Macau Business Daily August 14, 2015

MOP 6.00

Macau-Zhongshan Free Yacht Travel Scheme postponed to September

Closing editor: Joanne Kuai

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Local projects boost Far East Global profits Page 3

Novo Banco Ásia generates profit of MOP1.6 mln in 1H Page 4

Year IV

Number 857 Friday August 14, 2015

Publisher: Paulo A. Azevedo

Uncertainty surrounds HK-ZhuhaiMacau Bridge completion date Page 2

AMCM Soothes Yuan Panic Weaker yuan, stronger pataca. And different perceived outcomes. Some gaming analysts predict the city’s mass market will suffer. But Macau Monetary Authority says Macau’s long-term aspirations as a Centre of World Tourism and Leisure ‘remain intact’. Despite short-term negative effects.

Easing inflationary pressure is expected as Macau greatly relies upon Mainland imports Page

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Legislators demand answers Legislators are warming to the subject. Inviting gov’t representatives to explain the controversial idle land plots issue in detail. Including the plots now deemed non-reclaimable.

Information about another 65 plots has never been released to the public.

The Iec Long Firecracker Factory case is right in the firing line

Lending to SMEs declines Local banks approved MOP18 bln-worth of loans to SMEs in 1H. Loans to manufacturing increased 12.9 pct. While loans to non-monetary financial institutions decreased 16.8 pct. The outstanding balance somehow increased 43.6 pct to almost MOP200 mln

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Brought to you by

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HSI - Movers August 13

Taming the yuan The yuan’s tumble. Thankfully easing as China’s central bank signals support for the currency. And calming investors after a shock devaluation rattled global markets on Tuesday.

The People’s Bank of China intervened to support the currency on Wednesday

www.macaubusinessdaily.com

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2.5-day weekend

Name

%Day

Tencent Holdings Ltd

+6.82

China Resources Land

+2.88

PetroChina Co Ltd

+1.92

Tingyi Cayman Islands

+1.85

China Shenhua Energy

+1.82

China Unicom Hong Ko

-2.62

Galaxy Entertainment

-3.01

Sands China Ltd

-3.18

Cathay Pacific Airways

-4.21

Gaming

Lenovo Group Ltd

-9.09

Packer Reshuffles Priorities

Source: Bloomberg

Official endorsement for short breaks. China’s State Council is encouraging companies to give Friday afternoon off to create 2.5-day weekends. Plus staggered holidays. The measures seek to boost tourism consumption.

Hopefully good news for Macau. With Guangdong and the hinterland prime holidaymaker sources

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It’s a game-changer. James Packer has stepped down as chairman of Australia’s Crown Resorts Ltd. The gaming billionaire says he “will continue to drive key projects”, including the joint business in Asia. He remains a director of Crown. And co-chairman of the Alon Resort project in Las Vegas and Melco Crown Entertainment Ltd. Robert Rankin, a former Deutsche Bank AG banker and chief executive of Packer’s family company Consolidated Press Holdings Ltd., assumes the chairman’s mantle

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August 14, 2015

Macau

Uncertainty surrounds bridge completion date What is certain is that Hong Kong’s Secretary for Transport and Housing Anthony Cheung does not envisage the whole project being completed in 2016 as originally planned Kam Leong

kamleong@macaubusinessdaily.com

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ong Kong’s Secretary for Transport and Housing, Anthony Cheung Bingleung said he does not envisage all the construction works for the Hong Kong-Zhuhai-Macau Bridge being completed by the end of 2016 as scheduled, claiming a more accurate anticipation of the completion and traffic-opening dates of the Bridge will only be available at the end of this year.

Making observations of the main construction of the Bridge with Hong

Kong’s Chief Executive Leung Chunying in Zhuhai on Wednesday, Mr. Cheung told media that the three governments are evaluating its construction progress. “[We are] striving to finish the evaluation this year so that we can have a more accurate picture of the completion and opening dates.

Currently, it seems that it is hard for all the related constructions to finish simultaneously by the end of 2016,” the Hong Kong official said.

The Bridge was originally scheduled to finish construction and be open to traffic by the end of 2016.

However, the Hong Kong Government said in 2014 that its artificial island, where the Hong Kong border for the Bridge will be located, may only be finished in 2017.

Conflicting stories

Nevertheless, Zhuhai’s Communist Party Secretary, Li Jia, said in a meeting with Hong Kong’s Chief

Macau-Zhongshan FYT Scheme postponed to September

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he ‘Free Yacht Travel Scheme’ between the city and Zhongshan in Guangdong may only start its pilot run at the end of September, a two-month delay of its originally anticipated implementation in July this year, according to Chinese news outlet Guangzhou Daily.

The newspaper cited the Zhongshan Foreign and Overseas Chinese Affairs Bureau as saying on Tuesday that the first-phase construction of the Border area for the yachting scheme had been 95

per cent completed, while the joint Customs control building has already been finished.

Moreover, the two governments have already determined an initial route for yachts sailing between the two cities, expecting the pilot run for the scheme can start by the end of September, the news outlet said.

In response to Business Daily enquiries, the city’s Marine and Water Bureau said the exact implementation date for the scheme has not yet been confirmed. Nevertheless, it confirmed that the end of September is the

latest target for opening the free yachting service.

According to the official website of Macau Government Tourist Office (MGTO), the yachting scheme for the two cities was initially expected to be implemented by July this year.

The Marine Bureau explained to Business Daily that the two-month delay is due to the two governments still having to confirm the issue of Customs inspection for the scheme.

In fact, the local government announced several measures for the scheme in recent months which

Executive on the same day that the main construction works for the Bridge can be finished next year, while the next step for the parties is to study how to make the border inspection convenient.

The Hong Kong CE declined to comment upon whether he is confident that the Bridge can be completed in 2017 when quizzed by reporters. He only indicated that the construction has many challenges as its structure comprises both bridge and tunnel.

According to Hong Kong-ZhuhaiMacau Bridge Authority director Zhu Yongling, the undersea tunnel of the Bridge, which will be the world’s longest tunnel at 5,664 metres and six lanes, is more than half completed.

The Chinese official told Hong Kong’s top official that 19 of the total 33 elements of immersed tunnels have been installed, saying he expects six more will be installed by the end of the year, while the whole installation can be completed next year.

Macau lagging behind, too

Meanwhile, Macau has not yet announced when it will start construction of its border for the Bridge. Yesterday, legislator Si Ka Lon filed a written interpellation slamming the government for hiding the progress of the Macau Border construction, querying whether the construction has started or not.

In fact, the reclamation of the artificial island for the Macau Border was completed in 2013. Meanwhile, the Zhuhai border, located on the same island, is already under construction.

Last September, the city’s Infrastructure Development Office (GDI) chief construction officer José Lam Wai Hou told local media during an inspection tour of the Bridge that the government was working on the drawings of the border building, as well as undertaking geological exploration on the artificial island.

The Macau border, occupying 76.71 hectares or 34 per cent of the artificial island, will include two passenger terminal buildings - Macau-Zhuhai and Macau-Hong Kong, receiving 150,000 and 100,000 passengers per day, according to the GDI officer.

were expected to be effective midyear.

At the end of May, Marine Bureau director Susana Wong Soi Man said the government expected 50 provisional berths on the waterway in front of the Concordia Industrial Park in Colane could be ready for the yachting scheme by the middle of the year.

At the beginning of June, the government, meanwhile, announced in an Official Gazette that a 24-hour border checkpoint at Coloane Pier would be established, with the service starting June 30 for people entering or leaving the Special Administrative Region by yacht.

Currently, the city has a total of 79 berths, with 57 off Lam Mau Pier on the Macau Peninsula managed by Macau Yacht Club and 22 others at Macau Fisherman’s Wharf.

K.L.

Business Daily | 3

August 14, 2015

Macau

Government to recover 5 more plots of idle land The government is recovering another 27,530 square metres of land, the follow-up committee for land and pubic concession affairs revealed yesterday João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he government is going to recover five more plots of idle land occupying some 27,530 square metres. The information was released yesterday by the followup committee for land and pubic concession affairs of the Legislative Assembly. These lands are part of the 113 plots ceded by the government that were not developed in due time per the contract requirements.

Of the five plots, the location of which were not revealed, two are on the Peninsula and three in the Islands (Taipa and Coloane). Furthermore, three of the idle plots were ceded for the development of housing – utilising 24,124 square metres - while the remaining two, together amounting to 3,406 square metres, were for industrial units.

The information has yet to be published in the government’s Official Gazette. However, it was confirmed to the follow-up committee and integrated into its report titled ‘Point of view about the recovery of idle land’ handed to the government yesterday.

Idle plots a priority

The question of the recovery of the idle plots by the government will

continue to be a priority for the follow-up committee for land and public concession affairs during the next Legislative Assembly (AL) term, Committee President Ho Ion Sang said yesterday.

“Of the 113 cases of idle land, there are still 65 plots of land that the public was not informed about.

The Committee is going to ask the government for more information about these lands, so there will be a follow-up to the situation”, Mr. Ho said to the press yesterday after another meeting of the Committee.

Previously, the government had released information to the Committee about the other 48 idle plots. From these, only 9 processes are pending, while 23 are to be recovered; 16 will not be handed back to the government.

Compensation fee

Besides the report on the idle lands, the Committee produced another two reports on the concessions of public transport and energy policy.

Concerning the recommendations for public transport, the Committee wants the government to study changing the law on public works

in order to introduce a compensation fee, which would have to be paid when the contractor fails to fulfil the responsibilities assumed in the contracts signed with the government.

Another recommendation in relation to public transport issues included improving the mechanisms revealing information about the development of works of the Light Rail Transit (LRT) system, increasing the number of taxis in the streets, and improving conditions for bus drivers

in order to resolve the problem of lack of human resources in this sector.

With relation to the energy policy the Committee says it will continue to monitor the contract between the government and the company Sinosky for the import of natural gas. In spite of the signing of the contract in 2007, only the public housing complex in Seac Pai Van and the University of Macau in Hengqin are provided with natural gas. Sinosky has been accused of failing in its responsibilities.

