Macau Business Daily August 17, 2015

MOP 6.00

End of the road

Closing editor: Joanne Kuai

It’s long been rumoured.

Now LRT contractor Mei Cheong says its contract with the gov’t is to be terminated. The decision awaits formal approval by the Secretary for Transport and Public Works. The superstructure of the LRT depot in Taipa has been blamed as the major cause of the whole project’s protracted delay and multi-billion dollar overrun

Year IV

Number 858 Monday August 17, 2015

Publisher: Paulo A. Azevedo

Page 3

Cloud with A Silver Lining

Feeling the pinch. Many sectors took a hit from the depreciation of the renminbi. Recently dropping 4.4 pct, Macau foreign reserves the biggest fall in decades. Fashion clothing retailer I.T. says it’ll lose HK$60 mln converting deposits into at MOP144.6 bln in July Page 4 HK dollars. But some retailers sense opportunity. With many materials bought in from China, operating costs will fall. While the regional market may benefit as Chinese consume closer to home Giordano profits up 20 pct Page

5

International Interline

in first half of the year

Page 5

China Eastern Air buys 15 Airbus jets for US$3.6 bln

Page 6

Carson Yeung freed from Hong Kong jail, granted right to appeal

Valid until the end of the year.

Through parent company Air China, Air Macau is offering international interline flights. Passengers departing Macau Airport can currently transfer to 15 European cities and the Americas via Beijing or Chengdu

Page 7

Page 6

IMF backs depreciation An encouraging step. As perceived by the International Monetary Fund.

China’s move to link the yuan’s value to market forces is the right one, says the IMF. An encouraging step toward what may become a freely floated currency within the next few years

www.macaubusinessdaily.com

Page 10

HSI - Movers

When the chips are down

August 14

Name

%Day

CITIC Ltd

+6.56

BOC Hong Kong Holdin

+2.98

MTR Corp Ltd

+2.08

CK Hutchison Holdings

+1.79

CLP Holdings Ltd

+1.66

China Shenhua Energy

-2.17

Li & Fung Ltd

-2.24

China Resources Powe

-3.51

Want Want China Hol

-4.47

Interview

Lenovo Group Ltd

-5.84

Hitting the right note

Source: Bloomberg

Not too devastating, apparently. Some 61 former VIP gaming club workers have lobbied the Labour Affairs Bureau for help since December. “The re-employment for these laid-off staff is not difficult, with most later hired in a related industry [of gaming],” said Lau Wai Meng, deputy director of the Labour Affairs Bureau. The number of gaming workers dropped by 800 Q-on-Q in 2Q

Page 7

Macau’s music industry remains in its infancy. But it’s progressing steadily, says Ung Kuoc Iang. The co-founder and president of Macau Association of Composers, Authors & Publishers (MACA) says copyright protection is a must for it to develop healthily.

Education is key, as are US-style infringement penalties, he tells Business Daily. Meanwhile, local songwriter talent should be nurtured. With more exposure in what is rapidly becoming an entertainment city

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2 | Business Daily

August 17, 2015

Macau

Public divided on Zone B buildings height The preliminary feedback from the public consultation on the master plan for the reclaimed zones indicates that the local population’s opinion on Zone B is divided João Santos Filipe

joaosantosfilipe@macaubusinessdaily.com

T

he height of the buildings to be constructed on reclaimed land Zone B, which may block views of Penha Hill, is causing controversy among residents.

According to preliminary data released regarding the public consultation on the master plan for the reclaimed zones, from a total of 117 opinions collected up to last Friday, 60 said that that it is important to control the height of the buildings in Zone B to avoid blocking the views of Penha Hill and threatening the World Heritage City status of the territory. Conversely, 57 believe that the reclaimed land will not be properly utilised if building height is too low.

During the meeting between government officials and journalists on the public consultation, the Deputy Director of Land, Public Works and Transport Bureau (DSSOPT), Cheong Ion Man, dismissed concerns about the population density of reclaimed Zone A. “The population density was one of the concerns shared by the public about Zone A. However, this zone can be considered medium density because it will have around 96,000 people, while other zones such as Iao Hon and Horta e Costa districts have a higher density”, Mr. Cheong explained. This area will have 28,000

public housing units and 4,000 private housing units

“Nevertheless, the temporary fuel depot in Ilha Verde will be removed”.

Population density

Fourth connection

Much of the dialogue of the meeting focused on Zone A and the fourth connection between Macau and Taipa, which will dissect this reclaimed area.

