Macao Science Centre to the western part adjacent to the Macau Tower and Nam Van Lake area.

Speaking on a programme aired by public broadcaster TDM yesterday, Mr. Cheong noted that Zone B has more conditions to be readily developed by the government compared with the four other to-be-

reclaimed zones that comprise some 301 hectares.

This new Zone B is designed to house the offices of 7 judiciary units, including the courts, Public Prosecutor’s Office, Commission Against Corruption, Audit Commission and Police Headquarters. Currently, all of these units are scattered in various commercial buildings throughout the city.

In addition to accommodating new government buildings, Zone B is developable for about 2,000 twobedroom housing units, according to the government’s latest consultation text for the urban planning for the five reclaimed zones.

Speaking to reporters after the radio programme yesterday, Mr. Cheong stressed that the government has not imposed any fixed height

Lower sales in HK & Macau for Bauhaus in first quarter

H

ong Kong-listed clothing retailer Bauhaus International Holdings Ltd. saw its same store sales growth register significant decreases in its Hong Kong, Macau and Taiwan markets year-on-year for its first quarter ended June 30 this year, whilst its sales in Mainland China remained flat.

The retailer told Hong Kong Stock Exchange yesterday that its same store sales growth in Hong Kong and Macau markets had posted a year-on-year decline of 9 per cent.

In addition, the Group had even

experienced a worse downturn in same-store sales in its Taiwan market.

According to its filing, Bauhaus’ samestore sales in Taiwan dived 17 per cent compared to the same period last year.

On the other hand, Bauhaus said its same-store sales in Mainland China did not increase or decrease at all during the three months, compared to the first fiscal quarter of 2014.

Nevertheless, the company did not disclose in the filing the information in terms of financial results, such as revenues and profits.

restrictions for Zone B, saying that it is still open to public suggestion.

The official noted that the restrictions on height, plot ratio and project coverage for any establishments in Zone B will be decided in the ‘detailed urban plans’ – a term that the government refers to as a planning stage following the ‘master urban plan’. Following the city’s urban planning law that came into effect on March 1, 2014, the government is to take three to five years to draft an overall strategic ‘master urban plan’ and a detailed one that spells out all the specific land usage requirements.

The government is currently conducting the third and final round of public consultations on the urban plan for the five reclaimed zones, which will end on August 8.

S.L.

Meanwhile, as at the end of June, Bauhaus had a total of 211 selfmanagement stores in the Greater China Region, which increased by 2 stores year-on-year.

Taiwan is the company’s biggest market with a total of 96 self-managed stores operating there as at the end of June this year. In addition, the company has 86 stores in Hong Kong and Macau, as well as 29 stores in Mainland China.

For its last fiscal year, the retailer enjoyed a net profit of HK$129.4 million (US$16.1 million), up 3.4 per cent on HK$125.1 million yearon-year, following its same-store sales in Macau and Hong Kong markets posting a year-on-year hike of 11 per cent, while Taiwan and Mainland markets rose 5 per cent and 4 per cent year-on-year, respectively.

K.L.

Business Daily | 5

July 9, 2015

Macau

A fifth of economic housing units vacant Although the government understands some of the cases are due to not building enough facilities for the awardees, it is now considering introducing penalties to ensure the uptake of these public units Kam Leong

kamleong@macaubusinessdaily.com

T

he government has expressed its intention to review the current Economic Housing Law, setting penalty provisions for householders who leave their allocated economic units vacant, as the current law does not give the authorities the rights to do so.

Government representatives, including the Secretary for Transport and Public Works Raimundo Rosario, met with the follow-up committee for the Public Administration Affairs of Legislative Assembly (AL) yesterday morning on the issue of vacant public housing.

The government said that the AL committee had found it hard to enforce the uptake of economic units without related penalty provisions.

The chairman of the AL committee, Chan Meng Kam, told reporters after the meeting of the parties that the government had consulted the Legal Affairs Bureau and Commission Against Corruption, enquiring whether the government is able to issue penalties related to the issue. However, both the departments indicated that the government has no conditions under which to penalise economic-housing awardees who leave their units vacant.

As such, the government now suggests adding penalty provisions, by partly amending the current related regulations, or directly

reviewing the whole Economic Housing Law, which the government actually prefers, according to the legislator.

Nevertheless, the way the government will apply to fulfill its purpose will depend upon consultations, Mr. Chan said, indicating that the government had not provided any timeframe for the proposal.

Lack of facilities Mr. Chan indicated that the vacant issue primarily applies to the Seac Pai Van Public Housing Group as the uptake rates of Weng Leng Building on the Peninsula, and Lakesides Building in Taipa, have reached 98 per cent and 91 per cent, respectively.

In March, the city’s Housing Bureau revealed that about 20 per cent, or 1,457, of the 7,087 households allocated an economic unit

had not yet moved into the units as at February, despite already collecting the keys.

Yesterday, the government admitted that the issue of vacant economic housing is complicated, as some households are not taking up the units due to lack of facilities or they do not have an urgent need to move in.

Some legislators on the committee also perceive that the vacancy issue is due to the dirth of auxiliary facilities in Seac Pai Van, advising that the government should thus not put its focus on amending the law for now.

Meanwhile, the government replied that it would speed up the establishment of the auxiliary facilities for the Seac Pai Van housing group, promising they would consider these facilities when constructing a new public housing project in the future.

The progress of these establishments will be submitted to the AL followup committee before the end of this term of AL on August 15, Mr. Chan said.

In addition, the government

claimed it would strengthen its inspections to check whether the current public unit householders have illegally leased or sold their units.

The current Economic Housing Law does not regulate the length of period between the public unit awardees collecting the keys and their uptake of the units. It only prohibits the awardees from using the flats for non-residential uses, and regulates awardees may only sell or lease the units 16 years after allocation.

On the other hand, for the city’s social housing, the government thinks that the vacancy issue is not serious as the delay in uptake of the units are due to the government’s long administrative procedures, the legislator said.

Rosario: Planning for new urban areas not dependent upon public opinion Secretary for Transport and Public Works Rosario Raimundo perceives that it is not necessary for the government to decide the planning for the five new urban reclaimed zones based on public opinion. The Secretary said yesterday that residents may not understand the technical issues involved in planning. As such, the government would listen to professional opinions before making the final decision for the planning. The third public consulting session for the planning of the new urban areas will end on August 8. The Secretary said this is the last public consultation for the areas.

6 | Business Daily

July 9, 2015

Macau

Morgan Stanley: Macau gaming market yet to bottom out Margin dilution and cost pressure driven by oversupply are the key risks stressed by investment bank Morgan Stanley, which says that the Macau gaming market has not bottomed out yet João Santos Filipe

jsfilipe@macaubusinessdaily.com

also hit the lowest value in June 2015 (down 53 yearon-year) since October 2009, which is causing junkets to struggle to maintain liquidity and profitability.

Fixed costs and Oversupply underappreciated

T

he latest results for Macau’s gaming revenue have brought a ray of hope to investors and some analysts that the market has finally bottomed out after

13 consecutive months of decline. The announcement of the transit visa relaxation is perceived as another sign of optimism in the territory.

Investment bank Morgan

Gaming Revenue Annual Estimates Current

Current MOP (billion)

Previously

2015

-34%

230.6

-26%

2016

6%

225.1

-2%

2017

8%

238.1

6%

Source: Morgan Stanley

Stanley, however, says the bottom has yet to arrive.

In fact, the report by analysts Praveen Choudhary, Alex Poon and Thomas Allen cuts gross gaming revenue forecast for this year further to a decrease of 34 per cent, while the previous prediction posited a 26 per cent fall.

For the American investment bank at the moment there are two key risks that can hit the industry, and mainly the VIP segment: reduction in margins and increasing costs.

“Although the number of hotel guests has picked up

in the last three months this was mainly caused by sharp cuts to hotel room rates for incremental customers who have lower spending power”, the analysts wrote. According to the report, room rates in May decreased 2.5 per cent year-on-year, while in May the decline reached 4.7 per cent.

“Not only does this reflect the deteriorating quality of customer, it also implies lower non-gaming EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization]”.

