Macau Business Daily August 12, 2015

MOP 6.00

Rosário: MOP1 / 10 min. meters worth a try

Closing editor: Joanne Kuai

Page 6

New yuan loans exceed expectations in July Page 8

Auto output and sales weak in Mainland in first seven months Page 10

Year IV

Number 855 Wednesday August 12, 2015

Publisher: Paulo A. Azevedo

MelcoLot: Second-phase tender for Spanish gaming licence starts soon Page 6

Taking the Long View Not such smooth sailing. The height of Fisherman’s Wharf’s Legendale Hotel continues to be dogged by controversy. With members of the Urban Plan Committee adding their objections to those of the public. And a supplementary study may be on the cards. At issue is gov’t approval for a 90-metre vs. 60-metre construction. The gov’t sys more discussion is needed. While a possible delay of the construction is expected by the company management. Regardless, “we’re definitely building it,” executive vice-president of Macau Legend Frederick Yip Wing Fat told reporters yesterday Page

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Cleared for take-off A whole new world awaits. The Bank of China Macau Branch now offers renminbi clearing services for Portuguese-speaking countries. The bank believes the newly approved policy will help it develop other financial business in Luso countries

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Centralising Currency

The yuan fell sharply yesterday. Following the central bank’s decision to improve its ‘central parity system’. In order to better reflect market development in the exchange rate between the Chinese yuan and U.S. dollar

www.macaubusinessdaily.com

Pages 8&9

It pays to be prudent

Property

A word to the wise. The local banking sector should adopt a cautionary approach. Particularly regarding bad loans and associated credit risks. The economic environment can change quickly, says a local researcher with the Monetary Authority of Macau

A 5.7 pct month-on-month increase. With new residential mortgage loans approved increasing to MOP3.93 billion in June.

Most were granted to local residents.

Nevertheless, the total value of mortgage loans represents a plunge of 57.1 pct Y-o-Y

Page 5

Bricks and mortar

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HSI - Movers August 11

Name

%Day

Li & Fung Ltd

+4.95

CNOOC Ltd

+4.09

China Overseas Land &

+3.70

Lenovo Group Ltd

+2.86

Tingyi Cayman Islands

+2.12

Galaxy Entertainment

-1.21

Tencent Holdings Ltd

-1.40

CK Hutchison Holdings

-1.47

Cheung Kong Property

-1.77

Cathay Pacific Airways

-2.03

Source: Bloomberg

I SSN 2226-8294

2015-8-12

2015-8-13

2015-8-14

26˚ 31˚

26˚ 30˚

26˚ 30˚

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August 12, 2015

Macau

Macau Legend management: Possible delay in hotel construction The protracted discussions between the Urban Planning Committee and government on the project’s disputed height could mean delayed completion Stephanie Lai

sw.lai@macaubusinessdaily.com

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senior management member of casino operator Macau Legend Development Ltd. told media yesterday that the construction of a new hotel that is part of the Macau Fisherman’s Wharf revamp could be delayed as the government says more discussions are necessary for the project’s disputed height.

“We may possibly see a delay.

But definitely we’re building it,” executive vice-president of Macau Legend Frederick Yip Wing Fat told reporters yesterday following a closed-door meeting of the Urban Planning Committee on the hotel project.

Macau Legend would like to see construction of the Legendale Hotel - with a planned 500 guest rooms including suites - completed by the fourth quarter of 2017, it said in its 2014 annual results filing. The project is part of the casino operator’s revamp of the waterfront Macau Fisherman’s Wharf that includes the addition of three new hotels in total, two new casinos, entertainment and shopping facilities and marina yacht club.

The Urban Planning Committee, an advisory organ to the city’s private

projects’ construction plans, convened a meeting yesterday to discuss the disputed height of Legendale Hotel.

The government has relaxed the proposed maximum height of 60 metres above ground to 90 metres with enlarged plot ratio (from 1.7 times to 2.6 times) and construction area ratio (from 42 per cent to 55 per cent).

The public works department delegates briefly explained that this relaxation was due to the development plan changes submitted by the developer, while at the same time the relaxed height still met the rules set out by administrative

regulation No.83/2008 – a special dispatch signed by the then Chief Executive Edmund Ho Hau Wah that specifies the height limits for buildings surrounding the cultural heritage site of the Guia Lighthouse.

But the majority of the committee members have either opposed or questioned the rationale for the relaxation, and expressed concerns that the relaxed height would impact the waterfront cityscape viewed from the Guia Lighthouse.

“Following our meeting today...we have to provide further supplementary information to the Urban Planning Committee as they request, including

a landscape analysis that will see to what impact the project’s different height would have on the surrounding area,” said the acting deputy director of Land, Public Works and Transport Bureau Cheong Ion Man yesterday after the meeting, saying that the date of the next meeting has yet to be decided.

“If [in the next meeting] most committee members still do not agree to the [relaxed] height restriction for the hotel project, a supplementary study will be needed and there will be some reconsideration on the adjustments of the project plan,” Mr. Cheong said.

Only when the Urban Planning Committee has finished discussing a project will the government finalise the urban condition plan for it, a document that determines construction area, height cap and plot ratio.

Pro-democrat activist group New Macau Association has petitioned the government and Urban Planning Committee requesting that the height and plot ratio for the Legendale Hotel project not be relaxed in order to preserve the cityscape.

Residential mortgage loans up 5.7 pct in June In June, both residential and commercial mortgage loans saw increases in value, as well as outstanding values

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ew residential mortgage loans approved by the city’s banks posted a month-onmonth increase of 5.7 per cent to MOP3.93 billion in June, of which most were granted to local residents, the latest data released by the Monetary Authority of Macau (AMCM) reveals.

In June, the city’s residents were granted MOP3.8 billionworth of home loans, a jump of 6.2 per cent month-onmonth, accounting for 96.8 per cent of total approved loans. Those granted to non-residents dropped 8.2 per cent month-on-month to MOP126.1 million from MOP137 million.

On a year-on-year comparison, the total value of mortgage loans by banks represents a fall of 57.1 per cent, while those to residents and non-residents plunged 45 per cent and 94.4 per cent year-on-year, respectively, according to AMCM.

Equitable mortgage

Local banks also approved mortgage loans of MOP282 million for units still under construction in June, also known as equitable

mortgages. The amount represents a fall of 14.7 per cent month-on-month, as well as a plunge of 89.7 per cent year-on-year.

The equitable mortgage loans that residents were approved accounted for 96.8 per cent of the total, amounting to MOP273 million, a month-on-month decrease of 11.3 per cent.

In addition, such loans to non-residents also posted a decline of 60.6 per cent month-on-month to MOP9.08 million.

Commercial real estate loans

Meanwhile, new commercial real estate loans approved by the city’s banks soared 51.8 per cent month-on-month in June, reaching MOP6.2 billion, compared to MOP4.1 billion during May. In terms of value, these new commercial real estate loans to residents grew 64.6 per cent month-on-month to MOP5.98 billion during the month, while those to nonresidents posted a month-onmonth drop of 45.4 per cent to MOP261 million.

Compared to June last year, the amount of commercial

real estate loans approved during the month dropped 42.7 per cent, AMCM said.

Increased outstanding values

On the other hand, the outstanding values for both residential mortgage loans and commercial real estate loans posted increases of 20.1 per cent and 34 per cent year-on-year, reaching MOP165.5 billion and 140.8 billion, respectively.

According to AMCM, 94.1 per cent of the outstanding values for home loans were made up by local residents, surging 20.3 per cent yearon-year to MOP155.8 billion, while outstanding home loans to non-residents grew 16.5 per cent year-on-year to MOP9.69 billion.

For commercial real estate loans, residents accounted for 89.2 per cent of the outstanding value in the segment, totalling MOP125.6 billion, an increase of 29.8 per cent month-on-month whilst those of non-residents surged 82.5 per cent yearon-year to MOP15.2 billion.

At the end of June 2015, the delinquency ratio for home mortgage loans was

0.07, a decrease of 0.01 percentage points from a month ago, or up 0.01 percentage points from a year ago. In addition, the ratio for commercial real estate loans

increased month-on-month by 0.03 percentage points to 0.07 as well, remaining virtually unchanged from one year prior.

K.L.

4 | Business Daily

August 12, 2015

Ad

Business Daily | 5

August 12, 2015

Macau Anbang in line to snap up Novo Banco Asia parent company Chinese group Anbang has offered the highest bid to buy Portuguese bank Novo Banco, according to Portuguese newspaper Diário de Notícias. The other contenders for the parent company of the Macau headquartered bank Novo Banco Asia are Chinese company Fosun International and American investment fund Apollo Global Management. The decision from the Portuguese Government to sell the bank, which was created following the rescue of troubled bank Banco Espírito Santo, is expected by next week.

Yuan clearing service for Portuguese-speaking countries

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he Bank of China (BOC) Macau Branch was given the green light by China’s central bank – the People’s Bank of China (PBOC) - to operate a renminbi clearing service for Portuguese-speaking countries earlier this month.