“People are concerned that there will not be enough social facilities in this zone. However, the master plan was defined in a way that there are more facilities per person in Zone A than in other regions of Macau”, he said. It was also said that Zone A will have two retirement homes for the elderly plus additional adult day care facilities.

Another question discussed was the new fuel depot, which originally was to be placed in Zone A. However, following the first public consultation on the reclaimed territories, it was decided that it is to be moved. Now the option being studied is to place it on the cross border artificial island of the Hong Kong-Zhuhai-Macau Bridge.

“After listening to the opinions of the population, we’ve decided to move the fuel depot from Zone A to the cross-border artificial island.

However, now we are studying the technical and safety aspects of this decision”, Cheong Ion Man said.

The population density was one of the concerns shared by the public about Zone A. However, this zone can be considered medium density because it will have around 96,000 people, while other zones such as Iao Hon and Horta e Costa districts have a higher density Cheong Ion Man, Deputy Director of Land, Public Works and Transport Bureau (DSSOPT)

In relation to the fourth connection, a decision to build a bridge or tunnel is expected by the end of the year, according to the Secretary for Transport and Public Works. The DSSOPT director said that one of the points essential for this decision is for the connection to be able to be used in spite of weather conditions such as typhoons.

“Our previous consultations showed that the most important thing for the population is to make sure that they can use the connection in spite of weather conditions and that will be taken into account”, he said.

The possibility of introducing a tunnel with a dedicated corridor for motorcycles was also commented upon. “We are studying this option among others. It will depend upon what is expected but there are always solutions. However, our study for the connection from April 2013 finds that the creation of an exclusive corridor for motorcycles would increase the cost of the construction by 24 per cent”, he said, without revealing the final estimated cost. The tunnel would be constructed 50 to 60 metres below the level of the sea. The public consultation on the master plan for the reclaimed land will run until 28 August.

Business Daily | 3

August 17, 2015

Macau

LRT contractor Mei Cheong: Contract termination imminent The company is part of the consortium building the much-delayed Light Rail Transit Depot in Taipa; according to the CEO there is already an agreement with the government to terminate the contract

T

he CEO of Mei Cheong, Wong Chong Fat, has admitted that an agreement with the government to terminate the contract for the construction of the Light Rail Transit (LRT) depot in Taipa has been crafted. Mr. Wong also told the Portugueselanguage newspaper Jornal Tribuna de Macau (JTM) that the agreement is pending the approval of Raimundo Rosário, the Secretary for Transport and Public Works.

“The scope of the negotiations was quite clear.

Now, what we have to do is wait for the final confirmation from the government”, he told JTM before explaining that the draft agreement had been settled by lawyers representing the government and the company. This notwithstanding, Mr. Wong refused to announce the terms of the deal, saying this question should be explained by the government.

For its part, the office of the Secretary for Transport and Public Works said the negotiations are sill ongoing and that some points between the two parties still have to be settled.

Suspending

The contract for the construction of the LRT depot in Taipa was signed with a consortium comprising Mei Cheong and Top Builders. The works involved a payment by the government of MOP555.1 million over four years.

However, Secretary Raimundo Rosário has commented before that the serious delay in the construction of the superstructure of the LRT Depot is the major factor affecting the Taipa route of the project. He also said that if an agreement was not achievable that the matter would be taken to court. Now, after months of negotiations, the situation, it seems, will be resolved.

Initially, in October 2009 the Macau LRT plan declared that the project would be completed in 2014 at a cost of MOP7.5 billion. However, according

to the Third Special Audit Report on the First Phase of the Light Rail Transit System published by the Commission of Audit the indication is that there is a

severe delay on the project and that it will substantially surpass the budget reviewed in 2013, which predicted a cost of MOP14.27 billion.

J.S.F.

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4 | Business Daily

August 17, 2015

Macau Public monthly parking pass fee to increase in Q4

T City's forex reserves at MOP144.6 bln in July

M

acau’s foreign exchange reserves amounted to MOP144.6 billion (US$18.11 billion) as at the end of July this year, representing 13 times the currency in circulation, according to the Monetary Authority of Macau’s (AMCM) preliminary estimate released on Friday.

The reserves increased by 0.4 per cent from the revised value of MOP144.1 billion for June, according to AMCM.

When compared with the same period last year, the reserves increased

by MOP17 billion or 13.32 per cent.

The trade-weighted effective exchange rate index for the pataca rose 0.76 points month-on-month and 7.43 points year-on-year to 104.75 in July.

