Macau business daily, 2015 July 15

MOP 6.00

Co-location arrangements not possible for Border Gate Monthly parking ticket scrapped for new public car parks Page 5

China’s credit warming up

Philippines suffering contagion from Macau gaming slowdown Page 7

Page 8

Banking on our Neighbours

Year IV

Number 835 Wednesday July 15, 2015

Publisher: Paulo A. Azevedo

Closing editor: Luís Gonçalves

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It’s one of the healthiest sectors in Macau. With credit, deposits and profits growing exponentially despite the recession. Now local banks are smiling even more. A new policy announced yesterday permits companies in the Hengqin and Nansha areas to borrow money from Macau and Hong Kong banks. Bank of China Macau says it loaned almost 600 million yuan to five companies yesterday.

Guangdong Free Trade Zone now has almost 15,000 potential new clients for Macau banks Page

2

Say, what?

It would be quite a revolution. Two local academics suggest nixing the city’s gaming monopoly. Claiming it’s needed to avoid capital-exodus from the Mainland. Macau Polytechnic Institute Prof. Li Sheng and Institute for Tourism Studies Assist.

Prof. Weibing Zhao anticipate flak. But believe the gaming market is underutilised in Mainland China. And that gambling should be legalised to avoid the loss of national wealth

HSI - Movers July 14

Name

%Day

Sands China Ltd

+4.85

Galaxy Entertainment

+3.81

Cheung Kong Property

+3.25

Hengan International

+3.10

MTR Corp Ltd

+1.87

China Unicom Hong Ko

-2.09

China Shenhua Energy

-2.15

Hang Lung Properties

-2.42

Hong Kong Exchanges

-2.50

Lenovo Group Ltd

-3.25

Source: Bloomberg

I SSN 2226-8294

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Sales warming up Summer’s here. And Air Macau is responding. The city’s flag carrier says bookings for its current flight routes already exceed 70 pct. Sales are likely to top last year for every route, the company said. With major regional cities the favourite vacation draws

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Start me up

Entrepreneurs never had it so good. The gov’t is mulling extending hefty interest-free loans to local firms starting up outside the city.

The gov’t also plans to invite Mainland authorities to explain Guangdong’s Free Trade Zone policies to local business dynamos

Page 5

www.macaubusinessdaily.com

Tourism

Time out for tourist prices Tourist prices have posted the slowest growth in 12 years. In Q2 2015, accommodation prices dropped almost 30 pct from the previous quarter. The 3 & 4-star segment was the most affected. The rise in tourist prices is slowing for the fourth consecutive quarter

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2 | Business Daily

July 15, 2015

Macau

Local banks may lend to FTZ firms The new policy allowing companies in the Hengqin and Nansha Areas to borrow money from Macau and Hong Kong banks was announced on Monday. The city’s Bank of China said it had loaned almost 600 million yuan to five companies on the same day Kam Leong

kamleong@macaubusinessdaily.com

C

ompanies registered and operating in the Hengqin Area or the Nansha Area of the Guangdong Free Zone are now allowed to apply for direct renminbi loans from banks in Macau and Hong Kong, the Guangzhou branch of the People’s Bank of China (PBOC) announced on Monday.

According to the Chinese central bank, this newly launched crossborder renminbi loan policy, in addition to allowing companies there to use the money they borrow from the banks on the projects within the areas, allows them to spend the capital on their overseas investments.

The loan period and the interest rate can be freely decided by the banks and the companies based

upon their business principles, PBOC said, claiming it will confirm the scale of the new loan scheme after concluding the capital demands from the companies in the areas, as well as the renminbi businesses in the two Special Administrative Regions.

15,000 companies

The latest official data from the Chinese Ministry of Commerce indicates that 14,217 companies registered during the first five months of the year in the Guangdong Free Trade Zone - which also includes the Qianhai & Shekou Area of Shenzhen, besides the Hengqin and Nansha areas. The registered capital of these companies totalled some 578 billion yuan.

In addition, the Free Trade Zone had also attracted a total of 135 companies from Macau and Hong Kong that had totally invested MOP5.87 billion yuan during the period, the Ministry said.

The Chinse central bank indicates that the new loan policy will benefit the cross-border renminbi businesses in the two areas, like decreasing the cost of capital funding, providing a good financial service environment for the Pearl River region, promoting the globalisation of renminbi and the convertibility of capital accounts.

BOC branches lend nearly 600 mln yuan

Meanwhile, the local branch of Bank of China (BOC Macau) said

in a press release on Monday that it had jointly issued a total of 575 million yuan (MOP750 million/ US$93.8 million) of direct loans to 5 companies in the Chinese areas through the Hong Kong and Guangdong branches of BOC on the first day of the policy.

BOC Macau and the Guangdong branch had loaned a total of 75 million yuan to three companies registered in the Hengqin Area, including a subsidiary of local food chain operator Future Bright Holdings Ltd. for its food plaza project on the island, state-owned Huafa Group’s subsidiary – Shizimen Central Business District Development Holdings Co., Ltd., and Zhuhai Financial investment Holding Co., Ltd. In addition, BOC Macau and BOC Hong Kong had also jointly granted direct loans of 500 million yuan with to Guangzhou Port Group Co. Ltd in the Nansha Area, as well as another 20-million yuan loan to Guangdong Yuexin Ocean Engineering Co., Ltd. ‘[The cross-border direct loan policy] has brought a new development opportunity to the city’s banking sector, widening the Special Administrative Region’s channels to use its renminbi capital, which will boost the activities of Macau’s renminbi offshore market,’ BOC Macau wrote in its press release.

70 per cent of Air Macau summer flights booked This month, the airline has increased its number of flights from the city to Bangkok and Osaka during July and August to ‘meet increasing market demand’

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he city’s flag carrier, Air Macau, said the tourism market for the summer vacation is still optimistic as bookings for its current flight routes exceed 70 per cent.

The general manager of Southern China of Air Macau, Winston Ma Sze Lok, told reporters on the sidelines of a company event yesterday that the airline’s passenger volume for each of its routes had increased year-on-year this summer, with most of its passengers local residents.

Last month, Air Macau announced an increase in the number of flights from the city to Bangkok and Osaka in July and August to ‘meet increasing market demand’. The extra flights connecting Osaka are available every Thursday and Sunday, while one extra daily flight will serve the Macau-Bangkok route.

Meanwhile, the Air Macau general manager said yesterday that he expects the Special Administrative Region’s travel alert to South Korea will soon be dismissed and the airline will consider resuming two daily flights to Seoul, following the airline reducing the number of daily flights between the two cities to one due to the MERS cases in the country.

Together with the extra summer flights provided by Air Macau, the city’s Civil Aviation Authority said recently that it had approved a total of 127 extra flights for the summer vacation until August 31.These extra flights primarily fly to Mainland China, Thailand, Japan, Vietnam and Taiwan.

K.L.

Business Daily | 3

July 15, 2015

Macau

Tourist prices track slowest growth in 12 years The city’s tourist price index for the second quarter has been largely influenced by accommodation costs. Hotel prices dropped almost 30 per cent from the first quarter Stephanie Lai

sw.lai@macaubusinessdaily.com

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acau’s tourist price index (TPI) for the second quarter of this year rose by only 0.82 per cent year-on-year to 134.61, reflecting the slowest growth for nearly 12 years as hotel costs in the quarter fell, according to the latest data released by the Statistics and Census Service (DSEC).

TPI growth for the second quarter, which is the fourth consecutive quarter the index has registered slower growth, has been sluggish as the price index of accommodation here has decreased by 2.82 per cent year-on-year due to ‘lower room rates for 3 and 4-star hotels’, DSEC explained.

TPI reflects the price change of goods and services purchased by visitors here.

The index has been weighted mostly by accommodation (23.06), restaurant services (17.47) and clothing and footwear (15.81), which comprise more than half of the basket of goods and

services the government measures for compiling the index.

In the second quarter, the 0.82 increase registered for the city’s TPI is mainly from increased charges for

restaurant services and food products, of which the price index rose 5.13 per cent and 4.5 per cent, respectively.

But the second quarter TPI is a 7.92 per cent decline from the previous quarter,

mainly caused by a 27.13 per cent fall in the price index for accommodation and 4.4 per cent dip in transport costs, following a lower hotel room rate and airfares after the Chinese New Year, the census found.

Hotel crisis

A separate set of survey data released by Macau Hotel Association, which measures the occupancy rate and room rates for the city’s 3 to 5-star hotels, reveals average room rates here started to fall in February.

The room rates for 3-star and 4-star hotels, in particular, have registered double-digit decline from February to May. By May, the room rate for 3-star hotels had dropped by 13.6 per cent year-on-year to MOP921.12 (US$118), while that for 4-star hotels fell by 17.21 per cent to MOP1,029.

For the first half of 2015, the TPI has risen 1.18 per cent year-on-year, a mild growth as the price index of accommodation decreased by 3.7 per cent year-on-year.

The TPI increase for the first six months is mainly supported by the growth in the price index of restaurant services, entertainment & cultural activities and food, alcoholic beverages and tobacco, which increased 6.48 per cent, 5.46 per cent and 4.21 per cent, respectively.

4 | Business Daily

July 15, 2015

Macau opinion

Boxing clever – but on the ropes

Light rationale

Retailers and government are mulling new, innovative initiatives to boost local consumption and attract tourists amid woes creeping from high-end to mass-end retail

José I. Duarte Economist

A

bout one year ago, residents from the northern neighbourhoods of Macau demonstrated in the streets of Macau. Their subject was the route followed by the light rail leaving from the area around the Border Gate in the direction of the city centre (more or less).

A consultation period was underway.

They were invited to ‘vote’ for a favourite path, among three alternatives. The demonstrators claimed that only the external alternative, one running along the coastline, should be considered. Other alternatives, they said, would impact negatively on their lives and, in one case, would lead to the loss of local public amenities.

Just a few days ago, the government made public the results of that consultation.

As a rule, one can question how these consultations are designed. The population is asked to ‘choose’ between alternatives, the rationale of which is not fully explained and where impacts are insufficiently described or quantified. This one does not seem to be a noticeable exception – but, leaving that aside, what did the residents say? The external route was the favourite.