The approval of the new service means BOC Macau, the city’s renminbi clearing house established more than a decade ago, is allowed to expand its business for the first time from its current scope covering the territory, Hong Kong and the Association of Southeast Asian Nations, according to local Chinese language newspaper Macao Daily.

The local bank believes the new approved service will help

it to develop other financial businesses in Portuguesespeaking countries in addition to attracting more business opportunities to the city’s banking sector.

Last year, the city’s total renminbi clearing amount surpassed 1,200 billion yuan (MOP1,567 billion/ US$248.4 billion), leading the city to jump to eighth biggest offshore renminbi market in the world from eleventh in 2013.

Meanwhile, for the first half of this year, the renminbi clearing amount already reached 997 billion yuan in the Special Administrative Region, soaring 37.3 per cent compared to the same period one year ago.

K.L.

AMCM study advises caution on loans A researcher at the Monetary Authority says banks should be more cautious as non-performing loans can increase abruptly in this changing economic environment

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acau banks should adopt a more careful approach to the quality of loans and associated credit risk as the economic environment in the territory may change in the short term. The warning was published by Nicholas Cheang, a member of the Research and Statistics Department of the Monetary Authority of Macau.

“Looking ahead, the consolidating economy of Macau in the short term could create some cooling effect on credit growth. Banks should remain attentive to the quality of loans and associated credit risk in view of the changing economic environment”, Mr. Cheang wrote in an article titled ‘Internal and External Factors for Credit Growth in Macau’.

While the author praises the health of the banking sector in Macau, he stresses that the non-performing loan ratio of banks can deteriorate abruptly in troubled times. Nonperforming loans are loans for which the debtor has not made scheduled payments for some time, usually 90 days.

“It should be noted that the nonperforming loan ratio is a lagging indicator of bank asset quality and could deteriorate swiftly in economically and financially difficult times. Therefore, local banks should formulate proper expectations for future asset quality, prudently incorporating a forward-looking attitude in credit operation”, he said.

Loans and deposits balance

Another cause for concern in the banking system is the relationship between the growth of deposits and credit, stresses the article, published in the July edition of Macau Monetary Research Bulletin.

“The weak linkage between deposits and loans heightens a certain

concern for financial vulnerability, especially when credit growth continues to outpace that of deposits and the loan-to-deposit ratio is at a relatively high level. The liquidity position of banks is also likely to be weakened”, Mr. Cheang stressed.

In this aspect, Nicholas Cheang writes that “for enhancement of the overall financial stability” the linkage between loans and deposits should be strengthened. He also notes that traditionally deposits are an important source of funds and stability for the system.

At the end of 2014, the loan-todeposit ratio in Macau stood at 87.2 per cent. This is the ratio of a bank’s total outstanding loans for a period to its total deposit balance over the same period. The value went up to 88.1 in July this year, still inside the 80 to 90 per cent margin usually perceived as prudent.

Credit expansion explained

The article also focuses on the factors affecting the credit growth in the territory, which increased from MOP51.3 billion in 2003 to MOP689.7 billion at the end of 2014.

“The growth of loans extended to residents is largely induced by internal factors such as real economic growth, domestic interest rate and banks’ health, while external monetary conditions play a more significant role in credit extended to non-residents”, the author explained.

J.S.F.

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August 12, 2015

Macau opinion

Uncertain terms

Rosário: No more than 100 MOP1 / 10 min. meters

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he government recently announced that effective September it would set up some parking meters that charge MOP1 per 10 minutes with a maximum permissible parking time of one hour. The measure provoked different opinions from society.

The Secretary for Transport and Public Works, Raimundo Arrais do Rosário, yesterday told reporters at the Legislative Assembly (AL) that the number of such meters would not exceed 100. He said the temporary measure is a trial that he believes is worth a try.

The Transport Bureau said earlier that the first phase of the instalment of new parking meters would be in Nape, Nam Vam and Taipa, where public or private parking exists already and public meters are already set up on the streets. Authorities vowed to review the measure in half a year.

In addition, the Secretary said at the AL plenary session that they will decide whether to keep or permanently cancel the temporary motorcycle lane on Sai Van Bridge at the beginning of next year. The temporary motorcycle lane has been used on the bridge for around three years.

José I. Duarte Economist

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his week, the Secretary for the Economy and Finance was at the Legislative Assembly. There, he was challenged on the issue of budget control, especially in the case of big public works. Some lawmakers requested a bigger say by the Assembly.

The Secretary declined, arguing that existing mechanisms are suitable and deferred to a future public finance law the setting of any new control mechanisms.

The subject is certainly important; the issues at stake have implications for the functioning of the government and the political system. The time and cost overruns in some major public works are common and often staggering. The causes are seldom analysed; the details are overlooked or ignored. They suggest serious derelictions of duty but nobody seems to take responsibility and no consequences appear to eventuate for anyone. This is certainly a topical and important subject. And yet, one cannot avoid the feeling that the debate is based on equivocal terms or ill-defined expectations.

Some lawmakers want more direct control over the execution of the budgets, it seems.

The Secretary disagreed, arguing that current procedures are enough and appropriate.

This is a point upon which the Secretary is essentially right. If the issue is getting more detailed and accurate information, that can certainly be done within the existing framework. The general political powers and monitoring responsibilities of the Assembly over the approval end execution of the budget, if used consistently, continuously and deliberately, would go a long way in forcing a more responsible management of public funds and a more stringent assignment of responsibilities. Creating new and necessarily overlapping responsibilities for the various branches of government will not contribute to more transparency or increased efficiency.

It is not incumbent upon the Assembly to take on what would be, in practice, executive powers over the budget execution.

Should the Secretary have stood just there, the outcome of these exchanges would have been neat. However, being essentially right, the development of the reasoning put forward seemed to yield somehow to the lawmakers – implicitly accepting their criticisms – and undermine his own central argument. In the future Budget Framework Law, transparency will be increased, it was said. Well, what prevents it today? Do we need a law for that?

Is there anything in the current legislation that actually prevents the government from being more transparent?

And then it is added that according to the future law, for multi-annual projects the government ‘will have to provide an estimation of the overall project budget; of the project’s timetable; and also an estimation of the budget for each year of the project’s foreseen period’. Isn’t it already the case? Can multi-annual projects be approved and budget commitments made without an estimation of the total cost and its distribution over time?! Is it not enough just to actually enforce the existing laws?

Somehow, this is a debate that seems to raise more questions than answers.

MelcoLot: Second-phase tender for Spanish gaming licence starts soon

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hinese sports lottery operator MelcoLot Limited, a company controlled by local gaming entrepreneur Lawrence Ho Yau Lung, said the second phase public tender for a gaming project near Barcelona in Spain that it is eyeing will open soon.

Last year, a wholly-owned subsidiary of MelcoLot- Instant Glory Holdings Limited, formed a 50-50 joint venture called BCN Integrated Resorts 2 SA with Spanish company Veremonte España SL. in order to submit an application for a gaming licence for the large-scale entertainment complex project BCN World in the European country.

Approved by the Spanish Government for its first phase application last year, MelcoLot said in the filing submitted to Hong Kong Stock Exchange on Monday that ‘it is expected that the second phase public tender will commence shortly. Our planning process has been continuing.’

Meanwhile, the company said its plan to launch a high-end casino project in the Republic of Georgia is also progressing.

‘Although it has taken longer than originally anticipated to settle the

terms of the casino premises lease, that process is now in its final stage,’ it wrote.

‘These ongoing international projects and existing PRC opportunities leverage on our corporate expertise in the gaming and entertainment industry, and diversify our business to support our goal of maximizing long-term shareholders’ value,’ the company added.

The company also announced in its Monday filing that it had posted a loss

of HK$19.3 million (US$2.4 million) for the first half of the year, which has narrowed from the HK$20.8 million loss it registered a year ago.

In addition, MelcoLot generated revenue of HK$24 million during the six months, a year-on-year increase of 6.7 per cent from HK$22.5 million.

According to the company, the distribution of its sports lottery on the Mainland made up 79 per cent of its total revenue.

K.L.

Business Daily | 7

August 12, 2015

Macau

Just 20 pct of Mainland companies mull expansion to the city Macau is perceived as a less interesting place for corporate real estate portfolio expansion than first and second tier cities in Mainland China for the next three years

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round 21 per cent of the companies operating in Mainland China forecast that in three years their real estate portfolio will include Hong Kong, Macau or Taiwan, according to the Jones Lang La Salle (JLL) China Corporate Real Estate Trends 2015 survey.

The JLL survey is focused on corporate real estate, which typically includes headquarters and the number of branch offices, and gathered answers from 544 executives leading the corporate real estate departments of 350 companies across 36 countries.

The companies were divided into three categories: global, which includes all those inside and outside the PRC; all of China; domestic and foreign multinational companies represented on the Mainland; and China Domestic – Chinese national companies.