This index is a gauge of the domestic currency’s exchange rates against the currencies of the city’s major trading partners.

S.L.

he Transport Bureau (DSAT)’s new director Lam Hin San said the government is to “substantially” increase charges for monthly passes for public car parks during the last quarter of the year.

The DSAT head told reporters last Friday after attending a TDM Radio show – Macau Forum – that monthly pass charges at governmentowned car parks will be increased to a level “very close to market prices”. Currently, monthly passes for unreserved parking lots cost MOP500, while those for reserved spaces are MOP1,000.

In April, the government informed the city’s Traffic Affairs Consultative Committee of its proposal to cancel such monthly passes. However, the Secretary for Transport and Public

Works, Raimundo Rosario, denied the plan, only claiming the government will stop issuing new monthly passes.

Mr. Chan told reporters that he perceives this is the most appropriate way to gradually reduce such monthly parking scheme. He claimed that his Bureau will enhance its enforcement to cancel holders’ passes if they fail to submit their fees before the third every month.

Meanwhile, on the radio show, the DSAT leader claimed that he is currently studying how to improve the bus service, whilst saying that the number of buses and lack of manpower are other problems even though the government is asking the bus operators to increase their service frequencies during busy hours.

K.L.

Business Daily | 5

August 17, 2015

Macau

Yuan depreciation loses I.T. HK$60 mln The retailer said the loss is because it converted all its fixed deposits into Hong Kong dollars after the value of the Chinese yuan had dropped.

However, the depreciation is not bad news for all retailers Kam Leong

kamleong@macaubusinessdaily.com

dollar prior to market opening, 1.6 per cent weaker than the previous fix of 6.2298. For the following two days, the central bank continued pushing down the value of the RMB, causing the Chinese currency to drop 4.4 per cent in total, the biggest fall in decades.

Benefits

F

ashion clothing retailer I.T. said the company is to lose some HK$60 million (US$7.5 million) due to the recent renmibi (RMB) depreciation, warning its shareholders that the loss will negatively impact the company’s interim results ended August 31 this year.

According to the company’s filing with the Hong Kong Stock Exchange last Thursday the company had converted all its RMB fixed deposits, amounting to 1.19 billion yuan, into

Hong Kong dollars following the People’s Bank of China (PBOC) lowering the value of the RMB against the US dollar last week.

‘The Group is expected to record a foreign exchange loss of approximately HK$60 million which may have a substantial negative impact on the results of the Group for the six months ending 31 August 2015 as compared to the same corresponding period in 2014,’ the retailer wrote in the filing.

According to another of the company’s filings on Tuesday, it said same-store sales in its Hong Kong market had posted a slight year-on-year decrease of 0.5 per cent for the three months ended May 30 this year, while an increase of 3.5 per cent and 23.2 per cent were registered in its Mainland China and Japan markets, respectively, without providing any financial data.

Last Wednesday, the PBOC set the midpoint rate at 6.3306 per

Nevertheless, for other Hong Konglisted retailers, the devaluation of RMB is not necessarily a bad thing but an opportunity to decrease operating costs.

Clothing retailer Giordano chairman and managing director Peter Lau Kwok Kwok Kuen told Hong Kong media last week that he perceives the RMB depreciation is bringing more benefits than harm to his business.

The Giordano boss said the company’s garments are primarily bought from factories in China, claiming the RMB weakness will reduce the company’s costs. In addition, he claimed that the company had not bought any RMB investment products; as such, the depreciation will not impact Giordano’s assets.

Meanwhile, retailer Oriental Watch’s executive director Alain Lam Hing Lun told Hong Konglanguage media Apple Daily that the depreciation may encourage Mainland residents to stay on the Mainland or go to Hong Kong for consumption.

He also claimed that the watch company does not face any foreign exchange risks as all transactions that the company makes are in Hong Kong dollars. In addition, Mr. Lam perceives it is now time for rent to be adjusted, and hopes rent in Hong Kong will drop 20 to 30 per cent.

Giordano profits up 20 pct in 1H It said the increase in same-store sales, as well as cutting its money-losing stores had boosted profits during the period

C

lothing retailer Giordano International Ltd. saw its profit attributable to shareholders jump 20 per cent year-on-year to HK$208 million (US$25.9 million) during the first half of the year due to its closure of loss-making stores, and growth in same-store sales in its major markets.

The company told Hong Kong Stock Exchange last week that its net sales during the six months reached HK$2.74 billion, which compared to the same period of last year, representing an increase of two per cent.