That is, the one that involves longer times to be reached, the one that is farther from the residential nucleus.

The preference, therefore, has an implicit message. Do it, if you really have to, for whatever reason: but do it as far away from our homes as possible. If the metro and its trail addressed the actual concerns of the local residents and their main transportation needs, they would certainly welcome a more centrally located access point. That is not the case, their ‘voting’ neatly suggests. Are the residents being irrational? (Let us ignore, also, the promise made by the previous Secretary for Public Works, who guaranteed the light rail would have ‘zero’ impact on the local residents.

Taken at face value, that statement would be the best argument that could be made for not doing it at all!)

Building the elevated rail in that densely populated area never looked like a good idea to start with. It does not seem to address the major transportation needs of the local residents or help to limit in any significant way the traffic stresses in that part of the city. It may look very modern (look, we have a sky train!), allow the administration to spread a lot of money around (without much control, as we know by now), but it does not seem to solve any major and unavoidable growth constraint, impact positively the neighbourhood economy or eliminate overall obstacles to physical flows in the city.

This and most facts and events associated with the light rail suggest that, if reason were to prevail, the project would be shelved, at least on the Peninsula, while other less disruptive and more adequate solutions were sought. Past administration behaviour and statements provide little support, however, for such hope.

A

fter taking a selfie in front of the signature monogram wall of the Louis Vuitton store in One Central Macau, Perry Zhou and his girlfriend, both from Shanghai, marked the end of their sightseeing at the retail-cum-residential complex by buying nothing.

“We visited Hong Kong before coming here, and we purchased a Hermès bag there,” said Mr. Zhou on a Friday afternoon in mid-June outside the shopping mall that has limited visitor footfall.

“We will probably spend, like, MOP1,500-2,000 [US$187.5-250] on eating and [buying] almond cakes and jerky beef,” he said of their twoday trip around the territory.

Since the Macau gaming industry headed south a year ago the highend retail industry has taken a pounding as the big-spending Mainland Chinese sidestep Macau, leaving mass market tourists like Mr. Zhou in their wake. But they might also stop coming and spending, prompting retailers from

high-end to low-end, as well as the government, to mull measures boosting the appeal of Macau.

The territory posted its biggest drop in retail sales on record – a whopping 10.7 per cent - from the previous year to MOP16.41 billion in the first quarter of 2015, extending the downward momentum of three consecutive quarters since the JulySeptember period of 2014, the longest losing streak since such public data was available in 2000. Freefall in the jewellery and watch sectors has exacerbated the turmoil, with sales plunging 30.8 per cent year-on-year to MOP3.73 billion in the JanuaryMarch period.

“The ongoing crackdown on corruption in the Mainland has turned away the big spenders [from Macau],” said Lei Chi Fong, president of the Macau Goldsmith’s Guild and chairman of Seng Fung Jewellery Co. Ltd. He refers to the antiextravagance campaign launched

by Chinese President Xi Jinping in late 2012, which is widely regarded as the main culprit for Macau casino revenues dropping 13 consecutive months as of June.

The full story can be read in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com.

Of seadogs and shipmates The much-heralded pilot scheme of cross-border yacht sailing between Macau and Zhongshan could start soon despite the anti-extravagance campaign sweeping Mainland China

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ollowing three years of preparation, yachts may be able to glide between Macau and Zhongshan City in Guangdong Province with simpler Customs clearance procedures as soon as this month.

Hopes are high that this socalled ‘individual visit scheme for yacht sailing’ can enrich the tourism offerings of Macau, which is desperately striving to steer away from its over-reliance upon casinos, although it remains to be seen how many old seadogs will really hoist the mainsail to the territory given the high-profile anti-corruption crackdown in Mainland China, which shows no sign of abating.

“The ‘free yacht travelling scheme’ has been under discussion for some time but there has not been substantial progress on factors like the mutual recognition of licences

and Customs procedures,” says Jack Chang Chak Io, vice-president of the Macau Association of Economic Sciences.

“It will be beneficial to the city’s tourism in terms of attracting Mainlanders of high spending capacity, especially as the administrations of the two places are determined to push this policy forward,” he adds.

The concept first surfaced in March 2011, when the authorities of Macau and Guangdong inked a co-operation framework agreement that spelt out that the two places should join forces to develop ‘exquisite tourism projects for cruise ships [and] yachts’. This concept started to take shape when it was first mentioned in the Macau Government’s Policy Address for 2012, which said it ‘will study [and] explore the individual visit scheme

for yacht sailing between Guangdong and Macau in a trial [stage]’.

In 2013, the Zhongshan administration of Guangdong signed a memorandum with the city to explore the pilot scheme together, prior to Macau and Guangdong sealing a cooperation agreement on the matter a year later. The plans have since been fast-tracked, with the target of implementing the pilot scheme between Macau and Shenwan Town in Zhongshan by the “middle of this year”.

A spokesperson for the Macau Marine and Water Bureau declined to confirm whether the scheme could set sail in July as reported, and whether the scheme could be extended to other Guangdong cities The full story can be read in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com.

Business Daily | 5

July 15, 2015

Macau

Young Entrepreneur Aid could be extended beyond Macau The government is mulling extending the maximum interest-free loan of MOP300,000 to local firms establishing their start-up businesses outside Macau Stephanie Lai

sw.lai@macaubusinessdaily.com

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he government is mulling extending the interest-free loan scheme for local ‘young entrepreneurs’ starting businesses outside the territory, said Macau Economic Services’ director Sou Tim Peng (pictured).

The statement was Mr. Sou’s response to legislator Chan Meng Kam’s enquiry published yesterday, in which the official explained this mulled amendment for the Young Entrepreneur Aid Scheme, an interestfree loan programme implemented in August 2013.

However, the published statement did not mention any other changes to be made in the Young Entrepreneur Aid Scheme.

The scheme, which grants up to MOP300,000 (US$37,574) lays no restrictions on the type of start-up business although only entrepreneurs who are about to start their business or have already established a business for less than two years are eligible.

Entrepreneurs eligible for this scheme are defined as local permanent residents aged 18 to 44 years old. The repayment period for the interest-free loan is 8 years.

“Aside from actively studying

extending the Young Entrepreneur Aid Scheme to Macau youths establishing start-up businesses in the region, we’ll continue to reinforce how we can complement other start-up business support schemes in Mainland China,” Mr. Sou wrote in the reply, noting that the government plans to invite Mainland authorities to explain the Guangdong Free Trade Zone’s policies to local entrepreneurs contemplating starting business there.

Business Daily asked Macau Economic Services to clarify which territories the scheme might support outside Macau but had not received a reply by the time the story went to press.

In response to Mr. Chan’s enquiry, the Macau Economic Services’

Monthly parking tickets scrapped for new public car parks

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he payment of parking fees via a monthly parking ticket will not be adopted for new public car parks, Secretary of Transport and Public Works Raimundo Rosario told the Legislative Assembly during a plenary session yesterday.

Currently, some 12 new public car parks are being built, which can provide about 7,100 parking lots, the acting director of the Transport Bureau Chiang Ngoc Vai told the Assembly. Most of these car parks

comprise part of public housing projects currently under construction.

However, the monthly parking ticket system currently practised in the city’s public car parks will continue, the Secretary noted.

This latest remark, however, differs to what the Traffic Consultative Committee recently told media, saying that the government plans to double the hourly parking rate for cars in the city’s public car parks and halt payment via a monthly parking ticket.

head also pledged to create better conditions for local start-ups and small companies to utilise ground floor shops in the city’s public housing complexes.

A move has been made to amend existing laws governing the rental activities for shops in public housing areas, known as No.28/92/M, whereby the government will make changes to the rental policy for tenants and reinforce the Housing Bureau’s monitoring of shop ownership transfers, according to Mr. Sou. The official also noted that of the 56 shops in the Seac Pai Van public housing complex, a major housing site located in Colaone, some 30 shop spaces remain available for lease.

The Housing Bureau is currently preparing for a public bid for opening restaurants or retail sales points in six shops in Ip Heng Building, the third phase of the Seac Pai Van housing site, Mr. Sou wrote.

Co-location arrangements not possible for Border Gate

T

he arrangement to co-locate Immigration and Customs facilities for both Mainland China and Macau involves complex legal and privacy issues which make it impossible to be applied at the Border Gate, the city’s inland checkpoint with the heaviest passenger traffic, according to acting deputy director Ng Kam Wa speaking in the Legislative Assembly yesterday.

Speaking at the plenary session, Mr. Ng noted that the co-location arrangement will only apply to the yet-to-be constructed border at the Hong Kong-Zhuhai-Macau Bridge, or other new checkpoints.

The MSAR Government recently announced the building of a new border checkpoint in Ilha Verde, for which a new mode of Customs checks is being mulled by both Beijing and the local government.

When asked about moving the Lotus Border in Cotai to Hengqin and practicing a co-location arrangement, Mr. Ng only told the Assembly that the government will study the possibility.

6 | Business Daily

July 15, 2015

Macau Furla sales in Macau International Airport ‘exceed expectations’ The sales of Furla’s Spring and Summer collection for 2015 in Macau International Airport have ‘exceeded expectations’ since it started operations two months ago, the company has announced.

“Many thanks to King Power for their support for this opening. We have opened many new stores in airports across Asia this year, all of which have proven to be a success and we look forward to opening many more in the months to follow”, Furla Global Travel Retail Director Gerry Munday said as quoted by British website The Moodie Report.

End city’s monopoly to avoid capital-exodus from Mainland, local academics advice

of legalising gambling, which would be strategically helpful in protecting China’s national economic interests”, they explained. “If the Chinese government does not take any action, the capital-exodus problem driven by overseas gambling will become a real threat to national welfare”, they added.

Li Sheng and Weibing Zhao say the gaming market is underutilised in Mainland China and that gambling should be legalised to avoid the loss of national wealth

Protecting Macau

João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he Macau gaming industry does not have the capacity to fully supply the Mainland market thus to avoid capital flight to other countries the central government should legalise gaming. This is the conclusion of the research conducted by

Macau Polytechnic Institute professor Li Sheng and Institute for Tourism Studies assistant professor Weibing Zhao.