The findings of the study show that for global and Chinese firms, first and second

tier cities on the Mainland are perceived as more likely targets for expansion of the portfolio of companies rather than Macau or Hong Kong.

When it comes to portfolio expansion, the base of the survey was shortened to 207 of which only 34 were operating in China. The number of answers from company executives represented on the Mainland amounted to 12, while representatives of national Mainland companies totalled 22.

This means that of 34 companies (100 per cent) on the Mainland, only 7 (21 per cent) predict an expansion into Hong Kong, Macau or Taiwan within the next three years. The number is less significant when only domestic Chinese companies are taken into consideration.

Of 22 executives surveyed, only 5 said they see the property portfolio of their corporations embracing Hong Kong, Macau or Taiwan.

In terms of all the companies, including those without operations in China, 54 (26 per cent) of 207 expressed their faith in moving to the three territories.

First tier cities more appealing

The study demonstrates that Mainland first tier cities are the most appealing for companies.

Of 207 corporations, 70 per cent expect their companies’ property portfolio to expand to these cities. The trend is the same for Mainland companies

(82 per cent) and for all companies operating in China (76 per cent).

Second tier cities are also likely candidates for corporate real estate expansion but to a lower degree. Of the 207 answers, 48 per cent pointed to such cities as logical places to expand. The answers were narrowed to 41 per cent for companies operating in China and to 18 per cent in terms of Chinese corporations.

As for third tier cities, 38 per cent of companies in China and 32 per cent of Chinese firms

expect to see an expansion in those cities. In terms of global companies, only 14 per cent expect to move into China’s third tier cities.

China Corporate Real Estate Trends 2015 survey emphasises the optimistic feeling of companies on the Mainland, in spite of the economy slowdown.

‘Notably, not a single one of China’s corporate real estate executives surveyed expects their portfolio to shrink’, the survey reads.

J.S.F.

8 | Business Daily

August 12, 2015

Greater China

Weak data l Yesterday, the spot yuan Pete Sweeney and Lu Jianxin

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hina devalued the yuan yesterday after a run of poor economic data, guiding the currency to its lowest point in almost three years in a move it billed as freemarket reform.

The central bank described it as a “one-off depreciation” of nearly 2 percent, based on a new way of managing the exchange rate that better reflected market forces, but economists said the timing suggested it was also aimed at helping exporters.

Data released at the weekend showed that China’s exports tumbled 8.3 percent in July, hit by weaker demand from three huge trading partners - Europe, the United States and Japan.

“We think the move is aimed to ease pressure on China’s weak exports performance in recent months and relieve imported deflation pressure,” said Guo Lei, economist at Founder Securities in Shanghai.

“Since China’s trade in goods continues to post relatively large surpluses, the yuan’s real effective exchange rate is still relatively strong versus various global currencies, and is deviating from market expectations,” the central bank said.

“Therefore, it is necessary to further improve the yuan’s midpoint pricing to meet the needs of the market.”

China manages the exchange rate through an official midpoint, from

July loan growth surprises after stock market rescue Total social financing, a broader measure of net new credit, stood at 718.8 bln yuan in July Nathaniel Taplin

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hinese banks extended a surprisingly robust 1.48 trillion yuan (US$238.4 billion) in new loans in July but economists said the numbers may have been distorted

by Beijing’s massive rescue package for the slumping stock market and other policy measures.

New bank lending has been weak for much of this year despite interest rates cuts and looser lending restrictions.

The People’s Bank of China (PBOC) has cut rates four times since November and also trimmed bank reserve requirements to support flagging growth in the world’s secondlargest economy.

New yuan loans in July trumped the previous month’s lending of 1.28 trillion yuan while broad money supply expanded an annual 13.3 percent, faster than June’s 11.7 percent.

Economists polled by Reuters had predicted money supply would expand 11.7 percent, with new yuan loans at 738.0 billion yuan.

Outstanding yuan loans grew at 15.5 percent by month-end, faster than expectations for a rise of 13.6 percent.

Economists say the past two months of stronger data may suggest

stock market rescue, and also that banks have been very reluctant to lend to corporates over the last several months.”

“Given all this, the big July lending number is very interesting, and it’s difficult to know what percentage is actually going to corporates.”

Stock rescue effect

commercial banks are starting to respond more strongly to stimulus measures, but could also reflect the massive stock market run-up in June and subsequent government rescue.

“It’s all about the stock market,” said Zhou Hao, Senior Emerging Markets Economist at Commerzbank AG in Singapore.

“Part of the increase is probably due to the local government debt swap and other stimulus measures.

But we know the government has raised around 2 trillion yuan for the

A recent note from Goldman Sachs estimated that 17 commercial banks had lent the China Finance Corporation, China’s official margin lending firm and the main vehicle for the stock market rescue, nearly 1.3 trillion yuan.

China’s huge stock rally in the second quarter was also driven in part by a massive increase in margin debt, some of which likely had its ultimate source in bank loans.

The PBOC said in a statement the rise in yuan loans was due to steady growth policy, demand for working capital, a real estate rebound and local government debt swaps.

I t a l s o a ck n o wle d g e d t h e government’s equity market rescue efforts in July had probably influenced the monetary data.

“Recently China’s capital markets have been volatile,” the PBOC said. “In order to stabilise market

expectations, guard against financial risks, and support healthy capital market development, monetary policy and the banking system in July took a series of temporary measures. Such measures also influence the growth of money supply and loans.”

Total social financing, a broader measure of net new credit, stood at 718.8 billion yuan in July.

The big drop from June’s massive 1.86 trillion figure may be related to deleveraging in margin financing, economists said.

Reuters

KEY POINTS July new yuan loans rise to 1.48 trln yuan Loan growth seen propelled by stimulus steps, stock market July total social financing falls to 718.8 bln yuan

Business Daily | 9

August 12, 2015

Greater China

leads to yuan devaluation price touched its weakest point since September 2012 in early trade

which it can vary 2 percent each day.

Yesterday, the People’s Bank of China (PBOC) said it was now basing the midpoint on market makers’ quotes and the previous day’s closing price.

The bank then weakened the midpoint to 6.2298 per dollar yesterday morning, compared with Monday’s 6.1162 fix - the biggest-ever one-day adjustment to the midpoint.

In the past, the central bank set the midpoint using formula based on a basket of currencies, but the methodology has never been publicised and many believed that in practice the midpoint was frequently used as a way to bend the market to policy goals.

Under the new method, market forces would have more ability to take the yuan lower in the weeks ahead, raising the possibility of competitive currency depreciations world-wide.

However, Beijing would still have a large say in setting the new midpoints, given the heavy influence of state banks in daily trade of the yuan.

Global currency jitters

The Australian dollar lost 1 percent against the dollar on China’s devaluation, and the South Korean won also lost ground, though traders suspected authorities in Seoul were selling dollars to smooth that currency’s fall.

But talk of a global currency war was mooted.

KEY POINTS China changes way it sets daily guidance rate Devalues midpoint nearly 2 pct, biggest daily change Decision follows surprise July export tumble China has kept yuan strong amid depreciation elsewhere

“What is really important is for markets to observe where the renminbi really goes over the next few days to see whether this is indeed a oneoff adjustment or a sustained trend,” said Vishnu Varathan, economist with Mizuho Bank in Singapore.

Yesterday’s move marks a retreat from China’s strong-yuan policy, which had been designed to support domestic demand, help Chinese firms to borrow and invest abroad, and encourage foreign firms and governments to make greater use of the currency.

Until yesterday, yuan volatility had vanished and traders suspected that the PBOC, with state-owned banks,

had been propping up the currency against depreciation pressure.

It had been locked in an extremely narrow intraday range since March, with rates varying over a range of only 0.3 percent.

In addition to the weak export data, China also reported a continuing slide in producer prices at the weekend to a near six-year low in July, increasing the pressure on manufacturers.

However, one economist doubted Beijing was reacting only to the weak data and said the move was part of its reform agenda to help the yuan become an international reserve currency.

“I don’t think this is a reaction to the weak trade data over the weekend, I think it’s because of the SDR,” said Zhou Hao of Commerzbank AG in Singapore, referring to Beijing’s push for the yuan to be included in a basket of reserve currencies known as Special Drawing Rights (SDR), which are used by the International Monetary Fund to lend money to sovereign borrowers.

The Chinese government “needs to have a market-based mechanism and it needs volatility,” he said.

The IMF proposed in a report this month to put off any move to add the yuan to its benchmark currency basket until after September 2016, and it gave mixed reviews of Beijing’s progress in making key financial reforms to its currency market.

Reuters

Property firms reap July boost Home sales area jumped 57.5 per cent in July from year earlier Clare Jim

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hina’s big property developers saw sales jump in July, as realtors said some investors sought refuge from the mainland’s US$4 trillion stock market rout by pulling their money out of shares and putting it into bricks and mortar.