The Morgan Stanley report also stressed that the VIP roll

One of the main points of the report released yesterday is that investors are too focused on weekly revenue data, “while the increase in fixed costs from oversupply and impact on EBITDA and margin” are played down.

In the eyes of Morgan Stanley’s analysts staff costs are expected to increase 15 per cent this year, 18 per cent in 2016 and 31 per cent in 2017. This is explained by a 5 per cent compound growth of wages plus an extra 7,000 new staff per casino.

At the same time, by 2018 table growth is expected to increase roughly 20 per cent and casino hotel rooms by 50 per cent. If these two facts are not perceived as negative alone, the fact fixed costs associated with those increases are “likely to grow by a similar magnitude” bring extra risks to the sector.

Concerning relaxation of the transit visa Morgan Stanley believes its impact will be limited because the problems for the industry arise from “revenue decline rather than transit visa restrictions.”

LVS employees to Corporate influence company’s philanthropy programme

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as Vegas Sands Corp. has decided to amend its internal policies to allow its employees to have a say in how the company uses its resources for community philanthropy, Macau included, World Casino News has reported. The gaming operator has more than 45,000 workers around the world, namely in Macau and Singapore.

The management decided that Sands employees who are spread across a number of international locations such as Singapore, Macau and Bethlehem will have the best ground knowledge in terms of what is lacking in their community and how best the Sands community

philanthropy can address those issues, the news website wrote.

Sands China employees worked together with elderly residents in Macau helping them to prepare for the Chinese New Year which is the biggest festival in China. Marina Bay Sands employees invested over 2,000 hours of community service and helped a number of different charities and NGO’s in Singapore. In 2014, the Sands Corp. helped organise an event where former captain and England soccer star David Beckham visited Macau and was part of a soccer programme for youth. Employees of the Sands Bethlehem, PA casino have been working with an adopted school for the last 7 years.

CTM Youth Development Programme 2015 successfully concluded CTM recently organised the CTM Youth Development Programme with the co-organisation of Bosco Youth Service Network and fully supported by Caritas Macau, Fuhong Society of Macau, ADA, and Macau Galaxy Entertainment Group.

The programme was held from June 11 to July 6.

Upon completion of an interview, 23 candidates were shortlisted to participate in the programme, with three weeks

(over 100 hours) work experience in CTM and an array of diversified activities including volunteer service and adventure camp. The programme enabled candidates to deepen their understanding of the local telecom industry in addition to giving them insight and enriching their life experience. The Graduation Ceremony of CTM Youth Development Programme 2015 was held on July 6 at Mandarin Oriental Macau.

Business Daily | 7

July 9, 2015

Gaming

Gaming & Leisure boosts bid for Pinnacle Casinos by 32 pct The offer gives Pinnacle’s real estate assets an enterprise value of US$5 billion and 54 per cent increase on its previous offer for the properties

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aming & Leisure Properties Inc., the gambling industry’s first real estate investment trust, has raised its bid to buy Pinnacle Entertainment Inc.’s casinos by 32 per cent to US$47.50 a share.

The offer, which gives Pinnacle’s real estate assets an enterprise value of $5 billion, includes 0.85 share of Gaming & Leisure for every Pinnacle share, according to a letter sent to Pinnacle on Tuesday. That’s a 54 per cent increase from its previous offer for the properties.

Pinnacle stockholders would also receive one share in Pinnacle’s operating company, which Gaming & Leisure values at US$16 each.

REIT fever has been sweeping the casino industry since Penn National Gaming Inc. spun off its real estate into Gaming & Leisure in November 2013. REITs can trade at higher stock market values because they don’t pay federal income tax,

passing earnings directly to shareholders instead.

Under pressure from activist investor Orange Capital LLC, Las Vegas-based Pinnacle announced its intention to split into a separate REIT and operating company in November. In March, Gaming & Leisure made an unsolicited offer to buy Pinnacle’s casinos in a deal it valued at US$36 a share.

Pinnacle rose yesterday 5.8 per cent to US$39.64 at the close in New York, giving the company a market value of US$2.4 billion. It’s up 78 per cent this year. Gaming & Leisure fell 2.6 per cent to US$35.72 and is up 22 per cent in 2015.

‘New demands’

Gaming & Leisure wrote in the letter it had already

provided Pinnacle with documentation of committed financing, adding it had ‘stretched itself to its limit on value and presented a highly compelling transaction.’

‘Nevertheless, Pinnacle continues to make new demands, delaying the signing of a definitive agreement and denying its shareholders a value-creating transaction that is clearly superior

to Pinnacle’s previously announced stand-alone separation plan,’ Gaming & Leisure said Tuesday in a separate statement.

Under Gaming & Leisure’s proposal, Pinnacle management would continue to run the properties, much as Penn National runs the casinos now owned by Gaming & Leisure. Pinnacle shareholders would own about 28 per cent of the new Gaming & Leisure.

Pinnacle owns 15 casinos and racetracks, such as the Boomtown Casino in New Orleans and the River City Casino & Hotel in St. Louis. Pinnacle’s operating company would retain two horse tracks, Belterra Park in Cincinnati and its interest in Retama Park in Selma, Texas, as well as the Heartland Poker Tour and 450 acres (182 hectares) of development land adjacent to its casinos, Gaming & Leisure said in the statement.

Bloomberg

Atlantic City loses US$63 mln Borgata property-tax appeal A state appeals court affirmed a US$48 million tax refund and about US$15 million in interest for two years

A

tlantic City, New Jersey’s fiscally struggling casino hub, must pay the Borgata Hotel Casino & Spa US$63 million it overcharged in taxes.

A state appeals court affirmed a US$48 million tax refund and about US$15 million in interest for two years, the Associated Press reported earlier Monday, citing a court ruling.

“The enormous amount of refunds that the city must pay back on successful tax appeals is simply unsustainable,” Mayor Don Guardian said in an e-mailed statement. “We continue to make cuts and run city government more efficiently but it is the taxpayers who will suffer in the long run without tax stabilization.”

Atlantic City, once the home to the only casinos on the East Coast, has struggled as nearby Maryland, Pennsylvania and Delaware have

legalized gambling. New Jersey’s casino revenue dropped to US$2.9 billion last year from US$5.2 billion in 2006. Four of its 12 casinos closed in 2014.

“We appreciate the Appellate Division’s quick decision unanimously affirming Judge DeAlmeida’s comprehensive and well-reasoned written decision in which he determined that the city had unlawfully overcharged” the casino, Tom Ballance, Borgata’s president and chief operating officer, said in an e-mailed statement.

The state legislature last month passed a bill that would require the city’s casinos to make payments in lieu of taxes. Governor Chris Christie has yet to act on it. In January, Christie appointed an emergency manager to devise a recovery plan for the community.

Bloomberg

8 | Business Daily

July 9, 2015

Greater China

Stock market freezing up as sell-o

More than 500 China-listed firms announced trading halts on the Shanghai and Shenzhe Samuel Shen and Brenda Goh

KEY POINTS CSI300 and Shanghai Composite indexes fall about 6-7 pct Nearly 1,300 firm shares suspended on China exchanges Central bank says will support stock market stability Regulator sees big increase in “irrational selling” BofA Merrill Lynch warns of risk of financial crisis

A stock investor reacts as he checks prices in a brokerage house in Fuyang in Anhui province yesterday

C

hina’s tumbling stock market showed signs of seizing up yesterday, as companies scrambled to escape the rout by having their shares suspended and indexes plunged after the securities regulator warned of “panic sentiment” gripping investors.

Beijing, which has struggled for more than a week to bend the market to its will, unveiled yet another battery of measures to arrest the sell-off, and the People’s Bank of China said it would step up support to brokerages enlisted to prop up shares.

The CSI300 index of the largest

listed companies in Shanghai and Shenzhen closed down 6.8 percent, while the Shanghai Composite Index dropped 5.9 percent.

With nearly half the market on a trading halt and another round of margin calls forcing leveraged investors to dump whatever shares

could find a buyer, blue chips that had been supported by stabilisation funds earlier in the week bore the brunt.

“I’ve never seen this kind of slump before. I don’t think anyone has.

Liquidity is totally depleted,” said Du Changchun, an analyst at Northeast Securities.