According to the sources quoted in the research, it is estimated that Chinese gamble around CNY1 trillion per year (MOP1,29 trillion). Meanwhile,

Macau was only able to absorb around one fifth of that value in 2011, when gaming revenue amounted to MOP268 billion.

Last year, gaming revenues totalled around MOP352 billion, still far away from the sum estimated to be gambled

by Chinese.

Le Saunda distributes dividends of HK$0.14 per share

T

he shareholders of Le Saunda Holdings approved a dividend of HK$0.14 per share for the fiscal year ended 28 February 2015, during the annual general meeting that took place last Saturday. The decision was announced in a filing with the Hong Kong Stock Exchange on Monday night.

The HK$0.14 dividend was approved after the clothing group registered a profit attributable to equity holders of HK$237.1 million

for the fiscal year ended February 2015, which meant a decrease of 17.4 per cent in relation to previous fiscal years.

The general meeting also approved the measure to increase the share capital of Le Saunda from HK$80 million divided into 800 million shares to HK$100 million divided into 1 billion shares. All in all, this operation resulted in the creation of an additional 200 million shares, with the decision approved by 99.39 per cent of the votes.

“Although Macau is the only Chinese territory where gambling is legal, its gaming capacity cannot entirely solve the underutilisation issue of Mainland China”, the authors explained in the article titled ‘Strategic Destination Management in the Face of Foreign Competition: the Case of Macau SAR’.

The problem related to the underutilisation concerns academics for the reason that Mainland Chinese will go to other locations to gamble and that the money spent will flee from the PRC. “The mushrooming of casinos in the Asia Pacific region, particularly near the Chinese border, is making the situation increasingly worse. Many destination nations, though permitting gaming, restrict or prohibit their citizens from entering casinos, showing an overt intention to earn money from foreigners”, the authors say concerning the markets competing with Macau.

“It is worthwhile for the government to devote serious efforts to pursue the possibility

While supporting the legalisation of gambling in Mainland China, Li Sheng and Weibing Zhao also stress the importance of protecting Macau’s economy, which relies on this industry.

In relation to this, the authors say that the legalisation of gambling on the Mainland should be executed in the sense that it would not compete with Macau. This means that the MSAR would be targeting VIP clients, while the Mainland would host the mass market segment. This status of Macau as the VIP destination should be kept until the region could diversify its economy and source of visitors.

In relation to the opening of the Mainland market, gaming operators are advised to invest in non-casino vacation hotels and resorts in Mainland China and to prepare for legalisation. The authors say that should the market open and foreign investors are allowed in they will be in a better position to seize the opportunity.

Another suggestion is that the Macau Government and private sector upgrade their casino facilities and overall level of tourism in the region.

And while competition from the Mainland may threaten the local economy, given that Macau is promoting itself as a world-class high-roller destination it will continue to prosper.

Customs seizes 12,000 cigarettes for unpaid duty

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acau Customs claims it seized 12,020 cigarettes between 00:00 am and 4:00pm yesterday for unpaid duty at the city’s border checkpoints following the implementation of the new tobacco regulations.

The number seized and undeclared cigarettes recorded yesterday represents a significant growth compared to the average 900 cigarettes seized by the authority per day for unpaid duty, according to local broadcaster TDM Radio.

From yesterday, the duty-free allowance for travellers entering Macau was decreased to 19 cigarettes from the original 100. In addition, tax on cigarettes has been increased to MOP1.5 each from MOP0.5.

Nevertheless, the Customs said most of the unpaid duty cigarettes, 11,000 of the total, were seized between 00:00 am and 01:00 am yesterday morning, involving 36 violations.

K.L.

Business Daily | 7

July 15, 2015

Gaming Philippines contaminated

by Macau gaming slowdown

T

he decline of gaming revenues in Macau is contaminating Philippine’s gaming sectors, according to a research note by First Metro Investment Corp (FMI), the investment banking arm of the Metrobank Group, titled ‘Philippine Gaming Sector: Macau Contagion’.

‘Macau’s gaming slump has contaminated the local industry’s earnings outlook, with share prices of Melco Crown Philippines, Bloomberry and Premium Leisure Corp. all sharply lower by -15.32 per cent, -6.6 per cent, and -0.8 per cent, respectively during the week of June 22 to 26,’ FMIC said, as quoted by the The Philippine Star newspaper.

‘A recent survey of the local gaming revenues in Pagcor City-based casinos indicated upbeat numbers last May, month-on-month.

But it is still hard to bet on

the sector on the basis of the recent revenue statistics and some much touted local industry pluses such as our reduced dependence upon VIPs given the dominance of the mass market, a more benign tax regime and geographical proximity to regional clientele. Gaming has lost its lustre and needs to show more evidence of a revival,’ the investment bank claimed.

However, the Chairman of the state gaming regulator Philippine Amusement Gaming Corp (Pagcor), Cristino Naguiat Jr, told the local newspaper that the Philippine market has a more diversified client profile than Macau, which cushions it from the impact of the slowdown.

The local official also explained that the gaming sector in the Philippines grew 19 per cent last year to US$2.5 billion (MOP20

billion) from US$2.1 billion (MOP16.8 billion) and that during the first half of the year revenue increased another 16 per cent to US$1.4 billion (MOP11.2 billion). “The figures speak for themselves”, he added.

However, FMIC also said that the latest gaming results are better than previously expected (drop of 36.2 per cent year-on-year in June to MOP17.4 billion) and stressed the easing of the Visit Transit Policy by Macau authorities.

“That the revenue drop is better than the median estimate of -38.3 per cent might have been partly due to Macau Government easing up on the crackdown; an announced reversal of the transit visa policy starting July 1 allows frequent travel and longer stays for Mainland China passport holders,” FMIC highlighted.

J.S.F.

Success Universe warns of ‘significant decline’ in profits

S

uccess Universe has warned investors that the results of the group had recorded ‘significant decline’ for the six months ended June. The company that controls Ponte 16 casino in Macau released the information in a filing with the Hong Kong Stock Exchange.

The company explained that this warning was given

based on the unaudited management accounts of the group for the five months ended May 2015. In the previous announcement of the interim results HK$47.7 million in profit attributable to owners was recorded.

The decline in profit is explained by the ‘substantial’ decrease of income from the Ponte 16 resort, and the nonrecurrence of FIFA World

Cup that boosted the lottery business turnover in June 2014. The results were also affected by the voluntary suspension of paperless lottery sales agency services, as suggested by the Ministry of Finance, the Ministry of Civil Affairs and the General Administration of Sport of China issued in January 2015 due to the illegal sales of lotteries through the Internet.

Singapore anticipates more problem-gambling in 3 years Cases of problem-gambling have increased 60 per cent since 2012

S

ome 2,700 cases of problem gambling were reported in Singapore from 2012 to 2014, a 60 per cent surge from the three years prior, local media have reported, citing Minister for Social and Family Development Tan Chuan-Jin as reporting to parliament on Tuesday.

"The increase is due partly to greater public education efforts, which have raised awareness of problem gambling and encouraged help-seeking behaviour," he said.

Tan also said pathological gamblers can seek assistance from two major institutions and other private and nonfunded community and religious organisations, adding that treatment for

problem gamblers depends upon the severity of addiction.

"It usually involves a combination of counselling and different types of therapy, conducted on an individual or group basis," Tan explained, adding that even patients who have already recovered following treatment are encouraged to join support groups for longer term support.

To further tackle the issue, Tan stressed the important role of family as "often in the best position" to detect signs of problem gambling in their families.

"Studies have shown that treatment works best if the problem gambler is accompanied by family members," he added.

Xinhua

Corporate

Asia’s coolest pool party returns to City of Dreams The pool party season kicked off last Saturday July 11, 2015 with the return of the region’s longest running and most loved pool party – SPLASH - exclusively presented by City of Dreams. This year, SPLASH is bringing even bigger names to the Hard Rock Hotel poolside with Redfoo.

The creative and vocal star of the 30 million album-selling pop dance sensation LMFAO brought his signature funky and fresh party rock style to this mega sizzling summer party, joined by DJs and dancers from his La Freak and Party Rock Crew.

Hottest queen bee Jennifer Tse Ting-ting also attended this coolest event in Asia, partying alongside SPLASHers for a wild night out.

Get ready to dive into the finale of this year’s SPLASH pool party series at the peak of summer on August 22, 2015. Taking centre stage this time are Australia’s #1 DJ and DJ Mag’s Top 100 – the Stafford Brothers fresh from their Las Vegas residencies. Another heavyweight headliner is the exciting Scottish house DJ and producer Chris Lake.

Shell launches Bonus Card in Macau Shell has announced the launch of Shell Bonus Card in Macau, to bring motorists an exceptional refuelling experience filled with Bonus! Shell has always been dedicated to offering premium quality fuel to motorists with promotional offers. The newly launched Shell Bonus Card introduces both instant fuel discount and fuel rebates all in one go to reward motorists in Macau!

From July 15 onwards, visit any of the Shell stations in Macau and submit the

application form to get a Shell Bonus Card on the spot. Motorists can then enjoy an instant offer of paying MOP$10 to get MOP$1 fuel discount with their Shell Bonus Card.

To celebrate the launch, motorists can receive a pair of limited edition Shell sunshade upon successful application during the promotional period. The sunshade will be on a first come, first served basis while stocks last.

8 | Business Daily

July 15, 2015

Greater China

June bank lending, money supply growth quickens Further policy easing is widely expected to support the slowing economy

KEY POINTS June new loans 1.27 trln yuan, vs f’cast 1.05 trln yuan June M2 money supply +11.8 pct y/y, vs f’cast +11.0 pct June total social financing 1.86 trln yuan

B

anks made 1.27 trillion yuan (US$204.57 billion) in new loans in June, according to Reuters calculations based on fresh central bank data, handily beating market expectations, while broad money supply growth quickened last month.

“The lending and money supply figures are higher than market expectations, indicating recent government measures have gained traction to lift loan demands in the

real economy,” said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.

“They also mean China’s economy may stabilise in the coming months.

Still we believe the monetary easing will continue.”

Banks made a total of 6.56 trillion yuan in new loans in the first six months of 2015, said the People’s Bank of China, which did not release loan data for June alone.

The central bank said the broad

M2 money supply (M2) grew at 11.8 percent, beating forecasts.