As the Shanghai and Shenzhen bourse indices slid 14 percent in July, extending a June valuation slide triggered by economic jitters, monthly sales at 18 firms surveyed by Reuters showed double-digit percentage gains in price and volume compared with a year ago.

The numbers reported by firms like China Vanke will ease concerns that investors might rush to sell property to repay stock margin calls, undermining Beijing efforts since last year to reverse a housing slowdown.

Vanke, China’s top residential property developer, said its July sales by area grew 33 percent, while the value increased 79 percent.

“Property sales last month didn’t experience the slowdown we anticipated. This shows that China’s real demand in housing is very strong, and some investors might have moved their money to real estate from stocks as they didn’t want to risk speculating anymore,” said David Hui, sales director at realtor Centaline Property.

Development Bank to issue RMB bonds in Taiwan China Development Bank Corp (CDB), the country’s biggest policy lender, has been approved to issue 5 billion yuan (US$793.8 million) in renminbi-denominated bonds in Taiwan to help fund its offshore yuan business, China’s economic planning agency, the National Development and Reform Commission, said yesterday. Taiwan is one of a number of economies that have developed as centres for offshore yuan, or renminbi (RMB). The issuance of debt by a big borrower such as CDB is considered important to providing holders of yuan in such a centre with ample investment opportunities.

VAT on fertiliser imports and sales restored China will reintroduce a value added tax rate of 13 percent on fertiliser imports and sales from September 1, as it attempts to curb widespread overuse, the country said yesterday. Fertilisers in China have been subject to favourable tax policies since 1994 in order to guarantee supplies and help boost grain output, but the system had been subject to abuse in recent years, the Ministry of Commerce said in a statement. China is aiming to bring growth in chemical fertiliser use to zero by 2020 in an effort to ease pollution problems in its vast countryside. Excessive fertiliser use has been associated with damaging algae blooms and soil acidification.

Turnover of rare earth exchange surges

Some investors might have moved their money to real estate from stocks as they didn’t want to risk speculating anymore David Hui, sales director, Centaline Property

Boosted by new sales launches, the positive trend in what is typically a slack month - hot July and August weather traditionally discourages buyers - will be welcomed by both the government and industry players.

As well as interest rate cuts, Beijing has rolled out relaxed tax rules and downpayment requirements on second homes to counter a housing slowdown seen as a major risk to the world’s second-largest economy.

“July sales were very robust. The impact from stock market was more on sentiment rather than actual sales,” an official of state-backed developer China Resources Land said, referring to its new launches in Shenzhen and Beijing.

As developers push on new launches towards year-end to meet full-year sales targets, optimism is growing for September and October - “gold” and “silver” months respectively, according to Chinese tradition.

China’s top economic planner, the National Development and Reform Commission, said earlier on Monday that the property market was likely to continue to improve in the second half of this year, a good sign for an economy struggling to bolster the pace of growth.

Home sales area jumped 57.5 percent in July from a year early, according to researcher China Real Estate Index System (CREIS) that tracks 35 major cities. Official July data will be published by the National Bureau of Statistics on Wednesday.

In a separate survey that tracks 100 cities, CREIS said home prices rose 0.54 percent in July compared to June, posting the third consecutive month of increase.

Reuters

Turnover of China’s rare earth exchange surged drastically in the first 7 months of this year due to declining prices and rising demand. The Baotou Rare Earth Products Exchange processed 116,400 tonnes of products in the first 7 months, with a trading volume of 15.755 billion yuan (US$2.57 billion), up 277 percent compared to the full year of 2014, according to Gu Ming, the exchange general manager. During the first six months of this year, the average export price of rare earth products was 32,000 yuan per tonne.

Disciplinary official in south China under probe A former director-level official for the disciplinary body in Guangdong Province is under investigation for alleged corruption, the Supreme People’s Procuratorate (SPP) said yesterday. Zhong Shijian, former deputy head of the disciplinary body of the Communist Party of China Guangdong provincial committee, and former head of the provincial department of supervision, is suspected of taking and giving bribes.

He has been placed under compulsory measures, which include summons by force, bail, residential surveillance, detention and arrest. The SPP and Fujian provincial people’s procuratorate designated the people’s procuratorate in Xiamen to investigate and file the case.

10 | Business Daily

August 12, 2015

Greater China

Beijing considers replacing head of markets regulator The matter will be discussed this summer at party meetings in Beidaihe, a seaside resort where leaders hold informal talks each year Benjamin Kang Lim and Pete Sweeney

C

hina’s ruling Communist Party has begun looking for an eventual replacement for the top securities regulator, who faces internal criticism over his handling of this year’s boom and bust in Chinese stock prices, sources with ties to the leadership said.

The party has in recent weeks sounded out potential candidates to succeed Xiao Gang as chairman of the China Securities Regulatory Commission (CSRC), and party elders will discuss the matter at meetings this summer, two sources said.

The search for a successor is unusual so early in Xiao’s term, which does not expire until end-2018, and reflects the party’s unhappiness with his performance, but a final decision has not been made yet on whether to replace him, they added.

Some in the party believe an immediate change of leadership at the CSRC, which is at the forefront of a government campaign to shore up share markets, could increase market uncertainty.

Xiao was appointed only two years ago. He has come under fire by investors for what they see as a clumsy response to the market panic that began in mid June, and for not doing more to curb the markets’ earlier excesses.

The party’s Organisation

KEY POINTS Communist Party eyes potential candidates for CSRC job - sources No final decision yet on future of incumbent Xiao Gang - sources Party officials unhappy with Xiao over market turmoil sources If replaced, favourite seen as Chongqing mayor Huang Qifan Xiao Gang, chairman of the China Securities Regulatory Commission

Department has recommended a shortlist of at least three candidates to replace Xiao, the sources said, adding that the secretariat of the party’s Central Committee had already sounded them out.

They include Huang Qifan, mayor of the southwestern metropolis of Chongqing, who is seen as the favourite, sources said.

He aroused speculation about his ambitions last week when he made comments in a speech about finance and reform, including his desire for Chongqing to develop a financial industry.

The sources did not know the identity of the other potential candidates.

CSRC chief ‘cannot take all the blame’

Xiao drew investor anger over the CSRC’s blunt measures to halt the sell-off: a freeze on initial public offers, a crackdown on short-selling, an instruction to major shareholders to not sell for six months, and allowing up to 45 percent of listed firms to suspend their shares at one point.

The measures had little immediate effect, but they

further damaged investor confidence and brought into question China’s commitment to free-market reforms.

However, fund managers and a regulatory official say it would be unfair to blame Xiao for the crash and that other state agencies also made missteps during the market rescue effort.

The Beijing leadership also backed the measures imposed by the CSRC, which was acting as part of a coordinated approach agreed upon at a meeting of regulators and Chinese financial institutions in early

Car sales decline a second month despite deeper price cuts Mazda Motor Corp. and PSA Peugeot Citroen warn of looming price wars in China

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hina’s passenger-vehicle sales fell for a second month in July even as dealers offered bigger discounts to revive demand.

Retail deliveries of cars, multipurpose vehicles and SUVs declined 2.5 percent from a year earlier to 1.3 million units last month, the China Passenger Car Association said yesterday on its website. Auto sales dropped 3.2 percent in June, the first decline in more than two years.

Automakers are cutting production in China and warning of a looming price war in the world’s largest vehicle market, as a slowing economy and government curbs on registrations weigh on demand. Dealerships are offering incentives at an unprecedented scale to move cars off their parking lots, according to the China Automobile Dealers Association.

July, chaired by Premier Li Keqiang.

Market speculation over Xiao picked up last Thursday when state media re-published a May speech by President Xi Jinping in which he called for the promotion of cadres who “want to reform, seek to reform and are good at reform”.

Xiao’s leadership appeared to have been in doubt even before the market began to slide, with some candidates approached by the party secretariat before then, one source said.

Reuters

Discounts of at least 30 percent are being offered in major cities on hundreds of models, according to Autohome, a popular car-pricing portal.

Besides reducing prices, carmakers and dealers are offering incentives such as subsidized insurance, zero down-payments, interest-free financing and boosting trade-in prices, according to brokerage Sanford C. Bernstein & Co. BMW AG said earlier this month that a sharp slowdown in Chinese demand may force it to revise its profitability goals. General Motors Co. reported a 4 percent drop in July deliveries, while Ford Motor Co. predicted industrywide sales may decline this year for the first time since at least 1998.

Others like Mazda Motor Corp. and PSA Peugeot Citroen have warned looming price wars in China, as a surfeit of brands compete for buyers amid a slowing economy and volatile stock market.

Even Great Wall Motor Co., the biggest sport utility vehicle maker in China and a beneficiary of the shift in demand to budget models, has stumbled. Its July deliveries slid 1.7 percent, led by its most popular model, the H6.