Fund turns to HK to sell Haitong Sec stake Investors are worried that Beijing’s move to support mainland stocks could throw their business plans into disarray and hit profits Fiona Lau and Saikat Chatterjee

A stockbroker prints the day’s transaction list at the Hong Kong Exchanges and Clearing Limited in HK

A

Chinese statebacked investment firm sold its stake in China’s fourth-largest broker Haitong Securities in Hong Kong yesterday in a sign that Beijing’s bid to arrest a sell-off in mainland

stocks is pushing investors to the island’s market to raise capital.

“Hong Kong is coming under pressure as the sell-off in China deepens, with some investors realising that the offshore markets may provide

a welcome escape valve,” said Francis Cheung, head of China and Hong Kong strategy at CLSA. Chinese stock brokers have been particularly hard hit by the past month’s plunge in mainland stock markets,

which has wiped more than US$3 trillion off investors’ wealth.

Despite Beijing’s efforts to stem the fall, China’s benchmark indexes fell sharply again yesterday, taking their slide since midJune to around 30 percent.

Before the abrupt reversal, the indexes had more than doubled since November.

Hong Kong shares, which had held up relatively well during the early weeks of the mainland sell-off, have also fallen sharply in recent days, and were down more than 4 percent on Wednesday.

Dawn State Ltd, a unit of state-backed Haixia Capital Management, raised US$816.3 million by selling the Haitong stake at an unusually large 20 percent discount to its last traded price, IFR reported yesterday.

Shares in Haitong were suspended yesterday, but the wide discount prompted investors to dump other Chinese stock brokers.

Investors are worried that Beijing’s move over the weekend to press 21 brokerages to commit about US$19 billion to support mainland stocks could throw their business plans into disarray and hit profits.

Yesterday, Hong Konglisted shares of Chinese brokers plunged between 10 and 20 percent amid worries the broader China stock market slide is likely to crimp demand for their booming margin finance business. Just this year, Chinese brokers raised about US$30 billion to grow their business.

Haixia Capital, based in the southeastern province of Fujian, managed 32.8 billion yuan (US$5.3 billion) at the end of December. It wasn’t clear what prompted Haixia to sell the stake, which would result in a loss of 38 percent in six months since it bought the 569.4 million shares at HK$17.89 each.

Dawn State Ltd sold 569.4 million Hong Kongtraded shares of Haitong at HK$11.12 each, the bottom of an indicative range of HK$11.12 to HK$12.00, added IFR, a Thomson Reuters publication. The price is equivalent to a discount of 20 percent.

UBS was sole bookrunner for the deal. Haixia Capital officials didn’t immediately respond to requests for comment.

Reuters

Business Daily | 9

July 9, 2015

Greater China

off gathers pace

en exchanges yesterday

“Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips.”

More than 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China’s market turmoil will destabilise the real economy is now a bigger risk than the crisis in Greece.

“Also, the ripple effect from the market correction has yet to show up,” wrote Bank of America Merrill Lynch analysts in a note. “We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis.”

Commodities markets reflected growing concerns about the broader health of the world’s second largest economy, with copper prices falling to a six-year low, Shanghai nickel futures sliding by their 5 percent daily limit, and oil falling towards $56 a barrel, near a three monthlow.

Trading halts

More than 500 China-listed firms announced trading halts on the Shanghai and Shenzhen exchanges yesterday, taking total suspensions to about 1,300 - 45 percent of the market or roughly US$2.4 trillion worth of stock - as companies scuttled to sit out the carnage.

With so many small-cap companies sheltering on the side-lines, the ChiNext growth board, which has seen some of the biggest swings in valuations, fell a modest 0.8 percent.

The plunge in China’s previously booming stock markets, which had more than doubled in the year to mid-June, is a major headache for President Xi Jinping and China’s top leaders, who are already grappling with slowing growth.

Beijing’s interventionist response has also raised questions about its ability to enact the market liberalisation steps that are a centrepiece of its economic reform agenda.

China has orchestrated brokerages and fund managers to promise to buy billions of dollars’ worth of stocks, helped by a state-backed margin finance company which the central bank pledged yesterday to provide sufficient liquidity.

The securities regulator said the Securities Finance Corp had provided 260 billion yuan (US$41.8 billion) to 21 brokerages.

Retail investors

Unlike other major stock markets, which are dominated by professional money managers, retail investors account for around 85 percent of China trade, which exacerbates volatility.

“It’s uncommon to see so many shares posting consecutive daily limit falls, and the index futures swinging so wildly,” said Wang Feng, CEO and founder of hedge fund firm Alpha Squared Capital Co and a former Wall Street trader.

“It’s a stampede. And the problem of the market is that all the players move in the same direction, and are too emotional.”

A surprise interest-rate cut by the central bank at the end of June, relaxations in margin trading and other “stability measures” have done little to calm investors.

The barrage of official commentary and new support measures continued throughout Wednesday’s trading session, without visible effect.

Deng Ge, a spokesman for the China Securities Regulatory Commission, said in remarks posted on its official channel on Weibo, China’s version of Twitter, that there had been a big increase in “irrational selling” of stocks.

Government agencies also announced that insurers would be allowed to by more blue chips and urged major shareholders and top executives to buy their own shares.

But the market sell-off has extended beyond the mainland, with Chinese stocks on U.S. exchanges falling as much as 6.1 percent on Tuesday, according to the Bank of New York Mellon index of such securities.

Hong Kong’s Hang Seng Index fell 5.8 percent, with shares of Chinese brokerages taking a heavy beating.

“Investors are extremely unimpressed with their sudden conscription into national service, and you can see that in their share prices,” said Matthew Smith, a strategist who covers the China financials sector for Macquarie.

Reuters

Cybersecurity law could irk business It has been a particular area of friction in relations with economic partners like the United States and the EU Gerry Shih

C

hina’s parliament has published a draft cybersecurity law that consolidates Beijing’s control over data, with potentially significant consequences for internet service providers and multinational firms doing business in the country.

The document, dated Monday but picked up by state media yesterday, strengthens user privacy protection from hackers and data resellers but elevates the government’s powers obtain records on and block dissemination of private information deemed illegal under Chinese law.

Citing the need “to safeguard national cyberspace sovereignty, security and development,” the proposed legislation will allow China to bolster its networks against threats to stability and better regulate the flow of information.

Earlier in July, China’s largely rubber stamp parliament passed a sweeping national security law that tightened government control in politics, culture, the military, the economy, technology and the environment.

Joerg Wuttke, president of the European Union Chamber of Commerce in China, said the business lobby was still reviewing the draft law

but that it was “worried”.

Under the draft law, Internet service providers must store data collected within China on Chinese territory; data stored overseas for business purposes must be government-approved.

Network equipment must also be approved under testing standards issued by China’s cabinet.

The government also reiterated its longstanding objective of requiring internet users to log in with their real names to services like messaging apps - though such drives have failed in the past.

The parliament said government agencies would issue additional guidelines for network security in “critical industries” such as telecoms, energy, transport, finance, national defence and military matters, and government administration.

Parliament will take feedback on the proposed legislation until early August, and it will likely undergo a series of readings and possible adjustments before being adopted.

Nicholas Bequelin, East Asia Director at Amnesty International, said the draft law would institutionalise censorship practices that were not explicitly formulated before.

Taiwan to check exposure to China markets Taiwan’s financial regulator has ordered domestic financial institutions to detail their exposure to China’s stock market, people familiar with the matter said yesterday, after huge losses in both China and Taiwan bourses. The Financial Supervisory Commission (FSC) is asking banks, insurance companies and brokerages in Taiwan to detail the profit and losses of their investments in listed companies in China, three sources said. The order came as China’s tumbling stock market showed signs of seizing up yesterday, as companies scrambled to escape the rout.

Surprise inspection of drug companies China will begin regular surprise inspections on pharmaceutical and medical device firms on September 1, according to China Food and Drug Administration (CFDA) yesterday. A surprise check will be initiated without early notice to the companies and law enforcement will disclose no information about the process and problems spotted during the inspection, according to the CFDA. When all the evidence has been collected and the nature of problems determined, local CFDA units will inform the manufacturers of rectification instructions. Surprise checks will also be launched when authorities are contacted by whistle-blowers.