Outstanding yuan loans grew at 13.4 percent by month-end, the bank said.

Economists polled by Reuters had expected new local-currency loans of 1.05 trillion yuan in June, compared with 900.8 billion yuan in May, a rise of 14 percent, and predicted money supply would rise by 11 percent.

Total social financing (TSF), a broader measure of overall liquidity

in the economy, was 1.86 trillion yuan in June, compared with 1.22 trillion yuan in May. The PBOC faces an uphill battle to channel money into the real economy even as the banking system is flush with cash, which has pushed down money market rates and stoked concerns about stock market bubbles.

The State Council, China’s cabinet, decided to scrap the country’s longstanding loan-to-deposit ratio requirement in late June, the latest measure to reform the country’s commercial banking sector and get more lending into a slowing economy.

Tomorrow, China will report economic growth for the second quarter, which is expected to be below 7.0 percent.

Reuters

Tsinghua Unigroup prepares bid for Micron Technology Micron makes both dynamic random access memory chips, or DRAM, and NAND memory chips for storing music, pictures and other data on smartphones, cameras and other mobile devices

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tate-backed Chinese technology conglomerate Tsinghua Unigroup Ltd is preparing a US$23 billion bid for U.S. memory chip maker Micron Technology Inc, The Wall Street Journal reported, in what would be the biggest Chinese takeover of a U.S. company.

Unigroup is prepared to bid US$21 per share for Micron, which is at a 19.3 percent premium to the stock’s close on Monday, the Journal reported, citing people familiar with the matter.

The Journal earlier reported that a bid had been submitted. A Micron spokesman however said that while the company did not comment on rumours or speculation, it had not received an offer.

A Tsinghua Unigroup spokesman said he did not know anything about the reported deal, while a person close to Unigroup said it was not clear it had received Chinese regulatory approval for an overseas takeover.

A successful bid for Micron would consolidate Unigroup’s position as a champion for China’s technological development, after it struck deals and research partnerships with international firms in the semiconductor industry.

The company is controlled by Tsinghua University in Beijing, which counts President Xi Jinping among its alumni, and is backed by China’s central government.

KEY POINTS Chinese firm prepares to bid US$21 per share for Micron - WSJ Micron says no offer has been received

China has attached strategic importance to the development of a domestic server and networking equipment sector amid fears of foreign cyber spying.

But any foreign takeover of Idahobased Micron - the last major U.S.based manufacturer of DRAM chips used in personal computers - would likely have to pass a review by the Committee on Foreign Investment in the United States (CFIUS), which reviews deals for national security implications.

Acquiring Micron’s cutting-edge memory manufacturing technology would be a major advance for China’s modest but improving chip industry headed by Unigroup.

With a roots as a private equity

Deal would face close regulatory scrutiny in U.S. Major consolidation under way in chip business

fund, Unigroup transformed into a serious semiconductor player after it bought Chinese chipmakers RDA Microelectronics and Spreadtrum in deals totalling US$1.6 billion last year.

When Unigroup received a US$1.5 billion investment from Intel Corp in October, the two sides pledged to cooperate on research and further Chinese technology.

Dwindling U.S. players

Micron has manufacturing plants and a sales office in Taiwan, and indirectly

holds a 20 percent stake in Inotera Memories Inc, a joint venture with Nanya Technology Corp. If Micron became a Chinese-owned company, Taiwanese rules would require it to re-submit its investment application for review.

The memory business in recent years has seen rapid consolidation.

In May, Hewlett-Packard Co sold a controlling 51 percent stake in its China-based data-networking business to Unigroup for at least US$2.3 billion, forming a partnership designed to create a Chinese technology powerhouse.

Last year Intel Corp acquired a stake in two mobile chipmakers through another deal with Unigroup, which owns the companies.

A Micron deal could also face scrutiny from China’s National Development and Reform Commission, which must approve outbound investments worth more than US$2 billion or those in sensitive industries.

Billionaire hedge fund manager David Einhorn said in an investor letter on Monday that Micron would be worth more than Netflix Inc within the next few years. Netflix was worth US$42.9 billion at the close on Monday.

Reuters

Business Daily | 9

July 15, 2015

Greater China

Domestic BMW maker issues profit warning

Top graft-buster warns on state enterprises China’s top anti-graft watchdog said it is urgently tightening the Party’s grip on the state-owned enterprises after a string of corruption cases were exposed. Inspections at SOEs revealed leaders abusing their power for personal gain and benefitting relatives at the expense of public interest, the Communist Party of China (CPC) Central Commission for Discipline Inspection (CCDI) said in an article published on its website Monday. “Some people embezzled state assets under the name of carrying out reforms at the SOEs while others tried to corrupt senior officials using illegally obtained state resources,” it said.

BMW Brilliance faces higher costs as it prepares to launch new models and new production facilities

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rilliance China Automotive Holdings Ltd, which makes BMW cars in China, issued a profit warning on Monday, citing slowing sales in the world’s biggest car market.

Brilliance, which makes minivans for China’s domestic market and assembles luxury cars for BMW via its joint venture with the German carmaker, said it expected first-half profit to fall 40 percent from a year earlier mainly because of lower results from its BMW Brilliance 50 percent owned joint venture.

“The decrease in BMW Brilliance’s profit was caused by the higher selling costs incurred during the first six months of 2015 as a result of the slowdown in the growth of the Chinese economy and the automotive industry,” Brilliance said in a statement to the Hong Kong Stock Exchange.

Brilliance’s profits, which are highly dependent on the JV’s earnings, would be roughly 2.2 billion yuan (US$354.38 million) for the first half of 2015, according to a Reuters calculation.

The company could not immediately be reached for comment on that figure. Brilliance China’s condensed consolidated income in the first-half of 2014 was 3.6 billion yuan.

Global automakers including BMW, General Motors Co and Ford Motor Co have cut prices on Chinese models in

Beijing to build 1,000 km of suburban rail recent months to combat weak sales growth as China’s economy slows to its slackest pace in 25 years In January, BMW agreed to pay 5.1 billion yuan to auto dealers in China, who have pressured the world’s top luxury carmaker to share the cost of overstocked showrooms.

BMW has been hit by a slowing Chinese economy where cut-throat competition leaves its ageing product range increasingly exposed. Its 7-series limousine for instance, on the market in China since 2009, competes with a new version of the Mercedes S-Class, which was launched in late 2013.

BMW reiterated on Monday that China would remain an important market.

“BMW has consistently said the high rates of growth seen in the Chinese market cannot be sustained

indefinitely,” BMW said in a statement, adding that the company took action to address business developments earlier in the year.

“Irrespective of the situation we believe that China remains an attractive market in the medium to long term,” BMW said.

A major China dealer group told Reuters last week that it had to resort to deep discounts to prop up sales at a dozen of its BMW dealerships, while also putting a freeze on new hires and salary hikes.

Brilliance said it plans to publish its unaudited half-year results in August.

Under China’s foreign ownership rules, China requires automakers to produce cars domestically via joint ventures with the foreign partner owning a maximum of 50 percent.

Reuters

Reserves dropping least in a year suggests outflows eased Government has been limiting yuan moves to encourage greater global use and deter outflows as it pushes for reserve‑currency status at the International Monetary Fund Fion Li

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undsun Technologies Inc, the financial information technology company controlled by Alibaba Group Holding Ltd founder Jack Ma, yesterday rejected local media criticism that blamed its platform for China’s stock market rout.

“It’s not objective or rational to say that HOMS was the major force of the stock market turmoil,” Hundsun in a filing to the Shanghai Stock Exchange yesterday.

The HOMS cloud-based system was launched in May 2012 and was originally designed for small and midsized asset management firms. Since China’s stock rally started, however, it has been widely used by “grey market lenders” - off-market financing firms that allow speculators to borrow up to 10 times their starting capital for up to 17 percent annualized interest.

During the past four weeks when China’s stock market tanked around 30 percent, investors with such

excessive leverage were forced to sell shares to meet “margin calls” that knocked prices in a vicious sellingcycle.

Although the China Securities Regulatory Commission said offmarket margin financing and selloffs using the HOMS system were merely “a small fraction” of total transaction value, a number of local media criticized the HOMS platform for fuelling a highly leveraged bull run and then triggering a free fall.

In the yesterday statement, Hundsun said only 30.1 billion yuan was forced-sold on its HOMS platform from June 15 to July 10, accounting for 0.1 percent of the total transaction volume during the period.

Last Friday, Alibaba’s financial arm Ant Financial pledged to invest no less than 40 million yuan within the next six months, buying shares in Hundsun from the secondary market to stabilise the stock price, according to a Hundsun filing.

Reuters

Beijing will build a 1,000 km suburban rail network as part of a transportation overhaul to integrate the Chinese capital with neighbouring cities, the city’s transport director said. “Inter-city rails and highways to connect a cluster of cities around Beijing and a suburban rail network will help expand the reach of the 1,000 km subway network within the city,” said Zhou Zhengyu, director of Beijing Municipal Commission of Transport.

Beijing’s municipal government said over the weekend that it will partly move to the city’s eastern suburb of Tongzhou.

Carbon growth rate in decline Despite the continued increase in global carbon emissions in China, the growth rate of carbon emissions has been “in a steady decrease” since 2005, and was near zero in 2014, according to a new climate report released Monday. The report, commissioned by Britain’s Foreign Office, was written by experts from Britain, China, the U.S. and India. Several factors have played key roles in bringing down the carbon growth rate in China, including better energy efficiency in major sectors, development of renewable energy, and concern for air pollution, the report said.

APS suspends redemptions from China hedge fund Singapore-based APS Asset Management has suspended investments into and redemptions from a hedge fund investing in Chinese stocks in a sign of the fallout on investors from four weeks of turmoil in mainland China’s stock markets. The firm has also stopped calculating the net asset value of the fund, known as the APS Greater China Long/Short Fund, it said in an exchange filing on Monday. The fund managed about US$85 million at the end of June, according to data seen by Reuters.