Bloomberg News

Business Daily | 11

August 12, 2015

Asia

Asian central banks hold nerve following yuan depreciation Market analysts say little cause for immediate concern regarding Chinese move

The Indian rupee is the only regional currency with smaller losses this year

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ome of Asia’s most interventionist central banks are for now holding their nerve on currency policy after a major devaluation in the currency of one of their top trading partners, China.

Even as market participants pushed the yuan down further to test a 2-percent daily limit, policymakers from South Korea, India, Indonesia and Japan said they saw no reason for tit-for-tat trade-war policies.

“We are not overly worried about the won (currency), but we are closely watching the market to see if there’s any excessive volatility happening,” a South Korean foreign exchange official told Reuters.

“This came as emerging-market currencies have already been depreciating against the dollar,” he said, while pointing to the yuan’s relative stability in the past few months even as emerging market currencies ceded ground to a rising U.S. dollar.

China is Korea’s largest trading partner, accounting for a fifth of total trade last year. While the won has weakened relative to the yuan this year, Korean policymakers have been actively trying to encourage outflows from their country and talking down the won.

Some of the angst in Korea is over the how uncompetitive the won is against export competitor Japan, where the yen has been pushed down 50 percent against the dollar since 2012 as part of the government’s growth strategy.

Japanese policymakers shrugged off the yuan’s 2 percent devaluation.

“I don’t think the move would trigger a global currency war,” a Japanese policymaker said.

Senior Deputy Governor Mirza Adityaswara at Indonesia’s central bank pointed to how undervalued the rupiah currency already was, precluding the need for further depreciation.

There hasn’t been a significant correlation or sensitivity of Asian currencies to China’s currency so far. But now that will change Mitul Kotecha, head of currency and rates strategy Barclays in Singapore

Analysts estimate the yuan has risen by more than 18 percent in tradeweighted and inflation-adjusted terms against the currencies of its trading partners since the middle of last year, suggesting there is some margin before depreciation would raise concerns over trade competitiveness in the region.

The yuan is barely down 2 percent against the dollar this year, compared with a 13 percent decline in Malaysia’s ringgit, near 8 percent drop in the won and a more than 4 percent fall in the yen.

The Indian rupee is the only regional currency with smaller losses this year, thanks to big foreign investment flows attracted to India’s strong economy.

“China is playing catch-up rather than being the leader of this currency weakness,” said Mitul Kotecha, head of currency and rates strategy at Barclays in Singapore.

Reuters

Bank of Korea holding rates steady this week Central bank action pending U.S. Fed interest rate rise

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he Bank of Korea is expected to keep interest rates unchanged this week, a Reuters survey showed, as central bankers around the world wait to see if the U.S. Federal Reserve begins raising interest rates as soon as September.

All 27 economists surveyed said the Bank of Korea (BOK) would hold the base rate at 1.50 percent at its policy meeting on August 13.

A majority of the 25 respondents saw no change until the end of this year, with some forecasting interest rates will remain frozen until the first half of next year.

Five of the 25 saw a hike, while six forecast the central bank would cut rates within the year, perhaps as soon as September.

“What the central bank does now will largely be linked to the Fed’s actions.

The BOK will also be wary

of whether the economy sticks to the growth path the government and central bank have in mind,” said Kim Sang-hoon, a fixed-income analyst at KB Investment & Securities in Seoul.

Top Wall Street banks expect the Fed to raise interest rates as soon as September, according to another Reuters poll, although a growing number believe the central bank will hike rates only once this year.

Kim said onshore market rates will see upward pressure if the Fed hikes in September, although that pressure will be limited due to the sluggishness of the local economy. The BOK has lowered rates four times since last year, with the last cut in June.

The BOK will also want to look at economic data later this month, which will be the first batch of economic data after a full month following the government’s

announcement of the end of Middle East Respiratory Syndrome (MERS) in South Korea last month.

BOK officials believe third-quarter growth will improve from a meagre 0.3 percent growth seen in AprilJune, thanks to record-low interest rates and government stimulus.

Parliament approved a supplementary budget in late July.

Reuters

12 | Business Daily

August 12, 2015

Asia

Drama as India’s Modi makes final push to pass tax reform Supporters say it will add up to two percentage points to economic growth Frank Jack Daniel and Rajesh Kumar Singh

Modi (R) and India’s Finance Minister (L) Arun Jaitley

T

he government of Indian Prime Minister Narendra Modi is making a last push before the end of a stormy sitting of parliament to pass a major tax reform aimed at boosting economic growth, but an opposition party has dug in its heels to stop the bill.

Aimed at creating a customs union for India’s 1.2 billion people, the Goods and Service Tax (GST) is the biggest revenue shake-up since independence

from Britain in 1947. Supporters say it will add up to two percentage points to economic growth.

Obstacles to the prime minister’s ambitious agenda of economic reform have increased a sense among debtladen domestic companies suffering subdued earnings that India’s fledgling economic recovery could take longer.

The government put the bill on yesterday’s list of business in the upper house but proceedings were

adjourned repeatedly as members of the opposition Congress party stormed into the well shouting “shut it down.”

Deputy finance minister Jayant Sinha made a plea for order, saying parliament just needed to function for one day to pass the bill and accusing Congress of blocking economic progress.

“We must try to pass GST in any way possible,” he said. “This is very irrational.”

The GST bill was originally written

by Congress, which ruled India for a decade before being defeated by Modi last year. The party is demanding the resignation of senior BJP leaders it accuses of graft before allowing parliament to work.

It also wants changes to the bill, which it says has been diluted to win support from states.

Modi made the constitutional amendment to allow the new tax the main goal of the “monsoon” sitting of parliament, which ends on Thursday.

Failure to pass the GST bill will make it hard for Modi to meet a self-imposed 2016 deadline for implementing it. In a research note, DBS Bank said any holdup “will be negative for market sentiment and could further delay the recovery process”.

Even so, many foreign investors still see India as a bright spot in the world economy.

The government, which does not have a majority in the upper house, needs two-thirds of votes in the house to pass the amendment. That is only possible if most opposition parties support it, or if Congress abstains.

Reuters

Singapore downgrades 2015 growth forecast An uneven and sluggish global recovery has dampened growth in a trade-reliant economy Masayuki Kitano and Jongwoo Cheon

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ingapore downgraded its 2015 gross domestic product forecast yesterday, and analysts said growth was likely to remain tepid in the second half with the outlook clouded by risks to global economic growth.

Gross domestic product fell 4.0 percent in the second quarter from the previous quarter on an annualised and seasonally adjusted basis, the Ministry of Trade and Industry (MTI) said yesterday.

That was better than the government’s advance estimate issued in July, of a 4.6 percent contraction.

The median forecast in a

Reuters survey was also for a contraction of 4.6 percent.

MTI also lowered the upper end of its forecast range for 2015 GDP growth, with the full-year growth forecast revised to 2.0-2.5 percent from 2-4 percent previously.

Edward Lee, regional head of research for Southeast Asia at Standard Chartered Bank, said Singapore’s GDP growth in the second half will probably be around 2.0-2.5 percent, broadly similar to growth seen in the first half.

The growth outlook for the second half of 2015 is “still relatively lacklustre,” Lee said.

An uneven and sluggish global recovery has dampened growth in Singapore’s trade-reliant economy.

The manufacturing sector contracted 18.3 percent in April-June from the previous quarter on an annualised basis.

MTI said global growth is expected to pick up gradually over the rest of the year, but added that there were some key downside risks, including those related to China, Singapore’s biggest market for non-oil domestic exports (NODX).

“In China, the recent sharp correction in the stock market have heightened the

risks to growth. In particular, consumer sentiment and spending in China could be adversely affected if the correction in the stock market worsens,” Ow Foong Pheng, permanent secretary at the MTI, told reporters.

Trade agency International Enterprise Singapore yesterdayrevised its 2015 non-oil domestic exports forecast to growth of 1.0-2.0 percent from the previous expectations for 1.0-3.0 percent growth.

“The biggest risk to policy now I think, is China,” said Vishnu Varathan, senior economist for Mizuho Bank in Singapore, adding that his baseline expectation is

that the Monetary Authority of Singapore will keep its exchange-rate based monetary policy unchanged at the next policy review in October.

If there is a sudden, negative shock to China’s economic growth and that triggers a large reaction in asset markets, however, the MAS might ease policy by lowering the mid-point of the Singapore dollar’s policy band, Varathan said.

“At the October meeting we can not rule out that the MAS will ease, but my base case is that they have no fresh reasons to bring out the big guns just yet,” he added.

Reuters

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Business Daily | 13

August 12, 2015

Asia

Reduced Australian emissions plan falls short

S.Korean July import prices fall

China has said that it would reach an emissions peak by 2030 and will boost its share of electricity from renewable energy James Paton and Jason Scott

A

ustralia pledged to cut greenhouse-gas emissions by at least 26 percent by 2030, falling short of a U.S. commitment to reach the same target five years earlier.