Rules for firms to buy back shares relaxed Securities regulator has relaxed rules to allow firms that recently sold their own hares to buy them back from the market in yet another step to halt plunging share prices. The China Securities Regulatory Commission said in an online statement yesterday that state-owned financial companies should also buy undervalued shares, which it defined as those with prices that have fallen below a reasonable level. Under Chinese law, companies are not allowed to trade their own shares in the run-up to the release of their quarterly earnings. Firms are also barred from trading their shares in the six months following the previous transaction.

Bank of China becomes yuan clearing bank in South Africa The chief concern is that, Central bank has appointed the Bank of China, the country’s fourth-largest bank, as with many Chinese as the bank that clears yuan transactions in South Africa. The People’s Bank of laws, the language is China made the announcement on its vague enough to make it website yesterday. unclear how the law will Fujian to sell 11.6 bln be enforced yuan of muni bonds Joerg Wuttke, European Union Chamber of Commerce in China president

Article 50, for example, would give authorities the legal power to cut areawide internet access to maintain order in the case of “sudden” incidents, much as it did for 10 months in 2009 after nearly 200 people died in ethnic riots in Urumqi, the capital of the western region of Xinjiang.

Reuters

Fujian province will sell 11.6 billion yuan (US$1.87 billion) of general obligation municipal bonds on July 14, according to a notice on the website of a major bond clearing house on Tuesday. The issue includes 1.16 billion yuan of threeyear tenor, and 3.48 billion yuan each of five-, seven- and 10-year tenors, the statement said. The current quota for new fundraising in China’s fledgling municipal bond market stands at 600 billion yuan in 2015. The Ministry of Finance announced earlier that local governments would be allowed to swap up to 2 trillion yuan of high-interest, maturing debt for official lower interest provincial or municipal debt.

10 | Business Daily

July 9, 2015

Greater China

Fate of rare earth miners rests on smuggling crackdown Cracking down on smuggling has been a priority in China since 2009 David Stanway

T

he fate of debt-ridden U.S. rare earth miner Molycorp rests on China's efforts to crack down on networks that smuggled as much as 40,000 tonnes of the vital technology metals out of the country last year, driving down global prices.

Greenwood, Colorado-based Molycorp is the sole U.S. domestic supplier of rare earths used in everything from smartphones to military jet engines and hybrid vehicles. In 2011, it re-launched its huge Mountain Pass mine in California expecting prices to stay high after China, which dominates world supply, restricted exports. Last month it filed for bankruptcy protection as operating losses mounted.

Customs police in the eastern Chinese port of Qingdao last month arrested five traders following a ninemonth investigation into a rare earth and ferromolybdenum smuggling ring worth nearly US$18 million.

That was no one-off. Chinese authorities have been struggling since 2010 to smash an illegal supply chain in which rogue miners deliver ores to unauthorised separation facilities, with the finished products then disguised and shipped abroad.

"Traders go through all kinds of channels and make false product declarations at customs - marking it as alumina or even washing powder," said Chen Zhanheng, vice-secretary general of the Association of China Rare Earth Industry.

According to industry estimates, around 40,000 tonnes of rare earth oxides were smuggled out of China last year, more than the official export

volume of 28,000 tonnes. It has hurt overseas producers like Australia's Lynas Corp and Molycorp, whose business plans were built on China's efforts to restrict domestic supply and crack down on illegal production.

"Paradoxically, Molycorp's biggest supporters may be in Beijing," said David Abraham, director of the U.S.-based Technology, Rare and Electronics Material Center, who studies the politics behind the rare earth sector. "If authorities in China can reduce black market trade it would introduce enough market stability and an unofficial price floor that will go far in giving Molycorp the space it needs to restructure into a profitable company."

More so than smuggling, illegal mining and production of the concentrates is perhaps the most prevalent problem in China’s industry Ryan Castilloux, founding director, Adamas Intelligence

Overseas rivals undermined

Cracking down on smuggling has been a priority in China since 2009, when authorities first turned their attention to restructuring an industry beset by disorder and regulatory failures.

Officials said China was not being properly compensated for its dominance in global supply, and its policies were designed to support prices and encourage 'value-added' downstream sectors. China controls around 90 percent of the world's rare earth supply.

Beijing vowed to restrict imports through a quota system and cap domestic production, justifying its policies to the World Trade Organisation by pointing to the environmental damage done by mining in regions like Inner Mongolia and Jiangxi.

But the smuggling has continued,

keeping prices low and undermining overseas competitors, with traders saying it remains relatively easy for smugglers to hide small volumes of rare earth amid consignments of bulk commodities.

"These activities are still under the protective umbrella of local governments and in the past it wasn't easy to crack down on them. Many of the mines are small-scale and widely dispersed," said Chen.

With quotas and tariffs helping to create a price gap between domestic and international markets, many have expressed hope that removing quotas this year would cause prices to converge and cut the demand for smuggled material.

"Now there are no such limits and traders only need orders from overseas to qualify as an exporter, there is no need to risk smuggling illegally - there's no profit motive," said Chen.

But with China still imposing production caps and many large rare earth mines operating at well below full capacity, there is still an incentive for illegal producers.

China set an official production cap of 105,000 tonnes for 2015. If consumption remains at the 2014 level of around 84,000 tonnes, it would leave around 20,000 tonnes of official output available for export.

With established smuggling channels, many buyers preferred to take the illegal route, even when quotas were available. In 2011, exporters used just 61.6 percent of total quotas, with that figure rising to 91 percent last year, showing that exporters were still not using all their quotas.

China also continues to restrict the number of firms allowed to produce and export rare earths, meaning there will remain a significant supply bottleneck that is likely to encourage smuggling as well as illegal production.

"More so than smuggling, illegal mining and production of the concentrates is perhaps the most prevalent problem in China's industry and is a major reason why prices are low because there are abundant inventories that were never planned to exist," said Ryan Castilloux, founding director of Adamas Intelligence.

Reuters

Business Daily | 11

July 9, 2015

Asia

Japan’s current account surplus widens Data also shows exports in May fell from the same period a year earlier for the first time in 27 months Stanley White

J

apan posted a current account surplus for the 11th straight month in May as lower oil prices narrowed the trade deficit, suggesting companies have more leeway to increase investment as the costs to power their plants and factories drop.

The current account surplus stood at 1.88 trillion yen (US$15.36 billion), against a median forecast for a 1.54 trillion yen surplus, Ministry of Finance data showed yesterday.

“Companies should have more money on hand to spend because energy costs are lower, which may be a factor behind robust capital expenditure plans,” said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. “The export situation needs to be watched in case it turns out that overseas demand is not as strong as we thought.”

The Current account data also showed exports in May fell from the same period a year earlier for the first time in 27 months.

The decline was very slight and contradicts more closely-watched customs cleared data which showed exports rose in May, but some economists are worried that Greece’s debt crisis could undermine the euro zone economy and hit Japanese shipments.

Japan’s economy is expected to have slowed in the second quarter as firms use up inventories built up in the previous quarter.

However, there are signs of a rebound in the second half, with the recent Bank of Japan’s closely watched “tankan” survey showing big companies plan to increase capital expenditure at the fastest pace in a decade.

Yesterday’s data showed imports tumbled an annual 10.3 percent in May as oil prices were down by almost half from the same period a year ago.

Exports fell an annual 0.1 percent, the first decline in 27 months, data showed.

The current account surplus also got a boost as the income balance rose 38.0 percent on-year due to higher earnings on overseas investments.

A collapse in oil prices last year prompted the Bank of Japan to push back the timeframe for meeting its 2 percent inflation target to the first half of fiscal 2016 from sometime around fiscal 2015.

Policymakers have generally welcomed this decline because it would make energy costs for Japanese companies and households cheaper, and in turn boost domestic demand.

India IT outsourcing firms seek booster shot from Obamacare U.S. states have to upgrade healthcare programs and build online exchanges where buyers can evaluate and select service providers under Obamacare Nivedita Bhattacharjee

I

ndia's IT outsourcing firms are betting on U.S. President Barack Obama's healthcare reform to rev up revenue growth which is slowing as the US$146 billion industry's key financial and manufacturing clients spend less on software services.