Taiwan to send deer, serows as gifts to mainland Taiwan will send two pairs of Formosan serows and a male spotted deer to the Chinese mainland next April, according to a national park in east China’s Shandong Province. An agreement has been signed between Taipei Zoo, the original home of the animals, and their new home, Liugongdao National Forest Park in Shandong’s Weihai City, a spokesman with the park said yesterday. The Formosan serow is a goat-like animal indigenous to Taiwan. In 2011, Taiwan sent a pair of Formosan serows and a pair of spotted deer to the park as a token of improved cross-strait relations.

10 | Business Daily

July 15, 2015

Greater China last without mass sales, like Xiaomi, or other businesses to support money-losing smartphone divisions, like Lenovo. Their best chance is to link handsets to new sectors such as wearable devices and smart home appliances, analysts said.

But new hopefuls are lured to the market by the fairy tale success of Xiaomi. In December, investors valued Xiaomi at US$45 billion less than five years after its founding, making the firm one of the world’s most valuable start-ups.

Chinese start-up Smartisan was established in 2012 and, like Xiaomi, has gained popularity based primarily on social-media marketing and word of mouth, rather than expensive advertising.

Attack of the clones

Xiaomi success inspires a generation of start-ups Small players compete for just one-fifth of the market as the rest is occupied by the 10 biggest incumbents

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he call of the world’s biggest smartphone market is proving irresistible for entrepreneurs in China, where even p u r veyor s of conc re te mixers, refrigerators and rock music are mimicking local trailblazer Xiaomi Inc with their own handsets.

But the market shrank in early 2015 for the first time in six years and sales have fallen at one-time leader Xiaomi. That sudden aboutturn raises questions over whether there is any chance for the likes of construction machinery maker SANY

Group Co Ltd, Gree Electric Appliances Inc of Zhuhai and veteran rockstar Cui Jian.

The slowdown may be too much for all but the largest handset makers, much less a plethora of metoos, some analysts say. In a crowded market plagued by price wars, entrants will have to convince buyers to abandon established brands with phones that surpass even premium models, U.S. research firm Gartner said.

China had 155 smartphone brands selling over 1,000 handsets a month as at endMarch, from 110 two years

ago, said analyst Neil Shah of Counterpoint Research.

In neighbouring India, there were 103 brands, over half of which are Chinese.

Fairy tale

Bringing a smartphone to market in China costs as little as a few hundred thousand dollars, with money going on licensing and off-the-shelf designs from manufacturers.

For greater scale, involvement in design, marketing and offline sales distribution send costs into the hundreds of millions of dollars, said Shah.

Few entrants are likely to

It’s not that easy to go bankrupt making phones, but it’s also not easy to be profitable CK Lu, Gartner analyst

Bohai leasing to buy 20 pct of Avolon The directors of both companies support the deal

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hina’s Bohai Leasing Co Ltd yesterday said it has agreed to buy 20 percent of U.S.-listed Avolon Holdings Ltd for US$429 million, in the latest acquisition by a unit of aviation and shipping conglomerate HNA Group.

The purchase would be HNA’s biggest in logistics since the US$1 billion buy of marine container leasing firm GE SeaCo in 2011, and would provide access to a global aircraft leasing market dominated by GE Capital and AerCap Holdings NV.

“This investment in Avolon will bring Bohai an increasing presence in the global aircraft leasing sector and Bohai will have a strong interest in benefiting from Avolon’s profitable growth,” Chief Executive Chris Jin said in a statement.

Chinese lessors, mostly backed by state-owned banks, have been expanding in recent years, as large carriers such as Hainan Airlines Co Ltd, Air China Ltd, China Eastern Airlines Corp Ltd and China Southern Airlines Co Ltd opened more routes at home and overseas.

Aircraft maker Boeing Co estimated China will need over 6,000 new aircraft over the next 20 years.

Bohai parent HNA owns miscellaneous shipping and aerospace companies including Hainan Airlines, and has been buying logistics and hotel assets to expand globally.

Avalon sells aircraft leasing and lease management services to airlines and aircraft investors. The Dublinbased firm has a fleet of over 260 aircraft serving 56 customers in 33 countries.

Xiaomi, whose sales are mostly domestic, saw phone shipments rocket 227 percent last year. But the firm’s fortunes wavered last week when it reported semi-annual sales that for the first time were lower than the previous six months.

The decline came after researcher IDC in May said smartphone shipments in China fell in the first quarter for the first time in six years, by 4.3 percent, due to “market saturation”.

A case in point is ShenQi, a smartphone firm started in April by current world No. 3 Lenovo. Like Xiaomi, its remit is to sell high-quality handsets over the Internet, touting software specially designed for a heavy-user target audience.

Rather than copying Xiaomi’s original model, China research director Nicole Peng of Canalys said entrants’ opportunities lie in making wearables and smart appliances as well as smartphones - akin to Xiaomi’s current strategy.

Reuters

Those customers include American Airlines Group Inc, Air France KLM SA and Ryanair Holdings PLC. Bohai’s cash tender of US$26 for each Avolon share represents a 14.5 percent premium to the stock’s volume-weighted average price last week, and a 30 percent premium to its initial public offering price of US$20 in December, according to a joint statement from Bohai and Avolon.

The offer is open to all Avolon shareholders and will be launched at the end of this month after approval from Bohai’s shareholders, the pair said.

Previously, sovereign wealth fund China Investment Corp partnered state-owned Aviation Industry Corp of China to explore a take over of Avolon, but ended talks in October.

Reuters

Business Daily | 11

July 15, 2015

Asia

Australia flags new live cattle export deal Indonesia’s President Joko Widodo came to power in 2014 promising to prioritise self-sufficiency in the livestock market Colin Packham

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ustralia’s agriculture minister said yesterday that a new live cattle export deal will soon be signed with an unnamed country. The news comes a day after its largest buyer Indonesia slashed quarterly import quotas by 80 percent.

The comment will stoke hopes that a long-awaited deal with China for the sale of live cattle may finally be sealed, though markets such as the United States and Papua New Guinea are also seen as potential export destinations.

Indonesia issued permits to import 50,000 cattle in the third quarter, a trade official said on Monday, less than one-fifth of what was allowed in the previous quarter.

Australia and China have been in talks concerning live cattle trade for well over a year and despite hope of a deal being close, a resolution continues to be delayed by an insect the size of a pen tip.

The trade is potentially worth billions of dollars as appetite for red meat soars, but the presence in the Australian herd of Bluetongue disease has delayed the opening of trade.

Analysts said the impact of the Indonesian import cut will be softened in the short-term with increased Australian sales to Vietnam and Malaysia.

The Indonesian decision is a blow to farmers in Australia’s north which

KEY POINTS Australia says new live cattle export deal imminent Australia has long sought access to China market Indonesia slashes third quarter import quotas by 80 pct Australia to lean on Vietnam and Malaysia to offset impact

Cattle auction in Australia

rely almost exclusively on live sales, primarily to Indonesia, a market which has been volatile this year.

Indonesia imported 97,747 live cattle, or 98 percent of its first quarter quota of 100,000. It issued permits to import 250,000 cattle in the second quarter and later added a further 29,000 head in anticipation of the

annual rise in beef demand during the Islamic fasting months in June and July.

Indonesia said its reduced third quarter quota was based on expectations of supply needs amid a drive for self-sufficiency.

Indonesia’s President Joko Widodo came to power in 2014 promising

to prioritise self-sufficiency in the livestock market, but analysts questioned whether Indonesia can continue to restrict supply from Australia in the long-term.

“You’ve seen what happened when they put quotas in place (in 2011), domestic prices shot up,” said Angus Gidley-Baird, senior analyst, animal proteins, Rabobank. “If Indonesian producers see prices say double, they will all go and cash it in and while beef production increases momentously, the size of Indonesian herd falls.”

Reuters

Singapore Q2 GDP unexpectedly shrinks The government is forecasting the trade-reliant economy to grow 2-4 percent for 2015 Masayuki Kitano and Jongwoo Cheon

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ingapore economy unexpectedly contracted in the second quarter as sluggish global demand knocked the city-state’s manufacturing sector, dimming the outlook as growth in key trade partner China continues to cool.

Gross domestic product shrank 4.6 percent in the second quarter from the previous three months on an annualised and seasonally adjusted basis, pressured by the manufacturing sector contracting 14 percent on quarter, advance estimates from the Ministry of Trade and Industry (MTI) showed yesterday.

That was in sharp contrast to a revised 4.2 percent expansion clocked in the first quarter and well below the median forecast of 0.8 percent growth in a Reuters poll.

Jonathan Cavenagh, senior FX strategist for

Westpac, said the poor GDP reading could stoke expectations for the Monetary Authority of Singapore (MAS) to ease its exchange rate based monetary policy later this year.

Since manufacturing tends to be quite volatile, the weak GDP is not necessarily the start of a sharp downtrend in activity, he said.

“Still, with an already weak inflation backdrop, a little bit of MAS easing expectation may creep back into the market, so hard not to see USD/SGD higher on the back of this, with the 1.3700 level now a reasonable upside target,” Cavenagh said.

The Singapore dollar slumped to a one-month low after the weak GDP data,

falling to 1.3622 versus the U.S. dollar at one point, its lowest level since June 8.

The surprise economic contraction comes amid renewed worries about the global outlook, with Greece’s precarious finances threatening a fragile recovery in the euro zone and the recent rout in China’s stock market posing risks to

already cooling growth in Asia’s economic giant.

Singapore’s manufacturing sector took the brunt of the downturn in the second quarter. The MTI said the contraction in the sector was largely due to a fall in output in the biomedical and transport engineering clusters.

The manufacturing sector has been under pressure in recent months, with industrial production in April and May falling more than expected from a year earlier.

“This (data) doesn’t push the (2-4 percent) growth target out of the range. It will be probably be below the midpoint of the range rather than above unless we see export-led manufacturing growth in the third quarter,” said Wai Ho Leong, an economist at Barclays in Singapore.

Reuters

12 | Business Daily

July 15, 2015

Asia

Nuclear deal seen boosting Iran’s economy U.S. Treasury Secretary Jack Lew said recently that Iran’s GDP had shrunk by up to 20 percent because of sanctions Babak Dehghanpisheh

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n expected influx of cash from an easing of sanctions after a nuclear deal between Iran and major powers looks likely to be directed mainly at reviving a moribund economy rather than increasing Iranian assertiveness.