Prime Minister Tony Abbott’s government said it hoped to curb emissions by as much as 28 percent from 2005 levels over the next 15 years, joining other nations in setting a goal ahead of United Nations climate talks in Paris this December.

“We’ve got to be environmentally responsible, but we’ve got to be economically responsible too,” Abbott told reporters in Canberra yesterday.

“We’ve got to reduce our emissions in ways which are consistent with continued strong growth.”

While Obama has made fighting global warming a second-term priority, Abbott faces criticism for not doing enough. His government has axed a program that put a price on carbon emissions, criticized wind farms and sought to ensure the future of coal, Australia’s second-largest export earner.

Australia, one of the highest polluters per capita, should cut emissions by

about 65 percent below 2005 levels by 2030, according to the Climate Institute, a research group.

The Abbott government’s commitment is “vastly inadequate to protect Australians from the impacts of climate change,” Tim Flannery, a professor at independent advisory the Climate Council, said by e-mail yesterday.

While Australia’s target is more ambitious than the goals set by Canada, Japan and South Korea when assessed against a common 2010 baseline, the country is lagging the U.S. and the European Union, according to Bloomberg New Energy Finance.

It’s doubtful Australia can reach its 2020 targets, let alone its 2030 pledge, with the government’s current policies, Kobad Bhavnagri, a BNEF analyst in Sydney, said in a statement.

Since the carbon levy was scrapped, Australia has lacked an enforceable system to reduce greenhouse gases. The centrepiece of Abbott’s environmental policy is a A$2.55 billion Emissions Reduction Fund to encourage companies to cut greenhouse gases through taxpayer-funded grants.

Abbott’s view that coal is “good for humanity” puts him at odds with a majority of Australians, according to the Climate Institute, citing a July 27-29 Galaxy Research survey. The poll of 1,016 adults found 72 percent agreed the nation’s old coal-fired power plants would need to be closed and replaced with clean energy, it said.

The Climate Change Authority, the government’s own adviser, has called for a cut of 30 percent below 2000 levels by 2025, and a 40 percent to 60 percent reduction by 2030.

The ultimate goal of the UN talks is to wrest commitments from nations to keep the rise in average global temperatures to 2 degrees Celsius above pre-industrial levels, the point scientists say would protect against irreversible damage to the climate.

The U.S., the biggest emitter after China, promised to cut heattrapping pollution 26 percent to 28 percent below 2005 levels by 2025.

The European Union plans to cut emissions 40 percent below 1990 levels by 2030.

Import prices fell at their slowest pace in seven months in July on annual terms as pressure on the dollar offset a renewed decline in global oil prices, central bank data showed yesterday. Import prices in won terms fell 13.7 percent in July from a year earlier, the Bank of Korea said, slightly slower than June’s revised 14.1 percent decline. July’s fall was the slowest since December last year. A Bank of Korea official said import prices fell for a 35th month as oil prices dropped 47.6 percent on-year last month.

Australian business confidence eases back Confidence eased back in July as mining and construction firms turned more cautious, though both sales and profits remained relatively healthy according to a survey out yesterday. National Australia Bank’s monthly survey of more than 400 firms showed its index of business confidence slipped 4 points to +4 in July. Its measure of business conditions also dipped 4 points to +6. “Much of the change stemmed from mining and construction firms, suggesting an escalation in Chinese growth concerns could be putting firms on alert,” said NAB’s chief economist Alan Oster.

Clothes buying leads rise in NZ card spending

Bloomberg News

Japan restarts reactor in test of Abe’s nuclear policy The reactor will take a few days to reach full power if all goes to plan Aaron Sheldrick and Issei Kato

New Zealanders stepped up shopping on their credit and debit cards last month, with spending on apparel leading the increase as winter took hold, the government’s statistics agency said yesterday. Retail spending using electronic cards rose 5.6 percent year on year to 4.6 billion NZ dollars (US30.13 billion) in July, according to Statistics New Zealand. Retail spending was up 0.4 percent from June 2015, following a 0.5-percent rise in June. “All six retail industries had higher sales this month,” business indicators manager Neil Kelly said.

S. Korean dept store sales rebound

J

apan has restarted a nuclear reactor for the first time under new safety standards put in place since the Fukushima disaster in 2011, as Prime Minister Shinzo Abe seeks to reassure a nervous public that the industry is now safe.

Abe and much of Japanese industry want reactors to be switched on again to cut fuel bills, but opinion polls show a majority of the public oppose the move after the nuclear crisis triggered by the earthquake and tsunami four years ago.

Kyushu Electric Power began the restart yesterday of the No. 1 reactor at its Sendai plant, a spokesman said.

The head of Japan’s atomic watchdog said that new safety rules meant a repeat of the Fukushima disaster would not happen, but protesters outside the Sendai plant are not convinced.

“You will need to change where you evacuate to depending on the direction of the wind. The current evacuation plan is nonsense,” said Shouhei Nomura, a 79-year-old former worker at a nuclear plant equipment maker, who now opposes atomic energy and is living in a protest camp near the plant on Kyushu island.

Abe has said only reactors that were deemed to have cleared the “world’s

most stringent regulation standards” would be allowed to restart.

The Sendai plant is the furthest away of Japan’s reactors from the capital Tokyo, where protesters regularly gather outside Abe’s official residence to oppose atomic energy.

The protesters in Sendai included Naoto Kan, who was prime minister during the Fukushima crisis and now fiercely opposes nuclear power.

In the worst nuclear disaster since Chernobyl 25 years earlier, the meltdowns at the Fukushima Daiichi plant caused a release of radioactive material and forced 160,000 from their homes, with many never to return.

The crisis shocked Japan and the world was transfixed as the government and the Fukushima operator, Tokyo Electric Power (Tepco), badly fumbled their initial response.

While two reactors have since been restarted for a fuelling cycle under the old standards in 2012, the whole sector has been shut down since September 2013, forcing Japan to import record amounts of expensive liquefied natural gas.

Ahead of yesterday’s restart, a few hundred people rallied outside the Sendai plant amid tight security.

“Human life and nature are more

KEY POINTS First reactor to restart under new safety rules since Fukushima Japan’s atomic watchdog says no risk of a repeat of crisis But majority of public opposes Abe push for nuclear restarts Protests staged outside Sendai plant on Kyushu island

precious than the economy,” a young woman told the national broadcaster.

Of Japan’s 25 reactors at 15 plants for which operators have applied for permission to restart, only five at three stations have been cleared for restart.

The Sendai reactor has been idled for more than four years and engineers say there is a risk of equipment failure causing early shut downs.

Reuters

Some of South Korea’s private consumption indicators improved in July, a monthly government report showed yesterday, adding to hopes the economy will rebound from the second quarter slump caused by the MERS virus outbreak. Combined sales at department stores run by Hyundai Department Store, Lotte Shopping and Shinsegae Co rose 0.9 percent in July from a year earlier, the finance ministry said in a statement. This was compared to a 11.9 percent drop seen in June, which was mainly due to an outbreak of Middle East Respiratory Syndrome (MERS), which hit private consumption and tourism hard.

Thailand may see only small impact from yuan devaluation Thai Finance Minister Sommai Phasee said yesterday that Chinese yuan devaluation may only have a small impact on the Thai economy although he was concerned with China’s economic slowdown. “The slowing Chinese economy is more a concern. The yuan devaluation is to help improve China’s exports,” Sommai told reporters.

14 | Business Daily

August 12, 2015

International Adecco Q2 raises concerns about margin target Adecco, the world’s biggest staffing group, said it was relying on a pick up in revenue growth in the second half of the year to hit its 2015 margin target, sparking concern among some investors who sent its shares down more than 3 percent. The Swiss group said yesterday its second-quarter net profit rose 22 percent to 177 million euros (US$194 million), missing analysts’ mean forecast of 182 million. But the company kept its full-year goal of boosting its earnings before interest, taxes and amortisation (EBITA) margin above 5.5 percent.

S&P 500 soon to have 505 listed shares The Standard & Poor’s 500 will soon contain 505 listed stocks, up from the current 502 listed stocks. S&P Dow Jones Indices, which oversees the benchmark index of large U.S. stocks, on Monday announced a methodology change that will cause three more companies to have multiple listings: Comcast Corp, News Corp and Twenty-First Century Fox Inc. The change follows a move made in January to allow multiple share classes in S&P indexes. It will take effect after the close of trading on September 18, to coincide with a quarterly rebalancing.

Hertz revenue falls 5 pct on lower U.S. car rentals Car rental company Hertz Global Holdings Inc reported a 5 percent decline in quarterly revenue, hurt by a strong dollar and lower car rental volume in the United States. Hertz, which received more than two-thirds of its car rental revenue from airport services in 2014, has been affected by the strong dollar that made travel to the United States pricier for tourists. The company also closed about 200 stores at off-airport locations in the second quarter, as part of its efforts to focus on more profitable locations and to save $300 million by March.