Committee: Clarify Iec Long Factory During the next term of the Legislative Assembly the follow-up committee for land and public concession affairs wants the government to provide more information on the Iec Long Firecracker Factory swap deal.

“It’s just one of the cases that we want to know more about. We’re talking about a large area and we need to check if there were problems with this deal”, the president of the follow-up committee, Ho Ion Sang, explained.

While the Iec Long Firecracker Factory swap deal is already being investigated by the Commission Against Corruption (CCAC) Mr. Ho believes that a clarification on the deal from the government will not interfere with the investigation.

“There is not a conflict on this. The CCAC will have to conclude its investigation, but the government needs to clarify to whom the land was awarded and the duration of the contract”, he insisted.

Local projects boost Far East Global profits The company is involved in projects for Wynn Palace Cotai, MGM Cotai and Louis XIII, taking profits to HK$34.7 million

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acau integrated resorts projects boosted the profits of Hong Kong-based Far East Global 61 per cent year-onyear during the first six months of 2015 to HK$34.7 million from HK$21.5 million, the company announced yesterday in a filing with the Hong Kong Stock Exchange.

‘Greater China, Asia and Other Division began to reap benefits from three projects of Wynn Palace Cotai, MGM Cotai and Louis XIII in Macau and the diversification into new general contracting business since 2014 as these projects contributed turnover and improved operating profit’, the interim report of the company involved in the curtain wall business reads.

During this period, revenue from Greater China, Asia and Other Division, in which the Macau segment is included, increased HK$315.5 million to HK$599.6 million from HK$284.1 million. However, this segment also includes other markets such as Mainland China, Hong Kong, Singapore and Australia. In terms of gross profit for the

segment mentioned before it increased to HK$117.8 million from HK$90.7 million.

On the other side of the world, its operations in North America registered a decline in

revenue to HK$363.8 million from HK$441.2 million. This was reflected in the profit for this segment, decreasing to HK$11.5 million from HK$13.3 million.

In relation to the future, the

group - which is also involved in the sale of aluminium - is aiming to increase market share in all markets.

‘The group will sharpen its integrated competitive edges in its curtain wall

business. By integrating resources, it will increase its market share in three major markets, including Hong Kong and Macau, North America and Mainland China’, it claimed.

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August 14, 2015

Macau opinion

The Special Ones

Local banks approve MOP18 billion-worth of loans to SMEs in 1H Nevertheless, it is a decline of 28.3 per cent from MOP25.2 billion recorded in the second half of 2014

Pedro Cortés

Lawyer cortes@macau.ctm.net

Kam Leong

kamleong@macaubusinessdaily.com

T

he Macau Special Olympics team recently participated in the World Games that took place in Los Angeles.

In the past, I’ve had the opportunity to be part of the Macau Special Olympics Golf Masters organised by the Charity Association of Macau Business Readers with the great co-ordination of Mr. Stefan Kuehn. In those events, I can assure readers that human beings that are said to be ‘normal’ most certainly got lessons from the so-called special ones.

The Macau LA delegation picked up a fistful of gold, silver and bronze medals. It is quite common to have stories of special people hidden from society; in events like these, they are exposed to their limitations and try to go beyond them. They meet people like themselves and have great experiences. It is good to understand that the limitations are indeed surpassed and that they are winners just for being present in an event like the World Games.

Some 6,500 athletes from 165 countries competed in 25 sports. For the good. But especially to make others understand that the most important thing in our short time on Earth is to take care of others. To inspire and set an example to our counterparts and to those whom we stupidly sometimes label rivals.

The feeling of inclusion was present; and it shall be present at all times. With almost half a million spectators, 2,000 coaches and 30,000 volunteers, I’m sure these World Games were a success.

The disabilities give way to the abilities of gifted people. People that do not see the world as others do but that are nevertheless happy. It is the second largest sporting event, after the Olympic Games. But in terms of feelings of the heart surely superior to those Mr. Coubertin has created.

The Macau athletes can show to the responsible persons of this Region that they are capable and that they must be supported.

Not only for the events, but also in their daily lives, creating schools and demolishing the architectural barriers that they face across the city. With the support of the families and Associations that host them in different fields.

The 78 Macau athletes - and those that are not athletes but have such disabilities - shall receive continuous incentives from our government in order to reward their efforts for a better life. As persons such as Paul Pun, the head of the delegation, shall see, their associations give more than financial support to assist the real special ones who compete for the joy of being alive without receiving millions of dollars in return.

*Chairman of the General Assembly of the Macau Business Readers Charity Association

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ew lending from local banks to the city’s small and medium sized enterprises (SMEs) declined 28.3 per cent to MOP18 billion (US$2.25 billion) during the first half of the year compared to the MOP25.2 billion registered in the second half of 2014, the latest official data released by the Monetary Authority of Macau (AMCM) reveals.

On a year-on-year basis, the approvals of local banks for new lending to SMEs declined 22 per cent, the Authority said. Meanwhile, the collateralized ratio, which indicates the proportion of credit limit with tangible assets pledged, registered a decrease of 3.5 percentage points to

78.5 per cent from the second half of 2014.

Nevertheless, the ratio, compared with the same period in 2014, was up 3.2 percentage points during the six months.

Meanwhile, the banks saw the outstanding value of total SME loans jump 8.8 per cent to MOP65.3 billion as at the end of June, as compared to nearly MOP60 billion at the end of last year. The amount also represents a year-on-year increase of 25.2 per cent.

Outstanding balance increased

In terms of sector, banks’ loans to SMEs engaged in manufacturing,

restaurants, hotels and similar activities, as well as the wholesale and retail trade increased by 12.9 per cent, 11.1 per cent and 8.7 per cent, respectively, from six months ago, according to AMCM. However, SMEs in the fields of non-monetary financial institutions, electricity, gas and water, as well as transport, warehousing and communications saw their loans approved by local banks decrease 16.8 per cent, 11.6 per cent and 4.4 per cent from the previous period, respectively.

On the other hand, the utilisation rate, which is defined as the proportion of outstanding credit balance to the credit limit granted, dropped 2 percentage points during the first six months of the year to 64.7 per cent from six months ago.

In terms of delinquent loans, the outstanding balance increased by 43.6 per cent to MOP195.8 million during the six months as compared to the second half of 2014. On a yearon-year basis, the balance represents an increase of 37.5 per cent.

The delinquency ratio, a ratio of delinquent loans’ outstanding balance to total SME loans outstanding, was 0.3 per cent at the end of the first half, representing an increase of 0.07 percentage points from six months ago, and a lift of 0.03 percentage points from the same period of last year.

Novo Banco Ásia generates profit of MOP1.6 million

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ovo Banco Ásia generated a profit of MOP1.6 million during the first half of the year, according to information published in the Macau Official Gazette. The bank, which is part of the Portuguese Novo Banco group, posted MOP26.93 million in revenues and MOP25.33 million in costs.

The published results also demonstrate a year-on-year decrease of 42 per cent in comparison with the first half of 2014, when the bank generated profits of MOP2.76 million and revenue

amounted to MOP62.30 million with expenses of MOP59.54 million.

In terms of deposits, the bank now has a total of MOP154.2 million for the first half of this year, while the number stood at MOP3.9 billion in July 2014, when it was still known as Banco Espírito Santo do Oriente (BESOR).

The Novo Banco group is the successor to Banco Espírito Santo, and was created after the Portuguese Government rescued the troubled Portuguese bank.

Business Daily | 5

August 14, 2015

Macau

AMCM stays positive on yuan devaluation The city’s monetary authority says stronger pataca against yuan may ease import prices and stoke moderate inflationary pressure Joanne Kuai

joannekuai@macaubusinessdaily.com

prices, declined by 1.4 per cent yearon-year in the first quarter of 2015.

As most of the foodstuffs in the SAR are imported from the Mainland, the weakening of the RMB would further lower imported prices and alleviate the cost-of-living pressure for residents.

Positive return

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hile some gaming analysts predict the devaluation of the renminbi may hit the city’s mass gross gaming revenue, the city’s monetary authority says that in the long view Macau’s positioning as a centre of world tourism and leisure ‘remains intact’, as it’s focusing on diversification in industry structure and visitor sources.

Following the recent announcement by the People’s Bank of China (PBOC) on further improvement in the renminbi (RMB) exchange-rate mechanism to promote the RMB internationalisation and marketdriven rate, the exchange rate of the RMB against the USD weakened in the past few days.

Under the current exchange rate regime of the SAR, the exchange rate of the pataca against the RMB has strengthened correspondingly.

Follow ing its p re liminary

assessment, the Macau Monterey Authority (AMCM) released a statement last night confirming the short-term effect, but vowing that the city is prepared for the long term and still expects a positive return for the entire year of 2015 for the fiscal reserves.

Local economy

AMCM says the RMB devaluation would undermine export competitiveness in the short term but would not affect the long-term and diversification developments of local industries.

It went on to say that as tourism is the dominant sector of the economy and the Mainland is the top visitorgenerating source for the SAR accounting for over half of the SAR’s visitor arrivals - the weakening of the RMB might reduce the attractiveness of the SAR as a tourism destination

for Mainland visitors. Tourism and retail businesses are expected to be adversely affected in the short term.

AMCM claims that the current devaluation is still mild, however, compared to the revaluation in the past few years. ‘The SAR’s development towards a Centre of World Tourism and Leisure through diversifications in industry structure and visitor sources remains intact,’ the statement reads.

Inflation easing

AMCM expects the yuan’s devaluation to result in import prices further lowering, leading to moderate inflationary pressure. Local inflation has receded in tandem with economic consolidation.

In the first half of 2015, CPI inflation slowed to 4.92 per cent from 6.05 per cent in 2014. The import unit value index, which reflects imported

Regarding the influence on the city’s fiscal reserves, AMCM says short-term returns will be adversely affected while appropriate risk-control measures have been taken.