The critics of the deal, including most Gulf Arab governments and Israel, contend that Iran has made no secret of its determination to expand its influence across the region.

Yet it is the economy where Iran is feeling most pain, and growth and jobs are the things that President Hassan Rouhani promised to deliver when he was elected in 2013 on a ticket of ending Iran’s isolation.

“The priorities of Iran are definitely on the economic side,” said Walter Posch, an Iran expert at the German Institute for International and Security Affairs. “There is so much to do in Iran, to repair and to fix.”

KEY POINTS Iran could have huge influx of cash after nuclear deal is struck Windfall likely to be used for economy and domestic needs Analysts say fears of more aggressive foreign policy overblown

U.S. Treasury Secretary Jack Lew said recently that Iran’s GDP had shrunk by up to 20 percent because of sanctions. He also said the Islamic Republic had lost more than US$160 billion in oil revenue since 2012.

Despite being Iran’s most lucrative industry, the oil and gas sector is so run-down that it cannot even refine enough gasoline to cover Iran’s own needs.

Potential investors are queuing at the gates, waiting for sanctions to be lifted so that they can team up with local partners to build up Iran’s infrastructure.

“There are going to be a lot of foreign companies,” said William O. Beeman, an Iran expert at the University of Minnesota who recently returned from a three-week trip to Iran. “You couldn’t go anywhere in the country and not run into a gaggle of potential foreign investors. They’re everywhere.”

All this economic activity, if it generates jobs and stabilises prices, will help Rouhani to justify his drive to end Iran’s international isolation.

Royal Dutch Shell, whose debt to Iran accounts for about US$2 billion of the US$150 billion or more estimated to be frozen or blocked overseas under sanctions, said last month that it had held meetings with Iranian officials in Tehran.

Car and aerospace firms have also approached Iranian companies about potential deals, with French and German firms leading the way.

But the president is not the sole power in Iran. The Revolutionary Guards, the most powerful military force in the country, also play a big economic role, and will undoubtedly benefit hugely from the influx of investment.

Reuters

Japanese automakers cling to lower Indonesian targets Economic situation is leading consumers to reserve more money for primary needs, the central bank said last month Fransiska Nangoy and Cindy Silviana

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apanese automakers are sticking to their targets in Indonesia in defiance of the longest sales decline in six years, resorting to steep discounts to entice tight-spending consumers into showrooms that remain stubbornly empty.

Honda Motor Co Ltd, Nissan Motor Co Ltd and Mazda Motor Corp aim to sell more cars this year than last, though overall sales to distributors have fallen each month since September and are down 17 percent in 2015.

“The decline is pretty drastic,” said dealership salesman Jonatan, whose monthly average sales of Toyota Motor Corp cars was four versus eight last year.

“We certainly have to work extra hard to sell cars these days.”

Auto sales are a key indicator of consumption in Indonesia, where the economy is growing at its slowest since

2009, and where 7 percent inflation is eroding purchasing power. Consumers are consequently reserving more money for primary needs, the central bank said last month.

In response, automotive industry association Gaikindo in June lowered its sales forecast for this year to a range of 1 million to 1.1 million vehicles from 1.2 million.

“We are struggling with the market slowdown,” said PT Honda Prospect Motor director Jonfis Fandy.

The firm has been trying to boost sales since early in the year via promotions usually reserved for Indonesia’s annual automotive exhibition in August, to meet Honda’s target sales increase of 10 percent.

Promotions include discounts on down payments, low-interest loans, and extending instalment periods to seven years from around four. Honda has sold

1.4 percent more cars as of end-May. At Mazda, which aims to sell 9 percent more cars, one customer said he was offered 11 percent off a 450 million rupiah (US$33,860.05) sports utility vehicle. But the mid30s communication manager still delayed purchase for six months as economic conditions made him worry about finances.

Astrid Ariani Wijaya, senior marketing manager at PT Mazda Motor Indonesia for whom year-to-date sales figures are unavailable - said the slowdown is affecting all industries, not just auto.

Production cut

Inflation and a weak rupiah are keeping the benchmark interest rate high at 7.5 percent, so the central bank is trying to boost demand by easing the passenger car down payment requirement to 25 percent from 30 percent.

“Willingness to spend money on big purchases is not there,” said BNI Securities analyst Thendra Crisnanda.

“So I doubt the down payment easing will be a significant help.”

Auto demand usually peaks before Indonesia’s Lebaran holiday in mid-July as consumers buy cars to visit home towns, but this year it is far less than expected, Crisnanda said.

At Toyota, one dealership salesman said supplies had fallen for its most popular multi-purpose vehicle, the Avanza.

Rahmat Samulo, a director at PT Toyota Astra Motor, said the company is making supplydemand adjustments and that, “if the stock is enough, we are not going to add excessively.”

Toyota has sold 25 percent fewer cars as of end-May. It declined to disclose its 2015 target, but said it aims to maintain its market share of

around 33 percent.

Japan’s top automaker opened its second local plant in 2013, will open an engine factory next year, and plans to invest further in the country. Despite the slowdown, investment plans are “still on track”, an official at PT Toyota Motor Manufacturing Indonesia told Reuters.

At Nissan, where sales are down 22 percent, its two local factories are running at 40 percent capacity, and have inventory turnover of about two months versus less than one month “during good days”, Trimegah Securities said in a June report.

PT Nissan Motor Indonesia president director Steve Ardianto did not comment on production. But he said the firm is offering variants of current models, adding dealerships and improving service to lift its 2015 share to 6 percent from 4.7 percent.

Reuters

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Business Daily | 13

July 15, 2015

Asia

Thailand approves US$1.8 bln in loans for farmers The economy grew only 0.9 percent last year, with the political crisis bringing it to the brink of recession in the first half

Indonesia sees GDP growth limited in Q2 Growth in Indonesia’s economy will remain limited in the second quarter but will rebound in the following three months, said central bank spokesman Tirta Segara yesterday. Southeast Asia’s largest economy grew 4.7 percent in the first quarter, its weakest level since 2009. Earlier yesterday, Indonesia’s central bank kept its benchmark interest rate unchanged at 7.50 percent yesterday, saying the level was in line with its efforts to manage inflation targets for this year and 2016.

Australian business confidence raises

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hailand has approved loans of up to 60 billion baht (US$1.77 billion) to support farmers affected by drought, the finance minister said.

The wet season is under way, but Thailand is contending with drought conditions in seven out of 67 provinces, the National Disaster Warning Centre said, and water rationing is taking place in almost a third of the country.

Thailand’s state-owned Bank of Agriculture and Agricultural Cooperatives (BAAC) has approved loans for 1 million farmers, following a meeting chaired by Finance Minister Sommai Phasee.

The loans will range from shortterm funds for emergencies to drought rehabilitation, to long-term assistance to increase farm productivity, with repayment periods from one to ten years.

Farmers unable to immediately repay existing debt, because of the drought, can also extend their debt periods, but by no more than a year.

“Famers affected by drought will now receive help to alleviate debt and will have money to spend for households in case of emergencies,” Sommai told reporters.

The loans will help farmers recover from drought, support jobs, and develop production, he added.

Sommai reaffirmed an earlier statement that drought could cut GDP growth by 0.5 percentage point although Thailand’s economy is expected to grow 3 percent in 2015 despite it.

“This year, if we can grow 3 percent that would not be too bad,” he said.

“If we can get 3 percent we wouldn’t be worse off than other countries.”

The economy grew only 0.9 percent last year, with the political crisis bringing it to the brink of recession in the first half. The central bank recently cut its 2015 economic growth forecast to 3.0 percent from 3.8 percent.

Reuters

Australian financial services group reduces IPO target Byron Kaye

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economic situations in China and Greece are having on global IPO markets.

In Australia, cash raised by new listings fell by nearly two-thirds

Japanese finmin remains wary of Greek situation Japanese Finance Minister Taro Aso said he would keep watch on markets as the Greek situation remains uncertain until the country’s parliament passes necessary legislation by Wednesday night to open negotiations needed for a bailout.

Aso told reporters after a cabinet meeting on Tuesday that markets appear to have regained calm but that he “cannot tell what is going happen” even after a conditional agreement between Greece and euro zone leaders on Monday. The opening of talks on a new Greek bailout of 82-86 billion euros is to be formally decided at the end of the week.

Indonesian June motorbike sales fall

The new investors will hold a 30 percent stake

on-bank lender Pepper Australia Pty Ltd plans to raise A$145 million (US$107.21 million) in an initial public offering, valuing the company at a discount to its target because of concerns about the Chinese and Greek economies, a person with direct knowledge of the deal said yesterday.

The company will sell about 56 million shares for A$2.60 each after securing commitments from 12 cornerstone investors overnight, added the source, who asked not to be identified as there was no official announcement on the deal.

The new investors will hold a 30 percent stake, giving the home loan specialist a total market value of A$471 million, a sixth below the A$564 million the company hoped to be worth, said the source.

The discounted valuation - the listing has a valuation of 10 times earnings, compared with the 12 times earnings Pepper hoped for highlights the impact that the volatile

Business confidence climbed in June to its highest in 21 months as sales and profits picked up markedly in a sign economic activity at home was withstanding bouts of global uncertainty, a survey showed yesterday. National Australia Bank’s monthly survey of more than 400 firms showed its index of business confidence climbed 2 points to +11. Its measure of business conditions jumped 5 points to an eight-month peak of +11 in June. The survey’s index of sales was particularly strong, jumping 8 points to an historically elevated +20, while profitability gained 2 points to +10.

in the first six months of 2015, compared with the first half of the previous year, Thomson Reuters data showed, as volatile markets made investors increasingly skittish.

The bankers Pepper hired to consider capital raising options, Macquarie Group Ltd and Goldman Sachs & Co, conducted an international road show as the Chinese share markets had a massive correction and Greece’s debt crisis brought it close to eviction from the eurozone.

Still, the listing will give the company access to growth capital while limiting its exposure to uncertain market conditions.

None of the current shareholders are selling shares, said the source.

Pepper is one of Australia’s biggest non-bank lenders with A$4.5 billion under management locally. In addition to its Australian lending business, Pepper provides loan services in Europe.

Reuters

Indonesia’s motorcycle sales in June fell 23.5 percent from a year earlier, an industry association said yesterday.