Senate chief warns on impeaching Rousseff risks The president of Brazil’s Senate said on Monday that attempting to impeach President Dilma Rousseff was not a priority and warned that seeking her removal in Congress would “set the country on fire.” Renan Calheiros, who is often critical of the administration, struck a more positive tone amid a deepening political crisis after seven months into Rousseff’s second term. Many of the president’s opponents in Congress have called for her impeachment for allegedly breaking the law by doctoring fiscal accounts to allow her government to spend more in the run-up to her re-election in October.

Google Inc to become Alphabet Inc in shakeup Google Inc is changing its operating structure by setting up a new company called Alphabet Inc, which will include the search business and a number of other units. Larry Page said in blog post he would become the chief executive of Alphabet Inc, while Senior Vice President Sundar Pichai will be CEO of Google. Alphabet Inc will replace Google as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights.

Greece, lenders clinch bailout deal after marathon talks A few technical details on measures - such as a law governing individual bankruptcies - that Greece must pass before getting aid were still being discussed between technical experts from both sides

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reece and its international lenders clinched a multibillion-euro bailout agreement yesterday after marathon talks through the night, officials said, raising hopes aid can be disbursed in time for a major debt repayment due next week.

After a 23-hour session that began Monday morning, exhausted Greek officials emerged in a central Athens hotel to announce the two sides had agreed on terms of the three-year agreement barring a couple of minor issues being ironed out.

“Finally, we have white smoke,” a finance ministry official said. “An agreement has been reached.”

Finance Minister Euclid Tsakalotos confirmed only “two or three small issues” were pending. Greek shares rose, with the banking index surging 6 percent, while two-year bond yields fell more than 4 percentage points.

An agreement would close a painful chapter of aid talks for Greece, which fought against austerity terms demanded by creditors for much of the year before relenting under the threat of being bounced out of the euro zone.

After a deal in principle last month on keeping Greece in the euro zone, the latest round of talks began in Athens three weeks ago to craft the agreement with details on reforms measures, the timeline for implementation and amount of aid.

The pact is expected to be worth up to 86 billion euros (US$94.75 billion) in fresh loans for debt-ridden Greece, but there was no immediate confirmation of its size.

Greek officials have said they expect the accord to be ratified by parliament today or tomorrow and then vetted by euro zone finance ministers on Friday. This would pave the way for aid disbursements by August 20, when a 3.2 billion euro debt payment is due to the European Central Bank.

Smooth negotiations

The latest round of talks with inspectors from four creditor institutions - the European Commission, European Central Bank, the European bailout fund and the International Monetary Fund - progressed smoothly in Athens, in contrast to the acrimonious negotiations for most of the year.

During talks that dragged through Monday night, the sides reached agreement on the three main sticking points - dealing with non-performing loans held by banks, setting up an asset sales fund, and deregulation of the natural gas market.

Athens wanted to set up a “bad bank” to take on the problem loans, while creditors want them bundled and sold to distressed debt funds. It was not immediately clear how that was resolved.

Officials had also argued over how to set up a sovereign wealth fund in Greece designed to raise 50 billion euros from privatisations, three-quarters of which would be used to recapitalise banks and to reduce the debt.

The marathon session overnight also found common ground on final fiscal targets that should govern the bailout effort, aiming for a primary budget surplus -- which excludes interest payments -- from 2016, a government official said.

Adapted from an earlier baseline scenario, the targets foresee a primary budget deficit of 0.25 percent of gross domestic product in 2015, a 0.5 percent surplus from 2016, 1.75 percent in 2017, and 3.5 percent in 2018, the official said.

Reuters

U.S. small business confidence bounces back in July There was an increase in the number of small business owners who said that now was a good time to expand

U

.S. small business confidence rebounded in July from a 15-month low as owners anticipated solid sales and inventory growth, providing another boost to the economic outlook for the third quarter.

The National Federation of Independent Business said yesterday its Small Business Optimism Index increased 1.3 points to 95.4. About 1,495 businesses took part in the survey. Last month’s increase partially recouped June’s plunge, which had pushed the index to its lowest level since March 2014.

Data on automobile sales, employment and the services sector have suggested a steady build-up of economic momentum at the start of the third quarter after gross domestic

product expanded at a 2.3 percent annual rate in the second quarter.

Seven of the index’s 10 components increased last month, while three continued to decline.

Owners were upbeat about business conditions over the next six months, and their expectations about sales improved after weakening for several months. They were optimistic about investing in capital and inventories.

There was an increase in the number of small business owners who said that now was a good time to expand.

The survey’s labour market gauges improved after weakening a bit in June. Fifty-seven percent reported hiring or trying to recruit workers in July, up five percentage points from June.

Twenty-five percent of all owners reported job openings they could not fill, up one point from June, but four points below the highest reading for 2015. About 23 percent of owners reported raising worker compensation, up two points from June.

The survey pointed to tame inflation pressures in the near term.

Thirteen percent of small business owners reported reducing their average selling prices in the past three months, down one point from June.

About 17 percent reported price increases, also down a point from the prior month. Seventeen percent said they planned to raise average prices in the next few months, down two points from June.

Reuters

Business Daily | 15

August 12, 2015

Opinion Business

wires

America in the way

Leading reports from Asia’s best business newspapers

Joseph E. Stiglitz

Nobel laureate in economics, is University Professor at Columbia University

THE KOREA HERALD South Korea’s two policy lenders have shouldered massive bad loans, estimated at 5.5 trillion won (US$4.75 billion), over the past five years, due to a series of collapses of big name companies during the economic slump, a report said yesterday. The Korea Development Bank and the Export-Import Bank of Korea have extended loans to 333 companies that have been under court receivership over the last five years, according to the report submitted by the banks to the parliament. The Seoul government injected 510 billion won into the Exim Bank last year alone.

VIETNAM NEWS A decree to guide implementation of the Enterprise Law is expected to be issued this month, a Ministry of Planning and Investment official said amid complaints from businesses that the law’s implementation is being up held due to lack of clarity.

Tran Thi Hong Minh, director of the ministry’s Agency for Business Registration, said the draft decree was submitted to the National Assembly for approval last May, two months before the law took effect. The new law is designed to safeguard the business freedom of enterprises, she said.

THE JAPAN NEWS Japan’s food self-sufficiency rate in fiscal 2014, which ended in March, remained 39 percent on a calorie basis for the fifth consecutive year, according to the farm ministry.

Rising domestic production of wheat and soybeans was offset by falling demand for rice as a staple food. The fiscal 2014 figure was the second lowest on record after the 37 percent in fiscal 1993, when rice harvests were poor. In March, the government lowered its food self-sufficiency target for fiscal 2025 from 45 percent to 50 percent.

JAKARTA GLOBE State-owned lender Bank Rakyat Indonesia is aiming for a 25 percent increase in fee-based income to compensate for sluggish loan growth in first half 2015, an official of the lender revealed. Fee-based income contributed 7.7 percent to the lender’s total income in first half 2015 or Rp 3.5 trillion (US$258 million), up 32.4 percent from the same period a year earlier, BRI corporate secretary Budi Satria said in a statement. BRI’s outstanding loans stood at Rp 503.6 trillion at the end of June, up 9.7 percent from the same period a year earlier.

Latest G7 meeting in Germany earlier this year

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he Third International Conference on Financing for Development recently convened in Ethiopia’s capital, Addis Ababa. The conference came at a time when developing countries and emerging markets have demonstrated their ability to absorb huge amounts of money productively. Indeed, the tasks that these countries are undertaking – investing in infrastructure (roads, electricity, ports, and much else), building cities that will one day be home to billions, and moving toward a green economy – are truly enormous.

At the same time, there is no shortage of money waiting to be put to productive use. Just a few years ago, Ben Bernanke, then the chairman of the US Federal Reserve Board, talked about a global savings glut. And yet investment projects with high social returns were being starved of funds. That remains true today. The problem, then as now, is that the world’s financial markets, meant to intermediate efficiently between savings and investment opportunities, instead misallocate capital and create risk.

There is another irony. Most of the investment projects that the emerging world needs are long term, as are much of the available savings – the trillions in retirement accounts, pension funds, and sovereign wealth funds. But our increasingly short-sighted financial markets stand between the two.

Much has changed in the 13 years since the first International Conference on Financing for Development was held in Monterrey, Mexico, in 2002. Back then, the G-7 dominated global economic policymaking; today, China is the world’s largest economy (in purchasing-power-parity terms), with savings some 50% larger than that of the

US. In 2002, Western financial institutions were thought to be wizards at managing risk and allocating capital; today, we see that they are wizards at market manipulation and other deceptive practices.

Gone are the calls for the developed countries to live up to their commitment to give at least 0.7% of their GNI in development aid. A few northern European countries – Denmark, Luxembourg, Norway, Sweden and, most surprisingly, the United Kingdom – in the midst of its self-inflicted austerity – fulfilled their pledges in 2014.

But the United States (which gave 0.19% of GNI in 2014) lags far, far behind.