At end-June 2015, after the adjustment of currency swap positions, the share of RMB assets in total Fiscal Reserve assets was 33.0 per cent, compared to 48.6 per cent at end-2014. As of June 2015, the annualised rate of return on the Fiscal Reserve was preliminarily estimated at about 4.0 per cent. It is expected that the fall in the exchange rate of the RMB against the USD would lower the annualised rate of return for the first eight months of 2015.

“The performance for the whole year will depend upon the global financial-market development in the remaining months while a positive return for the entire year of 2015 is expected,” the statement reads.

AMCM also stresses that under the investment strategy to control the risks strictly, RMB assets held by the Fiscal Reserve will help enhance medium-to-long-term returns.

State Council encouraging more short breaks As the top Chinese governing body says 2.5-day holiday is necessary for labour, local tourism trade chambers see it as good news for diversifying Mainland visitors’ portfolio and length of stay here Stephanie Lai

sw.lai@macaubusinessdaily.com

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hina’s State Council has again urged a nationwide improvement in the state’s pay leave policy for its citizens by creating more short holidays, a policy that can bring more visitors from the provinces around or beyond Guangdong to the MSAR if it can be properly implemented, local tourism trade chambers remarked to Business Daily.

On Tuesday, the State Council issued an opinion on its official website urging that each level of the government implement a labour pay leave policy as part of China’s plan to boost tourism consumption.

In the opinion, the Council noted that companies should improve summer holiday arrangements for their staff, encouraging them to travel by

tacking a Friday afternoon onto the weekend.

2.5-day weekend

The State Council has also encouraged companies to arrange holiday policies for their staff in a way that the holidays they take will not all be concentrated in the peak travel season.

“By this statement the Chinese Government is encouraging the country’s companies to create conditions for 2.5 days of holiday, which if put into practice, some staff will even try to arrange a three-day holiday,” the president of the Macau Hoteliers and Innkeepers Association, Chan Chi Kit, remarked to us.

“This is good news for us because it implies more travel

destination choices available for Mainland Chinese visitors when they are allowed a more flexible holiday arrangement,” Mr. Chan added. “I believe that it will also increase opportunities

for visitors from around Guangdong Province, such as Guangxi and Hunan that have railway connections, to travel to Hong Kong and Macau.”

Macau Travel Industry

Council president Andy Wu Keng Kuong shared similar views with Mr. Chan, saying, “This is definitely good news for Macau, as it can cfreate more chances for the number of visitors travelling here directly under the Individal Visit Scheme for a 2.5 day holiday, and in that sense these visitors’ stay in Macau can lengthen.”

The council president added, “Macau is a short-trip destination where it is very tested in its reception capacity on holidays like Golden Week so if Mainland companies can really implement the measure of not concentrating labour travelling only in the peak season that can soothe the pressure on our tourism capacity.”

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August 14, 2015

Macau

James Packer steps down as Crown Resorts chairman Packer will remain co-chair of Macau-focused Melco Crown Entertainment

Crown remains my number one business priority and passion.

I will continue to drive key projects, including our joint business in Asia and our planned resort in Las Vegas James Packer, co-chairman of Melco Crown Entertainment Ltd.

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illionaire James Packer stepped down as chairman of Australia's Crown Resorts Ltd on Thursday but said he would remain heavily involved in the company he owns half of as it faces declining revenues in the world's biggest gambling hub Macau.

Packer's surprise decision to take a less-public role in Crown, Australia's biggest casino operator by market value, initially sent shares down to a one-month low as it coincided with a steeper-than-expected drop in its annual net profit.

The stock, however, recouped some of its losses after it became clear that Packer would still be involved in key projects in Crown's A$10 billion (US$7.38 billion) development plans as well as its online business.

"Crown remains my number one business priority and passion," Packer said in a statement. "I will continue to drive key projects, including our joint business in

Asia and our planned resort in Las Vegas."

Interests overseas

Packer said he’d focus on resorts that Crown is developing around the world, which include a planned casino in Las Vegas and a hotel for high-rollers on Sydney Harbour due to open in 2019. He recently sold his six-level Sydney harborside mansion, signaling he intends to spend less time in Australia’s largest city.

“His departure is a big loss and it’s not like a Packer not to see something through to completion,” Evan Lucas, a market strategist at IG Ltd. in Melbourne, said by phone.

“The result was a little bit weaker on pretty much every metric and him leaving is a major problem. Where is Crown’s growth?”

Net income after adjusting for one-time items and an unusual rate of winnings was A$526 million (US$389 million) in the 12 months ended June

30, Crown said. That’s a drop of 18 per cent from a year earlier and matched the A$527 million average of 10 analyst estimates compiled by Bloomberg.

Crown shares closed down 3.2 percent at A$13.09. Echo Entertainment Group Ltd., Crown’s main domestic competitor, rose 3.4 percent to close at a record A$5.15.

New chairman

Robert Rankin, a former Deutsche Bank AG banker and the chief executive of Packer’s family company Consolidated Press Holdings Ltd., has been appointed as Crown chairman.

“Rob Rankin has my complete trust and respect as an executive and he will do an outstanding job as chairman,” Packer said in a statement. “Crown has a pipeline of resorts globally and this is where the majority of my time will be spent.”

Packer will continue as a director of Crown and remain co-chairman of

the Alon Resort project in Las Vegas and Melco Crown Entertainment Ltd., which owns Macau’s City of Dreams and Studio City resorts.

Packer has reached agreement with Crown to sell a 50 percent stake in his rural property at Ellerston, in the Hunter Valley north of Sydney, the company said.

Challenging Macau

The management changes come as Crown's earnings from Macau, which make up about 40 per cent of its total revenue, shrank 44.6 per cent amid a downturn in the casino industry following a Chinese government crackdown on lavish spending and corruption.

The declining Macau earnings pushed Crown's normalised net profit, which removes volatility linked to big spending gamblers, down 19 per cent to A$518.7 million, missing analysts estimates of A$531 million.

In a statement, Crown said it was optimistic about the long-term outlook for Macau, where it is due to open a new casino this year, even as it said the downturn in the industry's gross gaming revenue had accelerated in the second half.

Chinese gamblers

Credit Suisse analysts, however, singled out Crown as one of the Australian companies likely to suffer the most from the recent devaluation of the yuan given its exposure to Macau.

In Australia, where casino gambling has attracted many of the wealthy Chinese gamblers that left Macau, Crown said its main floor gaming revenue increased by 6.9 per cent in Melbourne and 2.6 per cent in Perth over the 2014/15 financial year.

The company did not say how much of this increase was due to Chinese visitors, but rival Echo Entertainment Group Ltd said its annual net profit had leaped 59 per cent largely due to higher revenues from Chinese gamblers.

Corporate

Fook Lam Moon opens in Galaxy Macau Renowned traditional Cantonese restaurant Fook Lam Moon is setting foot in Macau for the first time as it opens a new branch in Galaxy Macau this August.

The successful iconic restaurant of Hong Kong, famed for its authentic Cantonese cuisine and with numerous awards under its belt, is starting a new

page of its success story. The venture will broaden Fook Lam Moon’s horizons as it reaches out to local and visiting epicureans in Macau with its unique culinary tradition of more than six decades. The restaurant is open every day from 11:30am to 3:00pm and from 6:00pm to 11:00pm.

Mid-Autumn delights from City of Dreams and Altira Macau Appreciate the full moon get-together in the Mid-Autumn Festival with families and friends and spread the joy of family reunion.

In celebrating this traditional festival, ‘Jin Ying’ and ‘R Bar’ from the City of Dreams, together with ‘Ying’ from Altira Macau cordially present a series of exquisite

mooncake gift box and hamper selections.

Traditional Chinese or special flavour mooncakes are available in City of Dreams and Altira Macau with special offers, while there are also premium hampers of deluxe Chinese gift selections you can choose from to impress the ones you love.

8 | Business Daily

August 14, 2015

Greater China

Central bank tries to soothe global markets U.S. politicians accuses Beijing of unfairly supporting its exporters Lu Jianxin and Pete Sweeney

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hina’s central bank said yesterday that there was no basis for further depreciation in the yuan given strong economic fundamentals, in a bid to reassure jittery global markets after it devalued the currency earlier in the week.

As the yuan fell for the third straight day, the People’s Bank of China (PBOC) said the country’s strong economic environment, sustained trade surplus, sound fiscal position and deep foreign exchange reserves provided “strong support” to the exchange rate.

China’s decision to devalue the currency on Tuesday by pushing its official guidance rate down 2 percent sparked fears of a “currency war” and roiled global financial markets, dragging other Asian currencies to multiyear lows.

The PBOC said at the time that the move was a one-off depreciation, but sources involved in the Chinese policy-making process told Reuters that powerful voices within government were pushing for the yuan to go still lower, suggesting pressure for an overall devaluation of almost 10 percent.

PBOC Vice-governor Yi Gang dismissed such talk as groundless.

But even if the central bank succeeds in putting a new floor under the yuan for now, weak July economic data and expectations of more interest rate cuts later in the year are likely to fuel expectations that authorities could allow it to slip further.

Reforms at risk?

Fitch ratings agency said yesterday that the depreciation in the yuan “highlights wider pressures on the economy”, but also demonstrated that authorities remained committed to market-oriented reform, a commitment that many had questioned after Beijing’s heavy-handed interventions to stem a plunge in its stock markets in June.

Vice-governor Yi said China would quicken the opening of its foreign exchange market and would attract more foreign investors as it liberalises its financial markets.

Officials said the PBOC had stopped “regularly” intervening in the foreign exchange market but allowed that it could conduct

People’s Bank of China Vice-governor Yi Gang

“effective management” of the yuan in cases of extreme volatility.

Traders said major state banks had been buying yuan and selling dollars on Wednesday, causing the exchange rate to recover sharply in late trade, which influences the PBOC’s official guidance rate for the following day.

Though the yuan opened slightly weaker yesterday, the gap between the guidance rate and the traded spot market rate closed sharply as the central bank tried to slow a sharp sell-off that

has knocked around 3.2 percent off the currency since Monday’s close.

The PBOC set the guidance rate at 6.4010 per dollar prior to the market open, weaker than the previous fix of 6.3306.