Sales were still 22.4 percent higher than in May. Total sales in Southeast Asia’s biggest economy, where motorbikes are hugely popular, amounted to 574,174 in June. Sales were led by Honda Motor Co Ltd, Yamaha Motor Co Ltd and Suzuki, the data showed. Last month, Bank Indonesia issued a new regulation reducing the minimum downpayment for auto and motorbike loans, taking effect on June 18, to support sales.

Samsung exiting more non-core businesses South Korea’s Samsung Electro-Mechanics Co Ltd said yesterday that it will exit more non-core businesses, such as the manufacturing of modules to regulate supply of power to electronics devices, as it seeks to narrow the company’s focus. Samsung Electro-Mechanics, in a regulatory filing, said staff working in the respective product lines - including tuner modules that receive broadcast signals for TVs and set top boxes, and electronic tags displaying product information and pricing - will become shareholders of a new holding firm and take control of operations.

14 | Business Daily

July 15, 2015

International Russia’s falling car market to steady in Autumn Russia’s floundering auto market could stabilise in the second half of this year, the head of Ford Motor Co’s Russian venture told the Vedomosti newspaper yesterday, halting a slide in sales fuelled by the country’s economic downturn.

“The market will stabilise, but it will be a very fragile stabilisation,” said Ted Cannis, CEO of Ford Sollers, the U.S. firm’s 50-50 joint venture with Russian carmaker Sollers. After years of growth in excess of 10 percent, car sales in Russia nose-dived in 2014 as the economy weakened.

U.S. companies might report worst sales fall in six years It is expected to post a 35 percent decline in revenue in the second quarter, representing by far the biggest drag on the index

We know that over time it won’t be sustainable to see earnings growth as sales continue to weaken

British inflation rate falls back to zero Annual inflation rate turned flat in June from the previous month on the back of falling clothing and food prices, official data showed yesterday. “The Consumer Prices Index (CPI) was unchanged in the year to June 2015, that is, a 12-month rate of 0.0 percent, down from 0.1 percent in the year to May,” the Office for National Statistics (ONS) said in a statement. “Falls in clothing and food prices were the main contributors to the change in the rate,” it said. In April, the CPI rate had turned negative for the first time since 1960.

Nigeria asks state oil company to review swap scheme

Nigerian President Muhammadu Buhari (pictured) has instructed the state-run oil company to review agreements behind a programme to swap crude for refined products, his spokesman said. Nigeria’s anti-corruption agency and intelligence service began an investigation in May into whether the government was losing money through opaque contracts in which crude oil worth billions of dollars is given to traders in the exchanges. That probe was set up by the administration led by Buhari’s predecessor, Goodluck Jonathan. Buhari was inaugurated as president of Africa’s top crude producer and most populous nation on May 29.

Euro zone wrestles over emergency financing for Greece Euro zone finance officials were struggling yesterday to find a way of keeping Greece from defaulting on debt repayments to the ECB next week, with up to six options on the table but none that is problem-free. Greece needs 3.5 billion euros (US$3.9 billion) by Monday to redeem its maturing credit from the European Central Bank. Before this is paid, however, Athens has to settle an overdue payment to the International Monetary Fund of more than 2 billion euros. Overall, Greece needs 7 billion euros in July and another 5 billion by mid-August, its official creditors estimate.

Nick Raich, founder of research firm, The Earnings Scout If S&P 500 companies’ earnings fell in the second quarter, it would mark the first time since the third quarter of 2009

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.S. companies are expected to report their worst sales decline in nearly six years when they post second-quarter results, giving investors reason to worry about future profits.

Companies have managed to drive 2015 earnings by cutting costs, a practice they turned to during the financial crisis.

They have also used share buybacks to lift earnings per share.

But it is hard to make a case for sustained earnings growth given forecasts for a second-straight quarter of revenue decline at S&P 500 companies, which begin reporting financial results in earnest this week.

Though analysts expect corporate America to show a decline in second-

quarter profits, according to Thomson Reuters data, some strategists expect them to defy those forecasts and eke out a gain, just as they did in the first quarter.

The question is how long S&P 500 companies can outrun a downturn in sales, which have been hit by a fall in energy company revenues and a strong U.S. dollar.

This reporting period is expected to mark the 16th quarter in which sales performance has lagged that of earnings for S&P 500 companies.

Second-quarter S&P 500 revenue is expected to have fallen 3.9 percent from a year ago, according to Thomson Reuters data, marking the steepest

decline since the third quarter of 2009.

That follows a 3.1 percent slide in first quarter sales.

Second-quarter earnings are expected to have fallen 2.9 percent. That follows a 2.2 percent rise in profits during the first quarter, when analysts also forecast an earnings decline.

Share buybacks could once again help S&P 500 companies. One in five of them reduced their share count in each of the past five quarters, according to S&P Dow Jones Indices.

Hindering S&P 500 sales is the energy sector, which has been hit by a roughly 50 percent drop in U.S. oil prices since June 2014.

Reuters

Barclays investment bank in firing line despite change at top Over the past two years more than a third of investment banking jobs, or more than 8,000 staff, have been axed, first in Project Mango in 2013 and then under Project Electra in 2014

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ny investment bankers hoping for an easier ride at British bank Barclays after Chief Executive Antony Jenkins was ousted last week may be in for a surprise.

Retail banker Jenkins spent three years cutting trading desks in a bid to boost profitability and curb what politicians dubbed a casino culture after a series of scandals, alienating many Barclays dealmakers and traders.

Yet while new Executive Chairman John McFarlane was quick to say investment banking would be a key part of Barclays’ future, a recent plan to cut more assets is already being implemented, people familiar with the matter said.

Indeed, Barclays told the U.S. Federal Reserve last week that assets at its broker-dealer in the United States had halved since 2010 and would fall by up to another quarter

by July 2016 to US$185-215 billion.

The investment bank has gone from Barclays’ main profit engine to its biggest drag on returns.

Profit fell by a third last year to 1.4 billion pounds (US$2.2 billion),

accounting for a quarter of overall profits and putting it on a par with the bank’s credit card business.

What’s more, the investment bank’s return on equity was just 2.7 percent.

While returns were hit by deferred pay, conduct and legal costs, as well as restructuring charges, it was far short of the bank’s 12 percent target.

McFarlane has said he wants to speed up improvements in profitability. Investors and analysts say this means “non-core” activities must be sold off faster, and fewer assets should be allocated to trading.

Tensions remain

Yet despite a low return on equity and contributing only a quarter of profits, investment banking still dominates attention and management time at the bank, a legacy of the Barclays Capital business built up by Jenkins’ predecessor Bob Diamond.

A new plan set out three weeks ago and agreed by former CEO Jenkins, investment bank boss Tom King and Finance Director Tushar Morzaria, agreed to cut more assets from the business.

But King disagreed with Jenkins about the scale of cuts and threatened to retire early, a person familiar with the matter said. McFarlane persuaded King to stay, but the row undermined Jenkins and contributed to his departure. “(The investment bank) is where the battle will be won and lost for our stock and our company and we had a CEO who didn’t know anything about it,” said one senior U.S. investment banker who asked not to be named.

Sources said tensions remain between London and the United States, the investment bank’s two “home” markets, following the cuts. The U.S. division, largely the former Lehman Brothers business bought by Barclays in 2008, is far more profitable than investment banking in Asia and Europe.

McFarlane has said he will give more details about the plan that undermined Jenkins when half-year results are released on July 29.

Ranked the world’s eighth biggest investment bank last year down from sixth in the previous two years, according to analytics firm Coalition.

Reuters

Business Daily | 15

July 15, 2015

Opinion

Saving Greece, saving Europe wires Business

Leading reports from Asia’s best business newspapers

Barry Eichengreen

Professor at the University of California, Berkeley, and the University of Cambridge

TAIPEI TIMES The central bank yesterday voiced objections to a proposal to turn foreign exchange reserves into a sovereign wealth fund (SWF). Academics have advised Premier Mao Chi-kuo to establish an SWF using foreign exchange reserves to generate higher returns that would benefit the economy as a whole. “If an SWF is necessary, the government should first seek to pass a law for its establishment, management and oversight so it can operate legally,” the central bank said. The government is seeking a remedy for the softening economy after exports plunged by 13.9 percent last month.

THE KOREA HERALD South Korea plans to transform Busan into the world’s No. 2 transshipment cargo port by 2020 by building up infrastructure and streamlining operations, the government said yesterday. The move could enable the country’s largest sea port to outstrip Hong Kong for the second place slot among the world’s transshipment harbors and place it below Singapore, the Ministry of Ocean and Fisheries said. As of last year, Busan’s transshipment volume hit 9.43 million twenty-foot equivalent units, with numbers to rise to 13 million TEUs by the target year. This can generate US$1.3 billion, the ministry said.

THE PHNOM PENH POST Cambodia has moved to formalise its ill-regulated derivatives sector by launching a key regulation earlier this month.

On July 2, the Securities and Exchange Commission of Cambodia (SECC) approved the prakas on the “Licensing and Supervision of Derivative Trading”. The prakas regulates the sector by allowing individuals or firms to apply for official broker licences, bringing the practice under the law. Derivatives will not be exchange-traded on Cambodia’s bourse, but through brokers, who must comply with several regulations if they receive a licence.

THE JAKARTA POST The [Indonesian] Financial Services Authority (OJK) says that it will not publish the names of banks categorized as “domestic systemically important banks” (DSIB). According to the OJK commissioner for banking supervision, Nelson Tampubolon, the financial regulator will only announce the DSIB criteria, without revealing the names of the banks. “It will be in line with the standards set by the BIS [Bank for International Settlements, an international organization of central banks], but we will not publish the names for the sake of some depositors,” he said.

Anti-austerity protesters hold a banner reading: ‘NO’ (Oxi) as they demonstrate in front of the Greek Parliament in central Athens

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hatever one thinks about the tactics of Greek Prime Minister Alexis Tsipras’s government in negotiations with the country’s creditors, the Greek people deserve better than what they are being offered. Germany wants Greece to choose between economic collapse and leaving the eurozone. Both options would mean economic disaster; the first, if not both, would be politically disastrous as well.