The United States is the biggest market for the outsourcing industry, which is dominated by Tata Consultancy Services Ltd, Infosys Ltd and Wipro Ltd. It also accounts for 90 percent of all healthcare related contracts, which researchers Everest Group expect to more than double to about US$68 billion in 2020 from nearly US$31 billion two years ago, largely due to "Obamacare".

"In terms of technology maturity, other sectors like manufacturing, banking, are a lot more mature than

healthcare," said Rajib Bhattacharya, head of a healthcare software unit that India's fifth largest outsourcing firm Tech Mahindra Ltd set up last month.

"I think it's a huge opportunity," he recently told Reuters.

Average revenue growth for India's top five outsourcing firms by market value is expected to slow to 13.3 percent year-on-year in the quarter that ended June 30 from 18.6 percent growth in the same year-ago period, Thomson Reuters data shows.

The slowdown is largely due to banks, manufacturers and financial firms cutting down on IT spending amid uncertain prospects for the global economy.

By contrast, U.S. states have to upgrade healthcare programs and build online

Reuters

exchanges where buyers can evaluate and select service providers under Obamacare, creating outsourcing opportunities worth hundreds of millions of dollars.

Health care deals currently account for less than 10 percent of the sales of market leader TCS, which will be the first outsourcing firm to report first-quarter earnings today.

Last year, its annual revenue growth shrank to 13.6 percent from almost 30 percent growth in the previous year, the Reuters data shows.

Rival Infosys also reported slower annual revenue growth of 6.9 percent from 24.2 percent in 2013/14.

Researchers Gartner estimate global IT spending will this year fall 5.5 percent from a year ago to US$3.5 trillion, which means competition for booming sectors like healthcare will be fierce.

Analysts, however, say Indian outsourcing firms must address U.S. concerns about privacy, and spell out how they intend to protect sensitive medical and personal data for U.S. patients that will be processed half a world away in India.

"The best chance that Indian companies will have is to make acquisitions of companies that specialize in healthcare technologies," said Kevin Parikh, chief executive of U.S.-based management consulting firm Avasant.

Reuters

12 | Business Daily

July 9, 2015

Asia

Abe aide says US$20 billion needed to offset next tax hike The next planned move would take the levy to 10 percent Toru Fujioka

fine line as it tries to rein in a debt burden that’s more than twice the size of the nation’s annual economic output. At the same time, Abe’s hand picked central bank chief, Haruhiko Kuroda, is pumping money into the economy to rekindle inflation that Japan needs for growth.

Tapering before April 2017 “is a bit hard to imagine,” said Honda.

An increase in the tax from 5 percent to 8 percent in April last year sparked two quarters of economic contraction, even after Abe unveiled a 5.5 trillion yen stimulus package in December 2013. The next planned move would take the levy to 10 percent Honda was instrumental in persuading Abe last year to postpone the next hike by 18 months to April 2017.

Taper debate

The BOJ will have to judge whether it can taper by looking at the degree of deceleration after the tax hike. When the economy is slowing, it can’t start tapering Etsuro Honda, Japan’s Prime Minister Shinzo economic advisor

Japanese Prime Minister Shinzo Abe

I

t could be difficult for the Bank of Japan to taper its record monetary stimulus before a planned salestax hike in 2017 and the government may need to compile a 2.5 trillion yen (US$20 billion) economic package to cushion the blow to households, an

adviser to the prime minister said.

Etsuro Honda, who has known Prime Minister Shinzo Abe for three decades and advises him on economic matters, said the government would need to “take a cautious approach” after an increase in the levy last year

sparked a recession.

“Fiscal spending of about 2.5 trillion yen will probably be needed to counter the impact,” Honda said in an interview at the prime minister’s office in Tokyo on Tuesday.

Abe’s government is walking a

Luxury hotels in southern Vietnam face rising competition The rate at hotels in Ho Chi Minh City fell 6.7 percent but edged up 6.7 percent in Hanoi in 2014

A

lthough the number of foreign guests at fourand five-star hotels in southern Vietnam rose 10 percent last year, upscale hotels saw room occupancy and tariffs declining due to mounting competition, local newspaper Saigon Times Daily yesterday quoted results of a Grant Thornton Vietnam survey as reporting.

The company’s 2014 survey among 60 hotels, which has been released recently, showed that average room occupancy at four- and five-star hotels

nationwide was 60.7 percent last year, down 2 percentage points against the previous year.

The rate at hotels in Ho Chi Minh City fell 6.7 percent but edged up 6.7 percent in Hanoi in 2014 from a year ago.

Kenneth Atkinson, executive chairman of Grant Thornton Vietnam, told reporters in Ho Chi Minh City that room occupancy in Hanoi jumped thanks to more supporting infrastructure. Meanwhile, the rate in Ho Chi Minh City was down due to fierce competition and the emergence of new hotels in service.

Sofitel Legend Metropole Hanoi

While some private economists including those at Nomura Holdings Inc. predict that tapering of monetary stimulus could begin next year, Kuroda sees the BOJ’s 2 percent inflation target as distant as mid 2016.

“The BOJ must make inflation stable,” said Honda. “It has to discern if 2 percent inflation can be maintained, and then in principle they can begin tapering.”

Honda added that there is no need for the BOJ to bolster stimulus now, with a recovery on track. While he says it’s unlikely, if inflation isn’t on the road to 2 percent by September or October this year, the central bank may have to consider the option.

Any economic package the Abe government compiles will probably be designed to cut the impact of the levy hike in half for households, Honda said.

The yen, which has depreciated by about 30 percent since Abe came to office, is at a comfortable level, Honda said.

“The yen between 120-125 is no problem at all,” according to Honda.

Bloomberg News

The average room tariff in 2014 at upscale hotels inched up 0.2 percent, from US$97.6 in 2013 to US$97.8 last year.

The survey found an increase of 3.6 percent in the average room tariff at four-star hotels but a decline of 6.4 percent in that of five-star hotels.

Room charges in Da Nang City and Hoi An City registered growth of 23 percent, but dropped by 17.2 percent in Phan Thiet City, by 13.7 percent in Hanoi and by 4.7 percent in Ho Chi Minh City.

Atkinson said when a new luxury hotel is put into operation or launches a promotion program, other hotels would have to cut tariffs to woo customers.

As of the end of the first quarter, there had been 99 three- to five-star hotels with a total of 13,100 rooms in Ho Chi Minh City and 8,960 hotel rooms of three- to five-star ratings in Hanoi.

Xinhua

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

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Business Daily | 13

July 9, 2015

Asia

Modi faces reality check as India investment approvals slow Anoop Agrawal

T

hose waiting for a surge in Indian investment should get comfortable -- it will be awhile.

New project proposals announced in the three months through June were the lowest since Prime Minister Narendra Modi took power in May 2014, according to the Centre for Monitoring Indian Economy (CMIE), a Mumbai-based research company.

Of another 540 stalled projects valued at US$432 billion, three-quarters are either substantially completed, unviable or lack funding, UBS Group AG said in a July 2 note.

“If investors are looking at this being a sharp uptick in growth in the next 12 months, that’s where the hopes are misplaced,” said Gautam Chhaochharia, a UBS analyst in Mumbai. “It will take time.”

The data show that falling interest rates and Modi’s pro-business rhetoric have yet to prod companies into spending more, pressuring his government to pick up the slack.

Financial markets are dialling down expectations raised after Modi’s sweeping election win, with the benchmark index gaining 2.4 percent so far this year after a 30 percent climb in 2014.

The numbers bolster the case for central bank Governor Raghuram Rajan to further lower the benchmark interest rate after reductions totalling 75 basis points so far this year. UBS expects another 75 basis points of cuts in the year through March 2016, differing from swap traders and most

The promise they made that they will de-bottleneck has turned out to be a lot more difficult Mahesh Vyas, managing director, Centre for Monitoring Indian Economy

economists who predict he’ll keep the rate at 7.25 percent.

Lower borrowing costs could aid the private sector, which is struggling to clear stalled projects. Either way, Modi’s administration will have to fast-track clearances and ensure raw material supplies that have held up more than half of the stuck projects, HSBC Holdings Plc said in a July 3 note.