Today, developing countries and emerging markets say to the US and others: If you will not live up to your promises, at least get out of the way and let us create an international architecture for a global economy that works for the poor, too. Not surprisingly, the existing hegemons, led by the US, are doing whatever they can to thwart such efforts.

When China proposed the Asian Infrastructure Investment Bank to help recycle some of the surfeit of global savings to where financing is badly needed, the US sought to torpedo the effort. President Barack Obama’s administration suffered a stinging (and highly embarrassing) defeat.

The US is also blocking the world’s path toward an international rule of law for debt and finance. If bond markets, for example, are to work well, an orderly way of resolving cases of sovereign insolvency must be found. But today, there is no such way. Ukraine, Greece, and Argentina are all examples of the failure of existing international arrangements. The vast majority of countries have called for the creation of a framework for sovereign-debt restructuring.

Today, developing countries and emerging markets say to the US and others: If you will not live up to your promises, at least get out of the way and let us create an international architecture for a global economy that works for the poor, too

The US remains the major obstacle.

Private investment is important, too. But the new investment provisions embedded in the trade agreements that the Obama administration is negotiating across both oceans imply that accompanying any such foreign direct investment comes a marked reduction in governments’ abilities to regulate the environment, health, working conditions, and even the economy.

The US stance concerning the most disputed part of the Addis Ababa conference was particularly disappointing.

As developing countries and emerging markets open themselves to multinationals, it becomes increasingly important that they can tax these behemoths on the profits generated by the business that occurs within their borders.

Apple, Google, and General Electric have demonstrated a genius for avoiding taxes that exceeds what they employed in creating innovative products.

All countries – both developed and developing – have been losing billions of dollars in tax revenues. Last year, the International Consortium of Investigative Journalists released information about Luxembourg’s tax rulings that exposed the scale of tax avoidance and evasion.

While a rich country like the US arguably can afford the behaviour described in the so-called Luxembourg Leaks, the poor cannot.

I was a member of an international commission, the Independent Commission for the Reform of International Corporate Taxation, examining ways to reform the current tax system. In a report presented to the International Conference on Financing for Development, we unanimously agreed that the current system is broken, and that minor tweaks will not fix it.

We proposed an alternative – similar to the way corporations are taxed within the US, with profits allocated to each state on the basis of the economic activity occurring within state borders.

The US and other advanced countries have been pushing for much smaller changes, to be recommended by the OECD, the advanced countries’ club. In other words, the countries from which the politically powerful tax evaders and avoiders come are supposed to design a system to reduce tax evasion.

Our Commission explains why the OECD reforms were at best tweaks in a fundamentally flawed system and were simply inadequate.

Developing countries and emerging markets, led by India, argued that the proper forum for discussing such global issues was an already established group within the United Nations, the Committee of Experts on International Cooperation in Tax Matters, whose status and funding needed to be elevated. The US strongly opposed: it wanted to keep things the same as in the past, with global governance by and for the advanced countries.

New geopolitical realities demand new forms of global governance, with a greater voice for developing and emerging countries. The US prevailed in Addis, but it also showed itself to be on the wrong side of history.

Project Syndicate

16 | Business Daily

August 12, 2015

Closing Taiwan counts agricultural, education costs of Soudelor

COSCO, China Shipping Group in merger talks

Typhoon Soudelor caused an agricultural loss of 2.28 billion new Taiwan dollars (US$71.2 million) and another 357 million at the more than 1,800 schools affected in Taiwan, local authorities estimated yesterday. According to the agricultural authority, Chiayi County suffered the biggest loss, estimated at 545 million new Taiwan dollars, followed by central Taiwan’s Yunlin County with losses of 320 million. Losses of agricultural produce topped 1.75 billion, with a damaged area of 32,287 hectares. The degree of damage was estimated at 27 percent. Losses to animal husbandry, fishery, forestry and agricultural facilities totalled 15.5 million, 78.9 million, 22.1 million and 412.8 million respectively.

China Ocean Shipping Company (COSCO) and China Shipping Group are in talks over a possible merger, a person with direct knowledge of the matter said, as Beijing accelerates a drive to reform the bloated state-owned sector. Beijing has promised to restructure many state-owned enterprises (SOEs) and streamline industries to improve their global competitiveness. As part of that plan, it merged its top two nuclear power firms, and top two train makers this year. The listed units of the two state-owned companies, including COSCO’s flagship China Cosco and China Shipping’s China Shipping Development , halted trading in their shares from August 10, adding that they were “planning major issues”.

Beijing turns to tourism to boost sagging economy To pay for the new construction, funds will be created and private investors will be encouraged to become partners in projects

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hina is ramping up support for tourism, creating investment funds and building tourist attractions from camp grounds to theme parks in a bid to lift spending in its softening economy.

Helped by a fastexpanding middle class, tourism has emerged as a prospective new driver in China’s economy, with the government aiming to double leisure spending to 5.5 trillion yuan (US$886 billion) by 2020 from 2013.

Ten new ports for cruise ships will be constructed by 2020 and state companies will be encouraged to build vacation boats to spur growth, the State Council, China’s cabinet, said in an online statement yesterday.

In addition, around 1,000 camp grounds for recreational vehicles will be developed by 2020 and 57,000 toilet facilities for tourists will be built or renovated in the next three years, it said.

Wireless networks will be installed at top tourist spots to give visitors free Internet access at some 10,000 destinations.

To pay for the new construction, funds will be created and private investors will be encouraged to become partners in projects, the cabinet said, without giving further details.

More funding will be made

Analysts sharply cut Japan growth forecasts

available for the construction of roads and parking lots at holiday spots, as well as for new airports in northwest China.

Credit support for tourism firms and outdoor sports equipment makers will be increased, and more holiday

destinations will offer tax breaks to lift spending.

Tourist spots will target elderly Chinese, a well-heeled group whose spending lags that of the wider population, the cabinet said.

Held down by a cooling

China and HK stocks end flat

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apanese analysts are sharply cutting their economic growth forecasts for the year amid expectations that activity shrank in the second quarter, a survey showed, piling pressure on the central bank to trim its own rosy projections.

A poll of roughly 40 major think tanks, conducted each month by a semi-government body, showed yesterday analysts now expect the economy will grow 1.21 percent in the year to March 2016.

That was a rare sharp downgrade from 1.66 percent projected in the previous month’s ESP survey, regarded as the most comprehensive poll available in Japan.

It also widened the gap between private-sector views and the BOJ’s upbeat forecast last month for a 1.7 percent expansion this year.

The world’s third-largest economy likely contracted an annualised 1.9 percent in AprilJune due to weak exports and household spending, a sharp reversal from a 3.9 percent expansion in the first quarter, a Reuters poll showed.

Many analysts agree with the Bank of Japan that growth will rebound in the third quarter as solid U.S. demand lifts exports and Japanese households resume spending as wages rise.

Reuters

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ong Kong and Shanghai stocks ended flat yesterday, as investors mulled the impact of a sharp devaluation of the yuan announced by China’s central bank, dealers said.

The benchmark Hang Seng Index edged down 22.91 points to end the day at 24,498.21 on turnover of HK$96.1 billion (US$12.4 billion), after rising as much as 1.6 percent.

The surprise 1.86 percent reference cut marked the biggest drop since China reformed its currency system in 2005 by unpegging the yuan -- also known as the renminbi (RMB) -from the greenback.

The move sent Hong Kong and mainland shares on a rollercoaster ride, swinging between losses and gains as investors mulled the longterm impact of the decision for Asia’s largest economy.

The benchmark Shanghai Composite Index also settled largely flat, edging down 0.51 points to close at 3,927.91 on turnover of 712.3 billion yuan (US$114.3 billion).

The Shenzhen Composite Index, which tracks stocks on China’s second exchange, added 0.41 percent, or 9.43 points, to 2,284.27 on turnover of 623.1 billion yuan.

AFP

property market, sluggish investment, faltering global demand and a stock market slide, the world’s secondlargest economy is forecast to grow 7 percent this year, its worst showing in 25 years.

Reuters

German investor confidence unexpectedly drops

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onfidence unexpectedly fell, signalling concern that a global slowdown could weigh on Europe’s powerhouse economy.

The ZEW Centre for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, slid to 25 in August from 29.7 in July. The reading is the lowest since November and compares with a median estimate of 31.9 in a Bloomberg survey of economists.

“On the one hand, the Greek issue is behind us, so that should kind of boost markets,” said Anatoli Annenkov, senior economist at Societe Generale SA in London. “On the other hand, in August we’ve had more focus on commodities and China, so it moved away from Europe, and some of those issues have been putting a little bit of new uncertainty into the market.”

Still, the nation’s economy remains supported by record-low unemployment and interest rates that are driving consumer spending. ZEW’s measure of current conditions increased to 65.7 in August from 63.9 the previous month. A gauge of expectations for the euro area climbed to 47.6 from 42.7.

Bloomberg News