The spot market opened at 6.3880 and was changing hands at 6.4076 after the PBOC comments, 206 pips weaker than the previous day’s close and only 0.1 percent away from the guidance point, the closest it has traded to the guidance rate since November 2014.

The spot rate is currently allowed to trade within a

range of 2 percent above or below the official fixing on any given day, and had been consistently trading over 1 percent weaker than the midpoint since March.

The offshore yuan was trading 1.02 percent weaker than the onshore spot at 6.4764 per dollar.

The PBOC also said yesterday that it would monitor “abnormal” cross-border flows after the devaluation raised fears that investors would seek to pull capital out of China in anticipation of further falls in the currency.

Reuters

Hong Kong’s economy forecast to post mild Q2 growth The economy grew 2.1 precent in the first quarter from a year earlier Ever Tang and Christina WY Lo

H

ong Kong’s economy is expected to have expanded slightly in the second quarter helped by consumption, but the outlook in coming months will be dampened by a slowdown in China,

Hong Kong leader Leung Chun-ying said that it was time for the former British colony to scrap what he described as an out of date “positive non-intervention” with Mainland policy

a drop in mainland tourists to the city and weak retail sales.

Prospects for the Asian financial centre could be further compounded if a surprise Chinese yuan devaluation this week puts a deeper dent in tourists’ spending power.

Economic growth for the April to June quarter is forecast to have expanded 2.1 percent, according to the median forecast of six economists with year-on-year estimates.

The economy grew 2.1 precent in the first quarter from a year earlier and a seasonally adjusted 0.4 percent from the fourth quarter, propped up by private and public spending.

Hong Kong has become increasingly dependent on China to help spur growth, with mainland Chinese accounting for 78 percent of the 60.8 million tourists who visited the city last year. The number of Chinese visitors has dropped this year, hurt in part by an anti-corruption campaign launched by Beijing that targets lavish spending and street protests against mainland Chinese.

“Exports are not performing very well while consumption from mainland tourists in Hong Kong is weakening. We may see slower growth in the second half of the year,” said Paul Tang, chief economist at Bank of East Asia.

Exports are not performing very well while consumption from mainland tourists in Hong Kong is weakening. We may see slower growth in the second half of the year Paul Tang, chief economist, Bank of East Asia

Tang added that he believed the devaluation of the yuan will curb mainland Chinese visitors’ desire to come to Hong Kong and forecast growth of 2 percent for the full year. In February, the government

estimated GDP growth of 1-3 percent for 2015.

Hong Kong’s economy is heavily dependent on trade, and its exports and imports are predominantly reexports to and from mainland China.

The GDP data due today, comes days after China posted a surprise 8.3 percent drop in July exports.

Slower growth could pile further pressure on Hong Kong leader Leung Chun-ying, less than a year after prodemocracy protests paralysed parts of the city, hit retail sales and raised concerns over economic stability.

Leung and Beijing’s top official in the city both recently stressed the need for the financial hub to focus on economic stability.

Hong Kong’s leader said this week in an interview with China’s official news agency Xinhua that it was time for the former British colony to scrap what he described as its out of date “positive non-intervention” policy.

The government needed to take a more pro-active role in tackling economic and livelihood issues, he added.

The economy is facing challenges even before an expected interest rate hike by the Federal Reserve this year, which is forecast to add further downside risks.

Reuters

Business Daily | 9

August 14, 2015

Greater China Fear of further RMB decline sparks biggest Dim Sum selloff since 2011

Tianjin port blasts disrupt tanker traffic The deadly explosions in the northeast Chinese port city of Tianjin have disrupted chemical and oil tankers going in and coming out of the port, trading and shipping sources said yesterday.

Two huge explosions tore through an industrial area where toxic chemicals and gas were stored in Tianjin, killing at least 44 people and injuring hundreds, officials and state media said yesterday.

A crew member on board the 317,713 deadweight tonne very large crude carrier Samco Europe confirmed they had been told to stop discharging their crude oil cargo.

The devaluation is spurring speculation that market development may stall Lianting Tu

O

ffshore yuan bonds suffered their biggest sell-off in four years as investors ditched assets in the sliding Chinese currency.

Average total returns of so-called Dim Sum notes dropped 0.5 percent Wednesday, the sharpest decline since September 2011, according to an FTSE-BOCHK index. Lenovo Group Ltd.’s 2020 notes retreated 2.1 points Wednesday in their steepest descent since issuance in June. China Electronics Corp.’s 2017 bonds plunged 1.7 points, the largest retreat since they were offered in January 2014.

China’s yuan reference rate fell for a third day, widening the scope for declines in the currency after Tuesday’s devaluation. That’s adding to stresses in the Dim Sum bond market after a slump in Chinese equities prompted a drop last month on concern of contagion.

“There is lots of selling of Dim Sum bonds on the back of the yuan devaluation because people don’t want to hold renminbi- denominated assets for fear of further depreciation,” said Gordon Ip, a senior fund manager at Value Partners Ltd. “The sentiment is quite weak now as investors have yet

Draft license regulations for nondespository lenders

Hong Kong Stock Exchange trading lobby

to figure out whether the devaluation is a one-off thing or will persist.”

Stalling market

Market prices showed continued concern yesterday even as the yuan’s decline eased after the central bank signalled support for the currency.

The yuan fixing declined 1.1 percent to 6.401 per dollar, after slides of 1.6 percent and 1.9 percent in the last two days.

China had Hong Kong host the first Dim Sum bond sale in 2007. The equities rout and changes onshore to

Lenovo cut jobs to offset Motorola meltdown Executives downplayed the effect of China’s yuan depreciation, saying the company was well hedged and its gross margins would be largely unaffected Gerry Shih

C

hina’s Lenovo Group Ltd will lay off 10 percent of white-collar staff after sales of Motorola handsets fell by a third, raising doubts over the personal computer giant’s bet that a money-losing brand it bought for nearly US$3 billion will help it become a global smartphone leader.

Shares in the world’s biggest maker of PCs slid nearly 9 percent yesterday after it said its quarterly net profit was halved as its mobile division lost nearly US$300 million.

KEY POINTS Q2 net profit down 51 pct to US$105 mln Motorola handset shipments skid 31 pct Shares down nearly 9 pct, lowest since Feb 2014 Firm faces toughest environment in years - CEO Still believe Motorola deal was right decision - CEO

allow more companies to issue debt there already contributed to a 47 percent slump in offshore renminbi note sales this year, according to data compiled by Bloomberg.

“Primary Dim Sum issuance will likely dry up until the yuan stabilizes,” said James Su, a HongKong based executive director of asset management at Haitong International Securities Group Ltd. “International fund managers may face some redemption pressure after the yuan devaluation.”

Bloomberg News

Lenovo, which uses the U.S. dollar in operations rather than the recently devalued Chinese yuan, said it plans to cut about 3,200 non-manufacturing jobs with a one-time cost of US$600 million.

Beijing-based Lenovo said the restructuring would yield savings of about US$1.35 billion on an annual basis. But the difficulty in selling handsets, combined with a continuously shrinking global market for PCs, meant the firm was facing its “toughest market environment in recent years”, Chief Executive Yang Yuanqing warned.

“I still believe mobile is a new business we must win,” Yang told Reuters in an interview, saying Lenovo’s ambition to rival Apple Inc and Samsung Electronics Co in smartphones remains undimmed.

“I still believe this acquisition (Motorola) was the right decision...

Except Apple and Samsung there is no third strong (global) player. I believe that will be Lenovo.”

Motorola, bought from Google last year for US$2.91 billion, shipped 5.9 million handsets in the quarter, a 31 percent decline from a year earlier.

Yang cited poor sales in Brazil and China, saying Lenovo would prioritise marketing smartphones outside its home turf, where market saturation and price wars have hobbled firms from Samsung Electronics to domestic start-up Xiaomi Inc. For the quarter, revenue rose 3 percent to US$10.7 billion, but missed analyst expectations for US$11.29 billion, according to analysts polled

by Thomson Reuters SmartEstimates.

Net profit plummeted 51 percent to US$105 million, but analysts had estimated it would fall 59 percent.

Reuters

China is considering a licence system to prevent unauthorized non-depository lenders from making loans, according to a draft regulation released by the State Council Legislative Affairs office Wednesday. While acknowledging that small, non-bank lenders play an important role in China’s credit markets, the statement said it was important to regulate such activity to protect borrowers, to control the scale of activity, and promote healthy market development.

Licensed non-depository lenders cannot take deposits in any form, and should make loans backed mainly by company equity capital or bond market fundraising, according to the draft.

As Macy’s eyes China, some see need for more focus at home

On Wednesday, Macy’s said it has formed a joint venture in China with Hong Kong-based Fung Retailing that will start by selling products on Alibaba Group Holdings Ltd’s Tmall Global marketplace. The deal comes in the wake of Macy’s plans to open off-price stores in the United States that will sell clearance products, start new stores that will sell luxury beauty products, and offer same-day delivery services in more U.S. markets than Amazon.

Macy’s also is expanding a new loyalty program, localizing store assortments and trying to improve store service.

Automaker boss expelled from CPC Xu Jianyi, former party chief and chairman of Chinese automaker FAW Group, has been expelled from the Communist Party of China (CPC) and thrown out of his job, the country’s top anti-graft body said yesterday. The Central Commission for Discipline Inspection (CCDI) of the Communist Party of China (CPC) said Xu was in “serious breach of integrity and self-discipline rules,” as he had accepted gifts of cash, infringed upon state interests in property deals and taken a bigger bonus than rules allow. A CCDI statement said Xu had refused to implement Party decisions and favoured his son in promotions.

10 | Business Daily

August 14, 2015

Greater China

Steel exporters cut prices in bid to jump on yuan drop The weaker yuan is likely to hit imports of industrial metals such as copper, as well as soybeans, both of which China is the biggest buyer Ruby Lian and Manolo Serapio Jr

Price, a lawyer who represents U.S. steelmaker Nucor Corp.