‘Hard work needed’

“Several more quarters of hard work is needed,” wrote Pranjul Bhandari, HSBC’s chief India economist. The government also has an expenditure constraint as it looks to narrow the budget deficit to the smallest since 2008, she said.

The shortfall reached 37.5 percent of the full-year goal in the first two months of the fiscal year started April 1 as the government spent almost 15 percent of its budget, government data show.

While initial figures show a revenue surge, it’s unclear if the trend will continue.

V.P. Joy, head of Modi’s Project Monitoring Group, wasn’t immediately available for comment when called on his office phone.

Early signs

Some see room for optimism. “Early signs” of a revival in private capital expenditure are apparent in CMIE data showing that projects under implementation rose for the first time in eight quarters, Morgan Stanley economists led by Upasana Chachra wrote on July 3.

The government’s steps to encourage entrepreneurship will help boost early funding to companies, according to a June report from research and consulting company Frost & Sullivan Inc. Even so, it’s “unusual” for the government’s investment in AprilJune to be lower than that of private companies, Mahesh Vyas, CMIE’s managing director, said by phone.

“The promise they made that they will de-bottleneck has turned out to be a lot more difficult,” he said. “It signifies that the problems are a lot more intricate, complicated than they were made out to be.”

Bloomberg News

The government plans to sell its 73.9 percent stake in United Coconut Planters Bank

T

to be the first sale of a controlling stake in a Philippine bank since the government passed a law last year that allowed overseas firms to take full control of local lenders.

The Supreme Court on June 30 issued an indefinite stay on two executive orders by President Benigno Aquino that had paved the way for the sale of assets which were bought with taxes collected from coconut farmers

The Supreme Court on June 30 issued an indefinite stay on two executive orders by President Benigno Aquino that had paved the way for the sale of assets which were bought with taxes collected from coconut farmers

Malaysian Prime Minister Najib Razak is considering legal action yesterday against The Wall Street Journal over reports saying some US$700 million from the controversial state investment fund 1Malaysia Development Bhd., or 1MDB, has been transferred to his personal account. Najib’s legal team sent an email to the Dow Jones, owner of The Wall Street Journal, requesting it to confirm whether it stood by the report.

“This confirmation sought to enable us to advise our client on the appropriate legal recourse he can take to seek redress in relation to the articles,” it said.

S.Korea household loans grow on low rates

Bank loans to households in South Korea posted the second-highest monthly growth on the back of the record-low policy rate, central bank data showed yesterday. Debts owed by households to banks amounted to 594.5 trillion won (US$523.5 billion) as of end-June, up 8.1 trillion won from a month earlier, according to the Bank of Korea (BOK). It was the largest monthly increase except for an 8.5-trillion- won growth in April this year, which was the record-high monthly gain since the BOK began compiling the data in 2008.

Singapore-Myanmar technical cooperation extended

Philippines suspends bank sale after court injunction he Philippines has suspended the sale of its majority stake in United Coconut Planters Bank after the country’s Supreme Court granted an injunction requested by coconut farmers who have questioned the government’s authority to sell the asset.

The auction, expected to be worth at least US$350 million, has drawn much foreign interest as it was slated

Malaysian PM mulls suing WSJ

during the administration of the late dictator Ferdinand Marcos.

The farmers have argued that the government holds the assets in trust and does not have the authority to sell.

The government is suspending the bidding process but remains confident in the validity of the executive orders, Toni Coo, officer-in-charge of the Department of Finance’s Privatisation and Management Office told Reuters in a text message yesterday.

United Coconut is the country’s 12th largest lender and had assets worth nearly 260 billion pesos (US$5.8 billion) as of the end of last year.

The government had received 12 letters of intent to bid from foreign and local investors, including U.S. private equity firms Carlyle, Lone Star Funds and TPG Capital, as well as Japan’s Mitsubishi UFJ Financial Group Inc and local conglomerate San Miguel Corp.

The government plans to sell its 73.9 percent stake for a minimum of 1.1 billion pesos but has also stipulated that the winning bidder must inject at least 15 billion pesos in capital.

Reuters

The Singapore-Myanmar technical cooperation program was extended for three more years until 2018, the military-run Myawady Daily reported yesterday. Under the bilateral program, Singapore has provided targeted technical assistance to support Myanmar’s development in three areas including economic development, human resource development and public administration, and has trained more than 11,700 Myanmar officials in these aspects. Singapore is also Myanmar’s third largest foreign investor with a cumulative investment of US$10.23 billion since 1988 as of May 2015, standing after China and Thailand.

HCM City ranked in world’s top 10 dynamic cities Vietnam’s Ho Chi Minh City was ranked sixth among the most dynamic cities in the world, local media reported. The rapid augmentation of the foreign direct investment (FDI) and spending on infrastructure helped the Vietnamese southern economic hub become the biggest improver, Vietnam News Agency on Wednesday quoted the recent 2015 City Momentum Index of the U.S.- based real estate services and investment management firm Jones Lang LaSalle (JLL) as reporting. Jeremy Kelly, director within the Global Research Program team at JLL, said Ho Chi Minh City is emerging as an important economic hub in Asia.

14 | Business Daily

July 9, 2015

International Global upheaval threatens U.S. growth A global slowdown in economic growth, together with political and economic upheaval in places like Greece, the Middle East and Ukraine, could hurt U.S. growth going forward, the International Monetary Fund said. In its detailed yearly analysis of the U.S. economy, the IMF also reiterated that the Federal Reserve should delay its rate hike until the first half of 2016, until there are signs of a pickup in wages and inflation. IMF staff said weaker global growth, including in China, would sap U.S. exports and investment in certain sectors, and also push down equity market valuations.

ECB to keep Greek banks afloat till Sunday European Central Bank chief Mario Draghi assured euro zone leaders the ECB would do the necessary to keep Greek banks afloat until an EU summit on Sunday that will seek a deal on further aid to Greece, German Chancellor Angela Merkel said.

Speaking at a news conference after an emergency summit of euro zone leaders, Merkel said she was “not exaggeratedly optimistic” of a solution to rescue Greece on Sunday but the summit had been called “because we think the situation is so dangerous”.

The leaders had not discussed the idea of Greece possibly creating parallel currency, Merkel said.

Pace of UK hiring slows further in June Permanent staff placements by recruitment agencies in Britain rose at their slowest pace in more than two years in June, largely due to a lack of skilled candidates, a survey showed. Salaries for permanent hires grew at their slowest pace in four months but remained well above the historical trend, according to the survey produced by the Recruitment and Employment Confederation (REC) and accountants KPMG. “Recruiters are struggling to fill vacancies for everything from software engineers to sales,” Bernard Brown, a partner at KPMG, said. Skills shortages were driving up pay, he added.

Microsoft plans major job cuts Microsoft Corp plans to announce a new round of layoffs to cut costs further, the New York Times reported. The latest job cuts are in addition to the 18,000 jobs that Microsoft said it planned to cut a year ago, the newspaper said, citing sources familiar with the matter. The layoffs are expected to affect employees at the company’s hardware group, including the smartphone business that it acquired from Nokia last year, the newspaper said.

Scandal-hit Barclays bank axes chief executive Under Jenkins, Barclays slashed more than 19,000 jobs, but the group has struggled to recover from the Libor fallout Roland Jackson

T

roubled British bank Barclays, plagued by forex and Libor rigging scandals, announced yesterday that it has fired chief executive Antony Jenkins (pictured) with immediate effect.

Barclays management has “concluded that new leadership is required” to accelerate an overhaul of the beleaguered group, it revealed in a statement on the surprise decision.

Jenkins has left the group with immediate effect, a spokesman confirmed to AFP. Chairman John McFarlane has been appointed executive chairman until a successor to Jenkins is found.

“I reflected long and hard on the issue of group leadership and discussed this with each of the nonexecutive directors,” said deputy chairman Michael Rake.

Jenkins replaced Bob Diamond in July 2012 -- who himself was forced to resign after the damaging Libor rate-fixing scandal.

The retail banking veteran had vowed to bring a new culture of decency to Barclays, and oversaw drastic restructuring that shrank its investment bank.