When I wrote in 2007 that no member state would voluntarily leave the eurozone, I emphasized the high economic costs of such a decision.

The Greek government has shown that it understands this.

Following the referendum, it agreed to what it – and the voters – had just rejected: a set of very painful and difficult conditions. Tsipras and his new finance minister, Euclid Tsakalotos, have gone to extraordinary lengths to mollify Greece’s creditors.

But when I concluded that no country would leave the eurozone, I failed to imagine that Germany would force another member out. This, clearly, would be the effect of the politically intolerable and economically perverse conditions tabled by Germany’s finance ministry.

German Finance Minister Wolfgang Schäuble’s idea of a temporary “time out” from the euro is ludicrous. Given Greece’s collapsing economy and growing humanitarian crisis, the government will have no choice, absent an agreement, but to print money to fund basic social services. It is inconceivable that a country in such deep distress could meet the conditions for euro adoption – inflation within 2%

of the eurozone average and a stable exchange rate for two years – between now and the end of the decade. If Grexit occurs, it will not be a holiday; it will be a retirement.

Early Monday morning, European leaders agreed to remove the reference to this “time out” from the announcement of the latest bailout deal. But this door, having been opened, will not now be easily closed. The Eurosystem has been rendered more fragile and subject to destabilization. Other European finance ministers will have to answer for agreeing to forward to their leaders a provisional draft containing Schäuble’s destructive language.

Economically, the new program is perverse, because it will plunge Greece deeper into depression. It envisages raising additional taxes, cutting pensions further, and implementing automatic spending cuts if fiscal targets are missed. But it provides no basis for recovery or growth.

The Greek economy is already in free-fall, and structural reforms alone will not reverse the downward spiral.

The agreement continues to require primary budget surpluses (net of interest payments), rising to 3.5% of GDP by 2018, which will worsen Greece’s slump. Reprofiling the country’s debt, which is implicitly part of the agreement, will do nothing to ameliorate this, given that interest payments already are minimal through the end of the decade. As the depression deepens, the deficit targets will be missed, triggering further spending cuts and accelerating the economy’s contraction.

Eventually, the agreement will trigger Grexit, either because

Eventually, the agreement will trigger Grexit, either because the creditors withdraw their support after fiscal targets are missed, or because the Greek people rebel.

Triggering that exit is transparently Germany’s intent.

the creditors withdraw their support after fiscal targets are missed, or because the Greek people rebel. Triggering that exit is transparently Germany’s intent.

Finally, the privatization fund at the centre of the new program will do nothing to encourage structural reform. Yes, Greece needs to privatize inefficient public enterprises. But the Greek government is being asked to privatize with a gun held to its head. Privatization at fire-sale prices, with most of the proceeds used to pay down debt, will not put Greek parliamentarians or the public

in a mood to press ahead enthusiastically with structural reform.

Greece deserves better. It deserves a program that respects its sovereignty and allows the government to establish its credibility over time.

It deserves a program capable of stabilizing its economy rather than bleeding it to death. And it deserves support from the ECB to enable it to remain a eurozone member.

Europe deserves better, too.

Other European countries should not in good conscience accede to this politically destructive, economically perverse program. They should remind themselves that Greece had plenty of help from its European partners in getting to this point. They must continue to push for a better deal.

These partners should not allow the European project to be sacrificed on the altar of German public opinion or German leaders’ insistence on “rules.” If Germany’s government refuses to see the light, the others should find a way forward without it. Franco-German solidarity would be irreparably damaged, but Franco-German solidarity is worth nothing if the best it can produce is this agreement.

Last but not least, the German public deserve better. Germans deserve a leader who stands firm in the face of extremism, rather than encouraging it, whether at home or abroad.

They deserve a Europe that can play a greater role in global affairs. Above all, given Germany’s stunning political and economic achievements since World War II, they deserve their fellow Europeans’ admiration and respect, not renewed resentment and suspicion.

Project Syndicate

16 | Business Daily

July 15, 2015

Closing Volvo buys race-car maker to compete with Mercedes

Low oil price domino effect to shut more North Sea fields

Volvo Car Group bought Swedish race-car maker Polestar and will use the name for an expanded high-performance line to challenge the likes of Mercedes-AMG and BMW’s M models. Polestar sales are set to as much as double to 1,500 cars in the medium term from 750 targeted for this year, Volvo said. The company already sells tuned versions of Volvo’s V60 wagon and S60 sedan under a cooperation deal signed in 2013. Five years after being bought by Chinese billionaire Li Shufu’s Zhejiang Geely Holding Group Co., the Swedish carmaker is aiming to boost its global annual sales.

Low oil prices have tightened the screws on some of the most depleted and costly oilfields in Britain’s North Sea, forcing operators to cease production earlier than planned. For years North Sea producers have delayed expensive decommissioning projects, supported by high oil prices that have helped paper over soaring operating costs. But with oil prices halving over the last 12 months, some companies are faced with the unenviable choice of operating at a loss during a field’s twilight years, or limiting losses by bringing decommissioning forwards. Unsurprisingly, the industry is looking at the second option very closely.

E-commerce behind Mainland’s new wave of consumption In addition to boosting consumption, the government is exploring other ways the Internet can bolster the economy and employment

It is just open information on the Internet that is making new consumption possible

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hen Jia Hailan wants to buy something, she reaches for her phone almost as much as she opens her wallet.

The Beijing twentysomething buys food and clothing for her cat via her mobile phone and orders lunches through apps that track nearby eateries with delivery services. She hails taxis through cab-hailing apps when she goes out, and much of her home possessions were purchased online, including an electronic scale she uses to track her weight every morning.

Young Chinese born in the 1990s are a generation of online consumers, and older generations are catching on as well. By late 2014, the country had 360 million online shoppers, accounting for almost a quarter of the nation’s population.

In the first five months of 2015, online retail sales value in China grew 40 percent year on year, four times the growth for general retail sales value for consumer goods during the same period.

The trend is expected to continue as the number of Chinese Internet users grows. The country’s online population reached 649 million by the end of 2014, with some 557 million accessing the Internet via mobile phones.

“The Internet has brought three irreversible changes to China’s social consumption: online shopping is reaching everyone after becoming popular with young people, desktop shopping is being rapidly overtaken by mobile-based shopping, and buying based on what other people are buying has given way to personalized

Zhang Jindong, founder of retailer Suning

consumption,” said Shang Yan, online marketing director of womai.com, an online food retailer.

“These changes are certain to deeply transform Chinese people’s consumption style,” Shang said.

The online shopping boom is helping lift consumption’s role in the Chinese economy, which once relied heavily on exports and investment.

The National Bureau of Statistics said consumption contributed 51.2 percent to China’s economic growth last year, beating contributions by exports and investment, which cooled

Yuan rate near target

Central bank says financial system stable

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hina’s central bank said yesterday that the country’s financial system was basically stable, and it would maintain a prudent monetary policy, while also lowering borrowing costs and increasing the portion of direct financing in social financing.

The current economic conditions are complicated and should not be underestimated, the People’s Bank of China (PBOC) said in a statement published on its website. The bank reiterated that it will continue to push forward with interest rate liberalisation and to keep the yuan exchange rate at a “reasonable level”, without providing details.

The bank also repeated that it will maintain a prudent monetary policy and keep liquidity “appropriate”.

PBOC also approved foreign central banks, sovereign wealth funds and financial institutions to buy or sell bonds or invest in interest rate swaps in China’s interbank market.

Foreign central banks and financial institutions must first register with the Chinese authorities before they can proceed to invest.

Reuters

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due to uneven global demand and a downturn in the domestic property market.

A McKinsey report from 2013 said China’s online consumption has not simply replaced consumption that would have taken place offline. For each dollar of online consumption, around 40 cents were from incremental -- or new -- consumption, it said.

The report predicted that by 2020, China’s “e-tailing” market could generate up to US$650 billion in sales, equal to the 2013 e-commerce sales value of the United States, Japan, the UK, Germany and France combined.

Experts said the Internet is making consumption easier due to free flow of information between sellers and buyers.

Brick-and-mortar stores are also feeling pressure to adopt new business models to retain customers.

Shenzhen-headquartered Rainbow, a department store chain with 58 flagship stores across the country, has rolled out its own online sales service and promoted discounts and new product information through instant messaging service WeChat.

“By analyzing customers’ online shopping data, we will be able to refine and deliver our product promotions directly to users’ phones,” said Tan Xiaohua, deputy general manager of Rainbow’s e-commerce department.

Xinhua

India’s wholesale prices drop for eighth month running

hina’s central bank reduced the amount of cash added to the financial system via open-market operations, a sign shortterm lending rates are as low as it wants them to be.

The People’s Bank of China conducted 20 billion yuan (US$3.2 billion) of seven-day reverse-repurchase agreements yesterday, less than the 50 billion yuan that matured. The seven-day repo rate, a gauge of cash availability in the banking system, opened at 2.50 percent for a sixth straight day.

The PBOC began pumping in funds via reverse-repo auctions on June 25 after halting open-market operations for two months as it sought to meet quarter-end demand for cash.

The monetary authority cut benchmark interest rates and lowered reserve- requirement ratios for selected banks about two weeks ago to boost liquidity amid a stock market rout that led to trading suspensions for about half of the listed companies. The M2 measure of money supply rose 11.8 percent in June from a year earlier, while aggregate financing was 1.86 trillion yuan.

holesale inflation rate fell for an eighth consecutive month in June, government data showed yesterday, pulled down by weak global oil prices and above average early monsoon rains.

Inflation based on the Wholesale Price Index (WPI), an indicator which measures the biggest basket of goods, slid 2.40 percent last month from a year earlier, the statistics ministry said.

Economists surveyed by Bloomberg had estimated that the WPI would slump 2.30 percent after a 2.36 percent fall in May. “Crude oil has been weak for a while now and has helped tame inflationary expectations,” Ashutosh Datar, an economist at IIFL Institutional Equities brokerage, told AFP. Reserve Bank of India governor Raghuram Rajan has made controlling inflation a target and has been aided by the tumble in world oil prices over the past year, with Consumer Price Inflation (CPI) remaining consistently below six percent.

He has cut interest rates by 75 basis points in 2015.

Bloomberg News

AFP

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