Record shipments

C

hinese steel producers have already cut export prices in response to a lower yuan, industry sources said, providing some of the first evidence of how Beijing's devaluation will help companies in the world's second-biggest economy boost sales.

China's steel industry is the world's biggest, but shrinking demand at home has forced many mills to ship record amounts abroad, with some said to be selling at a loss.

Some small Chinese mills had already lowered export prices of steel products like rebar for construction use, by US$5-US$10 a tonne, sources familiar with the issue said.

A private mill in China's top steel producing city of Tangshan had cut export prices of billet - a semi-finished steel product - by US$5 to US$295 a tonne on a free-on-board basis, according to a senior official in charge of exports.

Another senior official at a stateowned trading firm said the company had no choice but to look at price cuts.

"The devalued yuan will make

our exports more competitive... we have no other option but to consider cutting prices as overseas buyers are aware that Beijing has pushed the yuan lower," said the official.

If the thinking is mirrored by China's legion of steel producers there will be a fresh flood of steel going to global markets. Higher sales risk inflaming anger in countries like India, where steel makers have complained over what they call dumping by China.

Tuesday's nearly 2 percent devaluation in the yuan makes Chinese steel exports around US$5 per tonne cheaper, said Seshagiri Rao, joint managing director of India's No. 3 steelmaker JSW Steel Ltd. "It will further sharpen the ability of Chinese steel companies to export to India. They are very desperate to export steel at any price," Rao said by phone.

The news that Chinese steel exporters wasted no time in cutting prices provoked cries of foul from the U.S. steel industry, and gave politicians sceptical of the pending

Trans Pacific Partnership trade agreement new ammunition.

"This devaluation is just the latest attempt to support Chinese industry at the expense of producers in the rest of the world who have to earn their cost of capital to survive," said Alan

KEY POINTS Some firms have cut rebar, billet prices by US$5-US$10/T -sources Early evidence of China firms jumping on devaluation Risks fresh global complaints over Chinese steel exports Moves spur protests from U.S. steelmakers, politicians

China is by far the world's largest steel consumer and producer, accounting for about half of the world's output.

Other Chinese exporters have also started to cut export prices by US$5US$10 a tonne, sources say, while some big mills and traders have yet to move, waiting for signs on whether Beijing plans a long-term weakening of the currency.

Chinese exports of steel products were 9.73 million tonnes in July, near the record 10.29 million tonnes hit in January.

Shipments reached 62.13 million tonnes in January-July, already twothirds of the record 93.78 million tonnes in 2014.

Increased exports could provide a lifeline for Chinese steel mills and delay Beijing's efforts to restructure the sector and cut excess capacity of about 300 million tonnes, equivalent to three times the annual output of No. 2 producer Japan.

"It adds to the pressure that Chinese steel exports are going to remain an issue for the rest of the global steel industry to deal with," said CLSA commodity strategist Ian Roper.

But there was a risk of other countries also weakening their own currencies and imposing more antidumping measures, said Bill Chen, a senior trader with Smart Timing Steel, a Hong Kong-based exporter.

Stronger Chinese steel exports could support imports of the raw material iron ore from suppliers such as Australia and Brazil, even with a lower yuan raising the price, said CLSA's Roper.

"From any commodity perspective the price in China has effectively gone up and consumers of those commodities are going to respond," said Gerard Burg, senior economist at National Australia Bank.

Reuters

FDI growth quickens in July Foreign investment in the Chinese hi-tech service sector surged 63.3 percent

F

oreign direct investment (FDI) in the Chinese mainland rose 5.2 percent year on year in July to 50.6 billion yuan (US$8.2 billion), official data showed yesterday.

The growth was an acceleration from the 0.7-percent rise recorded in June, the Ministry of Commerce (MOC) said.

In the first seven months of 2015, FDI grew 7.9 percent to 471.1 billion yuan.

Hi-tech services and

manufacturing are attractive to foreign investors, with major international firms increasing their investment, according to MOC official Huang Feng.

Foreign investment in the Chinese hi-tech service sector surged 63.3 percent to US$4.9 billion in the January-July period. Intel Corp. spent 6 billion yuan to buy 20 percent of the stakes of a subsidiary of the Beijingbased Tsinghua Unigroup.

Hi-tech manufacturing

attracted US$5.5 billion of foreign investment in the first seven months, up 0.1 percent.

LG Chemical Co. Ltd. has invested US$280 million in China since the beginning of the year on projects including optical filters and lithium batteries. Its investment in China has topped US$3 billion in the past 20 years.

The European Union invested US$4.5 billion in the Jan.-July period, up 18.4 percent.

Xinhua

LG Chemical investment in China has topped US$3 bln in the past 20 years

Business Daily | 11

August 14, 2015

Asia

Japan’s machinery orders tumble Weak data could raise doubts about the economic outlook in the face of China's slowdown Tetsushi Kajimoto

J

apan’s core machinery orders tumbled the most in over a year, adding to fears of an economic contraction in the second quarter as exports slumped and consumer spending slackened.

The 7.9 percent fall in the key gauge of capital spending followed a recent run of soft indicators - including exports and factory output - which led analysts to forecast a second-quarter contraction when economic growth figures come out on August 17.

Policymakers see little chance of a return to recession, expecting the economy to stay on track for a moderate growth in the current quarter.

Weak data though could raise doubts about the economic outlook in the face of China’s slowdown, adding yet more pressure on the Bank of Japan to trim its rosy projections and prompting calls for fresh stimulus to support expansion.

“There’s a risk that overseas slowdown could hit exports harder, prompting Japanese firms to put off investment plans. But so far I don’t see that happening yet,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

He added that automation of Japanese factories in China and steady U.S. growth have helped increase overseas demand for machinery, with orders jumping 20.3 percent in June helped by big items. Overseas orders are not counted as core orders.

Companies surveyed by the Cabinet Office forecast that core

machinery orders, a highly volatile data series seen as an indicator of capital spending in the coming six to nine months, will rise 0.3 percent in July-September, slowing from the second quarter.

Core orders, which exclude those of ships and electric power utilities, grew 2.9 percent in April-June from the prior three months, which was the fourth straight quarterly gain.

“June’s decline was due to a big drop in manufacturers’ orders, which came as reaction to gains in the prior month in sectors such as steel,” said a Cabinet Office official, suggesting

that the monthly decline may be a one-off.

Recent signs indicate that firms may finally be shaking off their deflationary mind-set, in which they hoarded cash long-term rather than investing in plant and equipment.

The BOJ’s quarterly tankan business sentiment survey on July 1 showed that big Japanese firms plan to boost capital spending in the fiscal year to next March at the fastest pace in a decade.

A Reuters poll also showed two in five Japanese firms plan to boost capital spending this business year.

Reuters

KEY POINTS June core orders -7.9 pct m/m vs f’cast -5.6 pct Q3 core orders seen +0.3 pct qtr/qtr vs Q2 +2.9 pct Manufacturers’ orders -14.0 pct; service sector +0.6 Govt maintains view that core orders are “picking up”

Bank of Korea holds rates steady South Korea's trade-reliant economy recorded its weakest expansion in six years in the second quarter Christine Kim and Choonsik Yoo

S

outh Korea's central bank kept interest rates steady yesterday, maintaining its view that the struggling economy is on track for recovery, but analysts said growing uncertainties in China could prompt it to cut rates later in the year.

The Bank of Korea's monetary policy committee unanimously left the base rate at a record low of 1.50 percent for a second consecutive month. It cut the rate by a combined 1 percentage point between August last year and June this year.

"The economy will recover on the back on expansionary macroeconomic policy and the end of the MERS outbreak, but uncertainties are high in the economy's growth path," Bank of Korea Governor Lee Ju-yeol told a news conference.

"Governor Lee gave no clear signal on the near-term policy direction but I see the risk for another rate

cut slightly increasing of late due to heightened uncertainties in China," said Young Sun Kwon, economist at Nomura in Hong Kong.

Bank of Korea headquarters

China is South Korea's largest trading partner, accounting for more than one-fifth of its smaller neighbour's total foreign trade, and

the yuan's sharp decline this week had sent the won falling sharply.

Governor Lee said possible capital outflows were the main risk when the U.S. Federal Reserve begins raising its interest rates likely later this year, but added that South Korea's economy was sound enough to avoid massive outflows.

"I can't say which is more important between exports or capital outflows in terms of what's happening in China. We have to see how the situation settles down -- what effects it will have on our exports and capital flows," Lee told reporters.

Local markets shrugged off the central bank's decision to keep rates on hold, as all the 27 analysts in a Reuters poll had forecast a steady rate. A majority of the analysts said rates would remain unchanged through the end of the year.

South Korea's trade-reliant economy recorded its weakest expansion in six years in the second quarter, growing just 0.3 percent, as exports sputtered and consumers cut back spending in reaction to a deadly outbreak of Middle East Respiratory Syndrome (MERS).

Exports have fallen throughout this year amid uneven global demand, and analysts have said it will be difficult to see a firm recovery in shipments until the fourth quarter of this year.

Reuters

12 | Business Daily

August 14, 2015

Asia

Malaysia’s growth cools GDP is forecast to increase 4.5 percent to 5.5 percent this year Livia Yap and Liau Y-Sing

M

alaysia’s economy expanded the least in almost two years after a new consumption tax curbed private spending, adding pressure on policy makers to revive confidence in a nation facing political turmoil and a weakening currency.

Gross domestic product rose 4.9 percent in the three months through June from a year earlier, after climbing 5.6 percent in the previous quarter, the central bank said in Kuala Lumpur yesterday. The median in a Bloomberg News survey was for a 4.5 percent increase.

Foreign funds have dumped about US$3 billion of the nation’s shares this year and the ringgit is at a 17-year low as Prime Minister Najib Razak grapples with allegations of financial

irregularities at a state investment company.