He leaves the bank with 12 months’ notice and will receive his current annual salary of £1.1 million (US$1.7 million, 1.5 million euros), as well as £950,000 in “role-based pay” and a pension of £363,000 a year.

Back in 2012, Barclays was fined £290 million by British and US regulators for attempted manipulation of Libor and Euribor interbank rates 2005 and 2009.

Damaged reputation

Jenkins has however struggled to restore the group’s damaged reputation which was also tarnished by forex rigging.

“In the summer of 2012, I became group chief executive at a particularly difficult time for Barclays,” Jenkins said in yesterday’s statement.

“It is easy to forget just how bad things were three years ago both for our industry and even more so for us.”

He added: “I am very proud of the significant progress we have made since then. Our capital position is much stronger, our business model is more balanced, we are much more disciplined on cost management, we have made good progress in rebuilding our reputation and we are seen as a leader in the application of technology to our business.”

The Libor system -- which has since been overhauled -- was found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure.

U.S. trade deficit widens on fall in exports Net imports of oil fell to US$5.8 billion in May, the lowest level since 2002

T

he U.S. trade deficit widened in May, fuelled by a drop in exports that could heighten concerns over weak overseas demand and a strong U.S. dollar.

The increase in the trade gap to US$41.9 billion, announced by the Commerce Department, was less than analysts had expected. That suggests Wall Street economists, who expected a US$42.6 billion deficit, might raise slightly their forecasts for economic growth in the second quarter.

But the drop in exports in May highlights a change in America’s

recovery from recession in which the economy has relied more on domestic drivers like construction and services, rather than export-led industries such as manufacturing.

Led by a drop in overseas sales of U.S.-made capital goods, exports fell US$1.5 billion in May, or 0.8 percent, to US$188.6 billion. Imports fell by about US$300 million, or 0.1 percent, to US$230.5 billion.

Since the middle of last year when the Federal Reserve made clear it was planning to raise interest rates, the dollar has strengthened, making U.S. exports less competitive.

In another damaging blow, Barclays was slapped in May with a US$2.4 billion fine by US and UK regulators for foreign exchange market manipulation.

Six major global banks, including Barclays and British peer Royal Bank of Scotland, were fined a total of almost US$6 billion, mostly for rigging the foreign exchange market.

Barclays’ fine was the highest because it had not participated in an earlier deal.

Barclays is due to post its firsthalf results on July 29. The London Interbank Offered Rate (Libor) is the rate banks charge each other for short-term loans and underpins US$300 trillion of transactions worldwide. Euribor is the eurozone equivalent.

AFP

Also since then, Europe’s economy has been on shaky ground and the European Central Bank has eased monetary policy, weakening the euro’s value against the dollar. European policymakers are currently fighting a debt crisis in Greece that threatens to rip apart the continent’s monetary union.

Exports of goods to Germany fell 6.0 percent in May from the prior month, according to non-seasonally adjusted figures. Sales fell 4.2 percent to France, 2.1 percent to Mexico and 3.0 percent to Japan.

Other economic data, including figures on hiring and consumer spending, have pointed to a rebound during the second quarter, and a firming domestic economy could encourage the Fed to raise rates later this year.

In May, the drop in imports came as purchases from China rose 9.5 percent. That could fan further criticism from U.S. manufacturers that Chinese firms are using a cheap currency and unfair subsidies to gain market share in America.

Reuters

Business Daily | 15

July 9, 2015

Opinion Business

wires

As China suspends reality, sit tight

Leading reports from Asia’s best business newspapers

James Saft

Reuters columnist

THE STAR Malaysian banks have the lowest bad loans in at least 17 years. They shouldn’t get used to it. While the lenders’ non-performing ratios are at the lowest levels in data going back to 1998, they’ve begun ticking up and Standard & Poor’s reckons they will keep doing so. “Loan quality is possibly at a cyclical peak,” said Ivan Tan, an S&P credit analyst in Singapore. Borrowers have binged on a record RM1.37 trillion (US$360bil) of loans, encouraged by a jobless rate which was close to a 1990s low last year.

THE KOREA HERALD South Korean companies are forecast to have posted worse-than-expected earnings in the second quarter as they grappled with the Middle East Respiratory Syndrome fallout and an economic slowdown in China, data showed yesterday.

The combined operating profit for 209 companies listed on the main KOSPI market was estimated at 33.11 trillion won (US$29.21 billion) for the April-June period, according to the data compiled by market researcher WiseFn. The latest figure was 1.5 percent down from the previous month’s average estimate of 33.61 trillion won.

VIETNAM NEWS The Vietnamese Government was considering a project to build a wholesale agricultural market worth billions of US dollars, said an official of the Korea Chamber of Commerce and Industry. According to Hong Sun, Secretary-General of Kor-cham in Viet Nam, farm products were the key exports of Viet Nam, but their distribution faced many difficulties, including the lack of wholesale markets to have auctions and distribute products everywhere, Bizlive newspaper online reported.

The disadvantage would create a barrier for Vietnamese enterprises to gain from the Viet Nam-South Korea free trade agreement, he said.

THE TIMES OF INDIA About half a dozen billionaires are among the 234 business leaders who are seeking extension of the retirement age, which has been fixed at 70 years under the revamped Companies Act for those serving in a listed company in an executive role. Wipro boss Azim Premji, who turns 70 on July 24, is seeking a two-year extension as executive chairman and managing director at the company’s annual general meeting slated for July 22. With a net worth estimated at over US$16 billion, Premji, India’s third richest man, emerges the most influential name seeking continuation.

O

nly an excessively brave investor would bet that China’s increasingly desperate moves to prop up its stock market won’t work; only a fool would bet that they will.

The proper place for anyone with any choice in the matter is on the side-lines, watching with concern as China, faced with a rapid implosion in its stock market, attempts to overawe would-be sellers with a raft of powerful measures, all of them supportive of prices but injurious to the price-to-reality ratio.

With the Shanghai Composite Index having fallen close on 30 percent since June 12, Chinese authorities initiated a series of supporting measures, culminating with an announcement on Sunday that the central bank would provide unlimited, open-ended financing to a state-backed margin financing company for on-lending to those wishing to buy shares.

Some of this margin debt will flow to a group of 21 securities firms that have pledged 15 percent of their net assets, or US$19 billion, to a stock market support fund. Initial public offerings have been suspended, apparently in hopes that investors who speculate on new issues will instead plough cash into existing ones.

These steps were only taken after China eased monetary policy and margin rules, both steps that failed to stem continued falls in equity indexes.

Authorities, having tired, it seems, of the concept of markets as being about opposing forces, have also turned their ire on shortsellers, vowing investigation

into “manipulation,” (see the irony there?) while also taking steps to both limit and make more expensive bets that stocks will go down.

China is clearly trying to position itself as a de-facto buyer of last resort of its own capital markets. While there is a fig leaf between the central bank and stock buying in that money is being on-lent for stock purchasing, much of the money is flowing to institutions that depend on official goodwill and can be counted on to fulfil official expectations.

Central bank test While Shanghai shares did rally on the measures on Monday, rising 2.4 percent, stocks in Hong Kong, which is more insulated from official control, slid by 3.2 percent, their biggest fall since 2011. Chinese capital controls limit the ability of foreign investors to access Shanghai’s exchange.

“A failure by the People’s Bank of China would, however, be the first time that a major central bank has failed to make their ‘equity put’ effective,” hedge fund manager Stephen Jen of SLJ Macro Partners wrote in a note to clients, “and may mark the beginning of central banks experiencing diminishing returns on their policies.”

China is clearly committed to the idea of a “put,” an effective pledge to underwrite market prices, and is going far beyond the verbal interventions combined with the bond buying programs initiated by the European Central Bank chief Mario Draghi and Ben Bernanke when he was chairman of the U.S. Federal Reserve.

A failure by the People’s Bank of China would, however, be the first time that a major central bank has failed to make their ‘equity put’ effective Stephen Jen, hedge fund manager, SLJ Macro Partners

China’s commitment to the policy comes from a similar place: It wishes to use stock appreciation as a means to encourage the transition to a consumer-oriented economy from an export-centred one.