The ringgit is Asia’s worstperforming currency this year as it dropped 12.5 percent against the

greenback. It weakened beyond 4 a dollar for the first time since 1998 Wednesday spurred by the yuan devaluation. The FTSE Bursa Malaysia KLCI Index has lost about

A key consumer confidence gauge is at the lowest since 2008 Bloomberg

The impact of the ringgit’s depreciation is manageable, Central Bank Governor Zeti Akhtar Aziz (pictured) told reporters

Lower gold prices may bolster Indian demand in H2 Demand for gold jewellery is usually robust in the final quarter as the country celebrates festivals such as Diwali and Dussehra, when buying the metal is considered auspicious Rajendra Jadhav

I

ndia’s gold demand in the second half of 2015 could rise by more than a quarter from a year before as lower prices encourage buying during the peak festival season towards the year-end, the World Gold Council (WGC) said yesterday.

Stronger demand from the world’s second-biggest gold consumer could support the global bullion price, which hit its lowest in 5-1/2 years below US$1,100 an ounce last month.

But growth in demand could be lower if monsoon

rains turned out to be weak, Somasundaram PR, managing director of the WGC’s Indian operations, told Reuters.

Last week the India Meteorological Department (IMD) forecast this year’s monsoon rain would be 88 percent of the long-run average as a strengthening El Niño weather pattern was likely to trim rainfall in August-September to 84 percent, which has raised fears of the first drought in six years.

“Assuming that we have the scenario that IMD has

predicted, then certainly it will lead to muted rural demand during Diwali,” Somasundaram said.

Rural demand for gold accounts for nearly twothirds of India’s total.

In the first half of 2015, Indian demand fell 7 percent from a year before to 346.2 tonnes, led by a 19 percent drop in investment demand, WGC data showed.

Better returns from the stock market, a belief that gold prices would fall further and curbs on banks’ selling of gold coins squeezed investment demand

and the trend is likely to continue in the second half, Somasundaram said.

He estimated total demand in 2015 would rise nearly 11 percent to about 900 tonnes, anticipating 554 tonnes in the second half, an increase of nearly 26 percent from a year before due to lower prices.

Indian gold prices fell to their lowest level in four years in July, although that failed to produce the long queues outside gold showrooms that were seen when prices fell in 2013.

Spot gold touched a threeweek high of $1,126 an ounce

on Thursday as a weaker Chinese yuan kept equities under pressure, encouraging investors to seek safe-haven assets.

Higher imports by banks and other trading companies pushed gold prices in India to a discount over London prices in May and June, making smuggling less attractive. In 2014 smuggling networks had brought in an estimated 175 tonnes of gold.

Such imports had come down “dramatically”, Somasundaram said. “The incentive to smuggle is very low.”

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

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Business Daily | 13

August 14, 2015

Asia 13 percent from this year’s high in April.

Manageable decline

The impact of the ringgit’s depreciation is manageable and th e econom y will remain on a steady growth path, central bank Governor Zeti Akhtar Aziz told reporters in Kuala Lumpur yesterday. Monetary policy remains accommodative and supportive of economic activity, she said.

Malaysia’s GDP is forecast to grow 4.5 percent to 5.5 percent this year, down from an earlier projection of as much as 6 percent.

Other economies in the region have signalled a softening outlook, as Singapore slashed the upper end of its growth forecast for 2015 after the economy shrank last quarter.

Malaysia’s central bank left its key rate unchanged for a sixth straight meeting in July.

A key consumer confidence gauge is at the lowest since 2008, and measures of manufacturing wages and credit-card spending weakened last quarter, according to inflation-adjusted data compiled

by Bloomberg.

In July, the ringgit slid past the 3.8-a-dollar peg that was set during the Asian Financial Crisis and was kept from 1998 to 2005. The central bank’s efforts to defend it contributed to the country’s foreign-exchange reserves dropping below US$100 billion for the first time since 2010.

The drop in reserves was anticipated, and the central bank will set about to rebuild them, Zeti said. They remain ample to facilitate international transactions, she said.

Bloomberg News

Japan’s Q3 core CPI seen negative

Myanmar’s ruling party leader removed

Kaori Kaneko

J

apan’s consumer prices are predicted to fall this quarter, heaping pressure on the Bank of Japan to ease monetary policy, but most analysts surveyed by Reuters this week expect no loosening until next year.

Analysts also revised down their economic growth forecasts for this fiscal year for the second straight month in the face of poor exports and weak consumer spending.

That revision does not bode well for the BOJ which has been struggling to meet its ambitious 2 percent inflation target while also combating what could prove to be an economic contraction.

The poll of 20 economists forecast the core consumer price index (CPI) - which includes oil products but excludes fresh food prices - would be minus 0.1 percent in JulySeptember, compared with a flat reading predicted in July.

For this fiscal year, ending in March, core CPI will probably be 0.3 percent, slightly less than last month’s 0.4 percent prediction and lower than the BOJ’s 0.7 percent estimate.

“I don’t expect consumer prices will hit 2 percent in the first half of next fiscal year as the BOJ projects,” said Hidenobu Tokuda,

senior economist at Mizuho Research Institute.

“Consumer prices will probably recover later this year but the pace of rises won’t be as quick as the BOJ forecasts, which will become clear around next spring,” he said.

The BOJ expects inflation to reach its target around September next year as improvements in the economy prompt companies to raise wages and prices.

Still, with the BOJ predicting a stronger economy ahead, most forecasters expect a pause on further easing until next year, while some said it could adopt more stimulus at the October 31 meeting.

The economy is believed likely to grow 1.1 percent this fiscal year.

That is slower than July’s 1.5 percent median forecast and the BOJ’s 1.7 percent estimate, but similar to the results of a survey by a semigovernment body this week.

After a possible contraction in the second quarter, the economy was expected to resume moderate growth from the third quarter, the poll also found.

Some BOJ policymakers warned in their rate review last month Japanese exports may be hurt if China’s economic growth slows further.

Reuters

S. Korea pardons SK Group leader amid growing discontent over chaebol The country has a long history of pardoning convicted chaebol bosses or suspending their sentences

S

outh Korean president Park Geun-hye yesterday gave pardons to 6,527 people, including the chairman of the country’s third-largest conglomerate, the SK Group, citing, in part, Seoul’s efforts to revive a sputtering economy.

The pardons announced by the justice minister come amid South Koreans’ growing discontent over the conduct of the family-run conglomerates, known as chaebol, that dominate Asia’s fourth-largest economy.

The heavy-handed conduct of South Korea’s rich and powerful made headlines worldwide with last December’s “nut rage” case, after the daughter of an airline chairman took offence at the way she had been served macadamia nuts.

SK Group Chairman Chey Tae-won has been in jail since January 2013, serving one of the longest terms ever given to a chaebol boss.

The order to free Chey and other business leaders aims “to give them a chance to develop the country’s economy,” the justice ministry said in a statement.

President Park told a cabinet meeting, “The pardons have included some businessmen, for the tasks we face,

economic revival and job creation.”

An SK Group spokeswoman said Chey’s pardon would resolve a management vacuum and help the conglomerate focus on efforts to rejuvenate the economy.

A Gallup Korea poll in late July showed 54 percent of respondents opposed special pardons for chaebol owners, while just 35 percent backed them.

The public is unlikely to be convinced by the government’s rationale for the pardons, said Chung Sun-sup, head of corporate analysis firm Chaebul.com, adding that they could undermine trust in the government.

“It doesn’t make sense to be calling for reforms by the chaebol and, at the same time, to be lenient towards the wrongdoing of the heads of those chaebol,” he said.

Over the years, the heads of the Samsung, Hyundai Motor, SK and Hanwha chaebol have been convicted of crimes but received suspended sentences, and later, presidential pardons.

In her 2012 presidential campaign, Park said she would “strictly limit” pardons for powerful business tycoons.

But analysts say that agenda has been derailed by a sluggish economy

Chairman of Myanmar’s ruling party, the Union Solidarity and Development Party (USDP), U Shwe Mann was removed yesterday, according to the party sources. U Shwe Mann was replaced

by Vice Chairman U Htay Oo, who is assigned to take up the post of chairman concurrently, according to a decision of the party’s central executive committee. U Htay Oo, an MP to the House of Representatives, was former Minister of Agriculture and Irrigation with a military rank of major-general during the previous military government and became vice chairman of the party in 2012.

Thai public debt ratio rising Finance Ministry said yesterday it expects a rise in the country’s public debt to GDP ratio to 48.3 percent for fiscal year 2016, and would borrow 638 billion baht (US$18 billion) to finance the deficit and investment for the year. The ministry has projected the public debt to GDP ratio increasing to 51 percent in 2017, 52 percent in 2018, 53 percent in 2019 and 52 percent in 2020, Theeraj Athanavanich, deputy director of the ministry’s public debt management office, told reporters.

Malaysia’s central bank says finished 1MDB probe Central bank has completed an investigation into troubled state fund 1MDB and submitted a report to the attorney general, the bank’s governor said yesterday. “The bank has submitted its investigation papers to the attorney general with the recommendation for the appropriate enforcement action,” she told reporters. The central bank is among institutions that are investigating 1 Malaysia Development Berhad (1MDB) over allegations of mismanagement and graft.

S&P puts Fonterra on negative credit watch Ratings agency Standard and Poor’s put New Zealand dairy giant Fonterra Ltd on a negative credit watch yesterday citing concerns about the impact of a slump in global prices on the co-operative’s finances. “The CreditWatch placement reflects our concerns regarding potential weakness in Fonterra’s key financial metrics given its high debt levels at a low point in the global price cycle,” said Standard & Poor’s credit analyst Brenda Wardlaw in a statement. S&P rates Fonterra’s long-term debt at A and short-term debt at A-1.

KEY POINTS SK Group Chairman Chey Tae-won had been serving 4-yr jail term Growing public discontent towards chaebol family behaviour Pardons aim to spur economic revival, job creation -Park and the reliance of her ruling Saenuri party on support from high-income conservative earners.

Many South Koreans are unhappy that chaebol founding families can control massive corporate groups with small direct stakes, using a complicated structure of cross-shareholdings.

Anti-chaebol sentiment was whipped up by a public feud between the two sons of the 92-year-old founder of Lotte Group, South Korea’s fifth-largest conglomerate.

Reuters

Vietnam expedites eco-friendly industrial park initiative An initiative aimed at converting existing industrial parks into eco-friendly production facilities was introduced at a conference in Vietnam’s southern Can Tho city. The US$4.5-million eco-friendly industrial park project was approved in August last year using non-refundable aid from the Global Environment Facility, the Swiss State Secretariat for Economic Affairs and the United Nations Industrial Development Organization, the Vietnam News Agency reported.

According to the ministry, eco-friendly industrial parks are a new model in Vietnam, which will be built through the application of advanced technologies and clean production methods.

14 | Business Daily

August 14, 2015

International Greek economy unexpectedly expanded Greece’s economy unexpectedly grew in the three months through June and a contraction in the previous quarter was revised away. The Hellenic Statistical Authority in Athens said gross domestic product rose 0.8 percent, as it revised up its estimate for the first quarter to show stagnation. The data comes as a surprise after economists in a Bloomberg survey of economists forecast a 0.5 percent contraction. Recent reports have painted a picture of an economy crippled by months of haggling over a new bailout and question marks over the nation’s future in the euro.

Vancouver panorama

Canadian PM vows to track foreign homebuyers

U.S. budget deficit widens Vancouver real estate agents question whether The United States posted a budget the measures would have much impact on the city’s deficit of US$149.2 billion in July, up 58 percent from the same period last red hot property market year, the U.S. Treasury Department said on Wednesday. Analysts polled by Reuters had expected a US$132 billion deficit for July. The government had a deficit of US$94.6 billion in July of 2014, according to Treasury’s monthly budget statement. A Treasury official said the July deficit was larger because of US$42 billion in payments that were shifted into that month from August.

Roche buys “superbug” diagnostics firm Roche is buying U.S. diagnostics firm GeneWEAVE BioSciences for up to US$425 million, expanding the Swiss group’s commitment to fighting socalled “superbugs” as the threat from drug-resistant microbes grows. Roche said yesterday it would pay shareholders in the privately held Californian company US$190 million upfront and up to a further US$235 million depending on the future success of its products.

The deal gives Roche access to GeneWEAVE’s “Smarticles” technology, which allows for the rapid identification of multi drug-resistant organisms direct from clinical samples, without the need for traditional preparation processes.

TUI earnings at top end The world’s largest leisure tourism group, TUI said summer trading had been robust and it now expected underlying core earnings (EBITA) to rise by between 12.5 and 15 percent in the current financial year, against a previous forecast for between 10 and 15 percent. European holiday companies have had to cope this summer with the impact of an attack on a beach massacre in Tunisia in late June that killed 38 people, 33 of whom were TUI customers. The Greek financial crisis has also affected tourist travel.

Recruitment firm Michael Page announces strong growth British recruitment firm Michael Page is to pay a special dividend to return cash to shareholders, it said yesterday, paying out more than expected sooner after strong demand in its home market helped boost half-year profit. The company, which mainly finds candidates to fill permanent positions, said the steady momentum of Britain’s economic recovery had helped boost its first-half profit, as clients sought candidates for jobs in finance, property and construction.

Chief Executive Steve Ingham told Reuters he had seen good growth overall in the majority of its markets, particularly in the UK and United States.

Randall Palmer and Julie Gordon

C

anadian Prime Minister Stephen Harper pledged on Wednesday to track and possibly limit foreign purchases of Canadian real estate if re-elected, but the move was not expected to cool foreign buying anytime soon.

“There are real concerns that foreign, non-resident real estate speculation is the reason some Canadian families find house prices beyond their budgets,” Harper said while visiting suburban Vancouver.

The announcement hones in on fears in Vancouver that foreign money - mostly from mainland China - is driving rapidly rising housing prices, fuelling calls for government to track international buyers and impose restrictions.

If the Conservatives return to power in the October 19 vote, Harper said his government will start collecting data on Canadian real estate purchases by non-resident foreigners.

If necessary, he would coordinate with Canada’s provinces to ensure

that foreign, non-resident investment “supports the availability and affordability of homes for Canadians”.

He did not provide details of what might trigger such a step.

But Vancouver real estate agents questioned whether the measures would have much impact on the city’s red hot property market because recent changes to immigration policy did little to discourage Chinese interest.

“Tracking is one thing and restricting buyers is another. Simply tracking won’t have any impact,” said Andrew Hasman, who sells on Vancouver’s west side, one of the most popular areas with Chinese buyers.

Hasman added that even if restrictions on non-resident buyers were introduced, many would find other ways to invest, such as through relatives and friends already living in Canada.

Indeed, foreign interest in Vancouver has climbed in recent years, agents say, despite Canada freezing its controversial millionaire

U.S. labour market tightens further in June The JOLTS report is one of the indicators being closely watched by policymakers as they contemplate raising interest rates

T

he share of unemployed Americans competing for each open job fell to a near eightyear low in June, pointing to a labour market tightening that could boost wage growth and bolster the case for an interest rate increase this year.

The Labour Department’s monthly Job Openings and Labour Turnover Survey (JOLTS), released on Wednesday, showed the number of unemployed job seekers per open job fell to 1.58, the lowest since August 2007. The ratio was at 1.62 in May. “We view this metric as an indicator of labour market slack and see its continued downward trend as supportive of our optimistic outlook for U.S. labour markets,” said Jesse

Hurwitz, an economist at Barclays in New York.

The so-called JOLTS report is one of the indicators being closely watched by Federal Reserve Chair Janet Yellen and other U.S. central bank policymakers as they contemplate raising interest rates for the first time in nearly a decade.

Many economists expect the Fed will hike borrowing costs next month against the backdrop of a steadily growing economy and a tightening labour market. Financial markets have, however, slightly shifted their rate hike expectations towards December following China’s devaluation of the yuan this week.

At 5.3 percent, the unemployment rate is near the 5.0 percent to 5.2

visa plan in 2012, and then scrapping the program last year.

The Conservatives said they are looking to countries such as Australia and Britain, that have also grappled with foreign money distorting their domestic markets, as possible models for future actions.

Andy Yan, an urban planner with Bing Thom Architects, said the platform was well thought-out, but noted it should also consider the impact of newcomers who continue to live off fortunes earned abroad.

“How much of it is this nonresident foreign buyer versus, say, a recently naturalized Canadian citizen with lots of global capital?” he said.

“I think you have to back it up and talk about that.”

In another step to deal with affordability, Harper promised to increase the amount that first-time home buyers can withdraw tax-free from their registered retirement savings plans to C$35,000 from C$25,000.

Reuters

percent range most officials think is consistent with a steady but low level of inflation.

While job openings, a measure of labour demand, slipped to a seasonally adjusted 5.23 million in June from an all-time high of 5.36 million in May, they remained at lofty levels. Hiring rose to its highest point since December.

The quit rate, which the Fed looks at as a measure of confidence in the jobs market, held at 1.9 percent for a third straight month. It has bounced between 1.9 percent and 2.0 percent since September 2014.

“Trends in hires and quits rates will likely be viewed positively at the Fed,” John Ryding, chief economist at RDQ Economics in New York.

The JOLTS report showed a modest rise in the pace of layoffs in June, with the layoffs and discharges rate rising to 1.3 percent from 1.2 percent in May. Layoffs and discharges increased in the Midwest and West.

“The number of layoffs has generally been trending sideways over the past few years at a fairly low level despite the choppiness in the monthly figures,” said Daniel Silver, an economist at JPMorgan in New York.

Reuters

Business Daily | 15

August 14, 2015

Opinion

Yuan devaluation more likely to boost wires than hurt China commodity imports Business

Leading reports from Asia’s best business newspapers

Clyde Russell Reuters columnist

THE KOREA HERALD South Korean steelmakers have been sued by U.S. rivals in the United States on anti-dumping charges, a trade association said yesterday. U.S. Steel, AK Steel and four other steelmakers filed the anti-dumping suit and countervailing duty penalties against hot-rolled steel plates produced by Korean steelmakers, according to the Korea International Trade Association. The suit filed with the U.S. International Trade Commission and the Department of Commerce said that the Korean products received diverse government subsidies, which it claimed have hurt their business.

THE JAKARTA POST Chinese Internet companies are aiming to make Indonesia their respective hubs for the Southeast Asia region, given the country’s population and growing mobile Internet market. UCWeb Inc. managing director for Indonesia, Jonathan Zhong, said that his firm would make Indonesia a hub through which it could expand to other countries in the Southeast Asia region.

“Indonesia is now our biggest market in the region and we want to use Jakarta as a hub to expand to other countries [in the region],” he said.

THE TIMES OF INDIA The government announced a 2.5% increase in customs duty on flat and long steel products, amid a growing clamour for protectionism from the metal industry, which is passing through a rough phase due to a crash in global prices and over capacity in countries such as China.

Several companies such as JSPL and JSW have reported loss in the last quarter and the government is worried that bank loans may be hit due to the adverse financial health of top-notch companies.

THE PHNOM PENH POST Cambodia welcomed around 2.3 million people for the first half of this year, up 4.6 per cent compared to the same period last year, amid concerns from the tourism minister that the Kingdom may not reach its target of 5 million arrivals for 2015. Minister of Tourism Thong Khon said Vietnamese, Chinese and South Korean tourists topped the list of arrivals into the country, but that there was a slowdown from South Korea and Russia. Early estimates for July showed the number of tourist growing, with a slight dip in August numbers so far, Khon said.

T

he sudden depreciation of the yuan will have flowon effects in commodity markets, but reducing China’s demand for imports is unlikely to be one of them.

The yuan has lost around 3.5 percent of its value against the U.S. dollar in domestic trade since the People’s Bank of China this week took steps to devalue its currency, in a move widely interpreted as aimed at boosting the competitiveness of the struggling export sector.

The depreciation was more steep in international markets, where the yuan lost about 4.8 percent of its value as investors feared China was starting a sustained depreciation, which may lead to a global currency war.

Commodity prices, and the currencies of major natural resource exports such as Australia, also took a hit along with the yuan on the view that a weaker Chinese currency will dampen demand for imports.