A crash now threatens to undermine that transition and, importantly, the Chinese government’s prestige with its own people.

Still, a pledge of unlimited money for an unlimited time should, if it works, generate a bit more by way of gains than what we have seen.

While there have been a

number of comparisons between China’s rescue and the unsuccessful effort in 1929 by Wall Street banks, notably J.P. Morgan, to support the stock market, China’s government-led rescue with no cap on cost is a different type of dish.

Perhaps the best historical parallel is the “Price Keeping Operation” done by Japan’s Ministry of Finance in 1992.

Japan, concerned about the solvency of banks, large holders of equity which might be forced to mark stock holdings to market, initiated the operation, which ultimately included the use of public money for the direct purchase of stocks.

The thinking in Japan in 1992, as perhaps in China today, was that if only the government could push the Nikkei index up, private investors would follow as would an economic resurgence.

While Japan’s stock market did recover somewhat on the official buying, it collapsed shortly after the program was ended in 1994. What followed in Japan and its stock market is grim history.

“The ministry does not realize that by sending out signals that say ‘do not sell,’ it is giving signals that say ‘do not buy,’” former Nomura Chairman Yukio Aida was quoted as saying about Japan’s operation.

China is unarguably more powerful in its own domain than Japan was in 1992, and much more than Mario Draghi in 2012 or Ben Bernanke in 2008.

This makes the distortion of Chinese capital markets all the more toxic, and quite possibly, the ultimate price that much higher.

Reuters

16 | Business Daily

July 9, 2015

Closing Mainland broadcasting, film industry revenues continue to rise

Fed rate increase ruled out for 2015 by traders on Greece, China

The total revenue of China’s radio, film and television industries increased 13.16 percent to 422.63 billion yuan (about US$69.1 billion) in 2014, according to an official report released yesterday.

In 2014, the revenue of the online streaming industry reached 37.84 billion yuan, up 48.8 percent year on year, and 604 domestic entities provide online television programs, said an annual report issued by the State General Administration of Press, Publication, Radio, Film and Television. Box office revenues hit 29.64 billion yuan last year, up 36.15 percent from the previous year. Domestic film productions grabbed 54.51 percent of the total market share.

The Federal Reserve will delay raising U.S. interest rates until next year, a Morgan Stanley index shows. Greece’s struggle to stay in the euro currency union along with plunging prices for Chinese stocks and commodities globally are all threatening to slow global economic growth. The U.S. central bank won’t increase borrowing costs until the first quarter of 2016, according to the Morgan Stanley index, which is based on futures trading.

As recently as last month, the gauge projected a shift by year-end. “The timing of the Fed rate increase will be postponed,” said Park Sungjin, head of investment management at Meritz Securities.

Tax inspectors shrug off borders to track multinational evasion They will boost local tax agencies’ efforts to ensure that multinational corporations pay what they owe to governments in regions such as Africa Alan Katz

S

tep aside, Doctors Without Borders. A new class of professionals is ignoring national frontiers to come to the aid of economically struggling nations.

A team called Tax Inspectors Without Borders will begin helping developing countries deal with the flood of income to low-tax jurisdictions once it’s established next week by the United Nations and the Organization for Economic Cooperation and Development.

The idea: to boost local tax agencies’ efforts to ensure that multinational corporations pay what they owe to governments in regions such as Africa, which alone loses more than US$50

billion a year to illicit financial flows, according to a UN report.

The UN and OECD, which represents rich nations, will draw up a list of several dozen tax inspectors from advanced countries who could be summoned to help local agencies understand what anomalies to look for and what documents they need. Of special concern are transfer-pricing cases involving assets moved among a corporation’s units in multiple countries.

It’s the sort of advice that netted authorities in Kenya more than US$23 million in a single case, thanks to veteran tax inspector Lee Corrick.

The first objective is to help them to make sure they obtain the appropriate tax from their audits and to be sure that they apply the rules in the appropriate way, to apply them consistently Lee Corrick, OECD, tax inspector

President Xi arrives in Russia for BRICS, SCO summits

Corrick, who works for the OECD, flew to the East African country in 2012 to give a workshop on advanced tax auditing. It wasn’t long before Kenyan tax officials told him about a major problem they were encountering.

They described a complicated arrangement involving a tea-auction license to a Kenyan unit of a multinational, letters of credit from a related U.K. unit and supposedly unrelated buyers who purchased tea from both entities.

Sealing agreement

After Corrick advised them on what to look for, and held two more workshops, the tax authorities met with the company and sealed an agreement for the tens of millions of dollars in extra tax payments -- among the largest adjustments ever

by Kenya.

That case, and similar gains in a pilot program in Colombia, prompted the UN Development Program and the OECD to scale up the plan, which they will present on July 13

at a financing conference in Addis Ababa, Ethiopia.

Tax Inspectors Without Borders would take on projects or audits either by flying in to hold workshops, as Corrick did, or embedding themselves full time in a tax agency for several months, as with another pilot program involving Italian inspectors in Albania, said Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration.

The group’s name is an echo of Doctors Without Borders, the medical charity that provides services in poor or disaster- struck countries.

In developing countries, the biggest share of money is lost through commercial illicit financial flows, including tax evasion, trade and services mispricing, and transfer-pricing abuses, according to the report this year by the UN Economic Commission for Africa.

Revenue drained by criminal activities and corruption come lower on the list, the report says.

Bloomberg News

Passenger car sales fall in China Tsipras pleads for fair deal assenger vehicle sales in China fell in June for Greece in EU parliament

P

hinese President Xi Jinping arrived in the south-western Russian city of Ufa yesterday to attend the annual summits of BRICS and the Shanghai Cooperation Organization (SCO).

Ufa, capital of Russia’s Republic of Bashkortostan, will host both the 7th leaders’ meeting of BRICS (Brazil, Russia, India, China, South Africa) slated for July 8-9, and the 15th meeting of the SCO Council of Heads of State on July 9-10. Russia holds the rotating chair of both BRICS and SCO in 2015.

It will be Xi’s third time to attend the annual BRICS summit. He and other leaders of the emerging-market bloc will exchange views on enhancing cooperation among BRICS countries and on international, regional issues of common concern.

On the side-lines of the two summits, President Xi is scheduled to hold bilateral meetings with Russian President Vladimir Putin and other leaders.

A trilateral meeting of leaders of China, Russia and Mongolia, the second of its kind during the annual SCO summit, is also on the agenda.

as slowing growth in the world’s secondlargest economy and plunging share prices dampened consumer demand, an industry group said yesterday.

Sales of saloon cars, multi-purpose vehicles (MPVs), sport utility vehicles (SUVs) and minivans declined 3.2 percent in June from a year ago to 1.43 million units, the China Passenger Car Association (CPCA) said.

The decrease was “a result of the stock market (coming off) the peak compounded with the slowdown in economic (growth)”, the CPCA said in a statement posted on Chinese news portal Sohu’s auto channel.

China’s share market has lost around US$3.5 trillion in value in a rout that began last month, according to Bloomberg News, a huge sum by any standards.

“The stock market turmoil has led more people to put off their plan to buy new cars,” the CPCA said, adding dealers complained that some customers who had put down deposits had become “unwilling” or “did not have the cash” to pay the balance of their purchase.

Xinhua

AFP

C

G

reek Prime Minister Alexis Tsipras pleaded in the European Parliament yesterday for a fair deal to keep his country in the euro zone, acknowledging Greece’s own responsibility for its plight, after EU leaders gave him five days to come up with reforms.

With its banks closed, cash withdrawals rationed and the economy in free-fall, Greece has never been closer to a total state bankruptcy that would probably force it to print an alternative currency and leave the euro.

Yet the leftist premier seemed relaxed and confident, with a note of humility, when he appeared before EU lawmakers in Strasbourg to cheers and scattered boos.

Speaking hours after euro zone peers, at another emergency summit in Brussels, set Greece a deadline of the end of the week to come up with convincing reform proposals, Tsipras said Greeks had no choice but to demand a way out of “this impasse”.

He promised to deliver detailed reform proposals in the next 48 hours and mostly eschewed the angry rhetoric that has alienated many European partners.

Reuters