Brent crude lost as much as 3.6 percent on August 11, the day of the Chinese devaluation, although by the close on Wednesday at US$49.66 a barrel, the decline had tempered to just 1.5 percent.

Spot iron ore lost 0.8 percent from when it lasted traded on August 6 ahead of a fourday weekend in Singapore to Wednesday’s US$55.80 a tonne.

Converting the changes to yuan prices shows that China will only be paying marginally more for major commodity imports, such as crude and iron ore, and certainly way less than it was in recent years.

Brent crude ended Wednesday at 317.05 yuan a barrel, up

1.3 percent from the close on August 10.

However, the yuan price of Brent crude has more than halved since the June last year, when it reached 716.67 yuan a barrel as Brent closed at its 2014-high of US$115.06.

If anything, the yuan price of crude is currently much closer to the 250.24 a barrel from December 2008, reached at the height of the global recession.

This means that the Chinese economy is still receiving a significant boost from cheap energy prices, and the modest depreciation of the yuan so far is barely a blip in that trend.

In iron ore, the yuan price has gone from 349 a tonne on August 6 to 356 at the close on Wednesday, a 2-percent drop.

However, at the end of 2013 iron ore cost 811.91 yuan a tonne and was 1,263 yuan a tonne when the spot price of the steel-making ingredient reached an all-time high of US$191.90 a tonne in February 2011.

Put another way, for the price of iron ore to rise in yuan terms to what it was at the end of 2013, the Chinese currency would have to slump to about 14.5 to the dollar, assuming the dollar price of iron ore remained constant at today’s prices.

Yuan to impact exports, market re-balancing The relatively small movement in the yuan prices of major commodities, especially when the massive declines over the past year are taken into account, make it extremely unlikely that China’s import demand will be affected by currency depreciation.

But that doesn’t mean there won’t be any impact at all.

The clamour for protection from Chinese exports is likely to grow louder, and it’s likely that more countries will seek to impose duties and tariffs on China’s commodity exports

China has emerged as major exporter of mildly beneficiated commodities, such as aluminium and steel products and refined fuels.

The depreciation of the yuan will make those exports more competitive, and it’s likely that Chinese companies will seek to exploit any new-found advantage.

Already, China’s exports of diesel have reached an all-time high of 166,000 barrels per day (bpd) in July, according to a briefing note from consultants

FGE, who also flagged the possibility of higher shipments as export restrictions may be further eased.

Exports of steel products rose 9.4 percent to 9.73 million tonnes in July from the previous month, taking the year-to-date increase to 26.7 percent.

Aluminium product exports are up 28.2 percent in the first seven months of the year, while those of all refined fuels have gained 8.6 percent.

If Chinese commodity companies can secure buyers for their exports, it’s more likely that this will lead to increased imports of raw commodities such as crude, iron ore and bauxite as the Chinese take advantage of their competitive currency devaluation.

Of course, the clamour for protection from Chinese exports is likely to grow louder, and it’s likely that more countries will seek to impose duties and tariffs on China’s commodity exports.

But the main impact of yuan devaluation is that it also causes currencies of commodity producers to decline, with the Australian dollar losing almost 1.5 percent against the greenback on August 11.

This lowers the cost of production, in U.S. dollars, for Australian iron ore miners, thus allowing them to remain in business for longer in the face of low prices.

Any sustained yuan devaluation, as long as it’s matched by currencies in commodity producers, will allow natural resource prices to remain lower for longer, thus inhibiting the rebalancing of oversupplied markets.

Reuters

16 | Business Daily

August 14, 2015

Closing Philippine central bank keeps rates steady

Audi to develop batteries for electric SUVs with Samsung and LG

The central bank held its benchmark interest rate steady for a seventh straight meeting yesterday, saying it stood ready to act on any threats to inflation and financial stability. As expected, the overnight borrowing rate was kept at 4.0 percent, where it has been since September 2014.

The rate on the short-term special deposit accounts (SDAs) rate was also left unchanged at 2.5 percent and the reserve requirement ratio was maintained at 20 percent. Central bank Governor Amando Tetangco said average inflation this year could settle below the official target of 2 to 4 percent.

German carmaker Audi said it will develop batteries for electrically powered sport utility vehicles (SUVs) that can run more than 500 kilometres per charge, in partnerships with South Korea’s LG Chem Ltd and Samsung SDI Co Ltd. The South Korean companies will supply the batteries from plants in Europe, Audi said in a statement yesterday. Audi, Samsung SDI and LG Chem declined to give financial terms of the respective partnerships.

LG Chem’s automotive customers include General Motors, Renault SA, and Daimler AG, while Samsung SDI supplies electric vehicle batteries to BMW and Volkswagen.

Global Chinese consumer leaves no winners in luxury stocks Swatch Group AG, which has lost 8.8 percent in two days, has the biggest exposure to Chinese consumers among foreign luxury brands Camila Russo

T

he rout in European luxury-goods makers is sparing nobody -regardless of how much they sell in China.

Burberry Group Plc and Hugo Boss AG plunged more than 7 percent in two days after China devalued its currency, even though the companies have some of the smallest sales exposure to the yuan among luxury makers, according to Credit Suisse Group AG. That’s because when taking into account purchases by Chinese travelers abroad, most of the companies are just as reliant on the nation, Sanford C. Bernstein says.

“It’s at these times that you understand the extent to which the market of luxury goods is exposed to China and how much it depends on the decisions of the Chinese government,” said Mario Ortelli, an analyst at Bernstein in London.

Looking at individual companies’ sales in the mainland isn’t a reliable

gauge to determine which shares are the most at risk.

Chinese consumers now do more than half of their spending abroad, according to Bank of America Corp.

Burberry gets 11 percent of its revenue in yuan, compared with 7 percent for Hugo Boss, according to estimates by Credit Suisse. Swatch Group AG, which has lost 8.8 percent in two days, has the biggest exposure, with 23 percent.

LVMH Moet Hennessy Louis Vuitton SE and Salvatore Ferragamo SpA sank more than 10 percent in two days.

All those shares rebounded yesterday, along with the region’s equities.

Exports to China

The Stoxx Europe 600 Index tumbled 2.7 percent on Wednesday, the most since October and compared with a gain in the Standard & Poor’s 500 Index. That’s partly because the region sells more to China than the U.S.: The European Union had almost 165 billion euros (US$184 billion) worth of exports to the country last year, compared with US$124

It’s at these times that you understand the extent to which the market of luxury goods is exposed to China and how much it depends on the decisions of the Chinese government Mario Ortelli, analyst, Sanford C. Bernstein

Bloomberg News

Philippine casino operator posts Taiwan consumer prices loss after betting on boom falling in 2015

B

loomberry Resorts yesterday reported multimillion dollar losses as costs soared from the expansion of its Manila operation as well as pioneering investments in South Korea. The operator of Manila’s Solaire casino swung into the red with an after-tax net loss of 786.55 million pesos (US$17 million) in the April to June period.

During the same period last year, the enterprise recorded an 846.59-million peso net profit.

While three-month revenues rose nine percent to 5.986 billion pesos, it said costs jumped even higher, with expenses soaring 59 percent to 6.27 billion pesos.

It said the extra costs were for the opening of a new wing at its Manila casino and investments in a casino in South Korea, the company’s first overseas forays abroad.

Despite the red ink, Bloomberry’s chief executive Enrique Razon remained upbeat as he said the investments would pay off.

Solaire was the first of four planned billiondollar casinos at a seafront enclave in Manila aimed at turning the Philippines into a gaming hub alongside Macau and Las Vegas.

AFP

billion for the U.S. to China, according to the European Commission and the U.S. Census Bureau.

For Berenberg Bank, benefits from Chinese travellers’ spending on the back of a weak euro will probably offset the effect of the yuan’s decline. The potential boost to the Chinese economy from export growth may also increase local demand from Chinese consumers, the Berenberg report said.

Rene Weber, an analyst at Bank Vontobel AG in Zurich, disagrees, saying burdensome import taxes in China will limit increases in local sales.

But the biggest concern for luxury companies is the slowdown of the nation’s economy, he said.

“You have a lot of sales in China, and if you see a strong decline in the economy, it becomes an issue for these companies,” Weber said. “With a deteriorating economy, people cut spending at home and abroad.”

Indian court overturns Nestle noodle ban

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A

aiwan’s central bank said yesterday it expects the headline consumer price index to decline 0.1 percent this year, but that deflation was not a concern.

Central bank deputy governor Yang Chin-long, who hosted an unscheduled news conference, told reporters that core CPI, however, was expected to grow 0.79 percent this year.

The briefing came ahead of the government’s expected downward revision to Taiwan’s economic growth forecast for this year due on Friday, and followed the local dollar’s fall to lows not seen in around five years this week after China devalued the yuan.

Yang reiterated that Taiwan’s central bank would maintain stability in the foreign exchange market and that the forex rate should not swing wildly.

The Taiwan dollar settled stronger at T$32.366 yesterday to the U.S. dollar, rebounding from the T$32.465 close of the previous session, which was a low not seen in more than five years.

With a 1.25 percent loss so far this year against the U.S. dollar, the Taiwan dollar has outperformed its emerging Asia peers.

n Indian court yesterday overturned a government ban on Nestle’s hugely popular Maggi noodles brand, but ordered further tests before the product can go back on sale.

Nestle had gone to the court to challenge the nationwide ban ordered by India’s food safety watchdog in June after tests by some states found lead levels exceeded statutory limits.

The Swiss food giant has always maintained the product is safe to eat, and has continued to sell it in other countries. In its judgement, the high court in Mumbai called the ban “arbitrary” and said it violated the “principles of national justice”.

“We have examined the evidence in great detail.

Since the petitioner Nestle has already agreed not to make and sell Maggi until the food authorities are satisfied, we see no reason to allow any relief to food authorities,” Justice Vidyasagar Kanade told the court.

“We direct that Nestle send five samples from each batch of Maggi for testing to three labs and only if the lead is found to be lower than permitted will they start manufacturing and sale again.”

Reuters

AFP