In the company’s Hong Kong and Macau market, a jump of 8 per cent was registered in its same store

sales although overall sales in the two Special Administrative Regions rose by only two per cent to HK$479 million.

‘Sales growth in Hong Kong and Macau was stronger in the first quarter than the second due to a lower base in

the prior year. During the first half, product mix favoured merchandise with higher prices than in the previous year,’ the company wrote.

In addition, the company closed nine ‘money-losing’ shops from one year ago, reducing its total number of stores in the two cities to 74 from 83. ‘[We are] moving the emphasis of our operations more towards residential areas and away from prime tourist areas where rents have been increasing significantly in recent years,’ it said.

Beyond the SARs

Meanwhile, the company posted a 12 per cent year-

on-year increase in same store sales in its Mainland China market although total sales in the region had decreased to HK$762 million from HK$773 million one year ago.

In addition, Giordano’s same stores sales in Taiwan, and other Asia Pacific countries such as Singapore, Malaysia and Thailand had also increased by 12 per cent and 9 per cent year-onyear, respectively.

However, it noted that its sales in South Korea had experienced a fall of 13 per cent year-on-year ‘due to the impact of Middle East Respiratory Syndrome and weak consumer sentiment in general.’

As at the end of the first half, the company has a total of 2,378 stores globally, some 175 fewer compared to the 2,553 during the same period of last year.

K.L.

6 | Business Daily

August 17, 2015

Macau

Air Macau provides transit flights to Europe, Americas

T

he city’s flagship carrier Air Macau has provided international interline flight tickets with its parent company Air

China, allowing passengers departing from the local airport to transfer for Europe and the Americas in Beijing or Chengdu airports.

According to the official website of Air Macau, the interline flight service is available until the end of the year. In fact, in April this year

the airline’s vice president Liao Hanxi announced the intention of the plan without revealing the available date of the service at that time.

China Eastern Air buys 15 Airbus A330 Jets; Net Gains 300-fold

C

hina Eastern Airlines Corp., the country’s second-largest carrier by passengers, said it will buy 15 Airbus A330 jets with a catalog price of US$3.63 billion to replace retiring wide-body aircraft and meet increasing demand.

The planes are expected to be delivered in 2017-18, according to a Hong Kong stock exchange statement.

The airline also posted an almost 300-fold gain in first-half profit after lower fuel prices reduced costs, and said it will wind up its Jetstar Hong Kong discount carrier venture.

Net income rose to 3.56 billion yuan ($US557 million) from 12 million yuan a year earlier, based on international accounting standards, the Shanghai-based airline said Friday in a Hong Kong stock exchange filing.

The profit was in line the company’s July 15 forecast of 3.5 billion yuan to 3.7 billion yuan.

The first of China’s major airlines to report earnings, China Eastern benefited from a 45 per cent plunge in crude oil prices from a year earlier to an average US$59.35 a barrel in the first half.

Still, the depreciation of China’s currency this week probably will lead to foreign-exchange losses that will hurt Chinese carriers’ fullyear earnings, according to Daiwa Capital Markets Hong Kong Ltd. “We see that the current jet fuel price is already at its 12-month low and we do not expect more downside

surprises over the next 12 months,” Kelvin Lau, a Daiwa analyst, wrote in an Aug. 11 note. Investor sentiment on Chinese airlines probably will turn bearish for the rest of the year on expectations that the yuan will weaken further, he wrote.

Jetstar dissolution

The airline’s board also authorized its president to take up detailed implementation of a resolution to terminate and wind up Jetstar Hong Kong, after the city’s government rejected the budget carrier’s application for an operating license, according to a separate statement to Hong Kong stock exchange.

China Eastern rose 0.9 per cent

to close at HK$5.38 in Hong Kong trading before the earnings. The stock dived 16 per cent this week -- its biggest weekly loss in almost seven years -- after China’s central bank lowered the yuan’s reference rate, cutting its gain to 45 per cent this year.

The airline’s first-half jet fuel spending fell 29 per cent from a year earlier to 10.6 billion yuan, even as aircraft-fuel consumption increased 13 per cent.

“What is quantifiable is the impact on the balance sheet” from the yuan’s depreciation, Geoffrey Cheng, BOCOM International Holding Co.’s head of transportation and industrial research in Hong Kong, said in an

The Air Macau website indicates passengers can travel from Macau to a total of 15 European cities such as Frankfurt, Rome, London, Paris and Madrid by transiting at Beijing Airport.

In addition, flights to the Americas are available for passengers stopping over in the Chinese capital, with destinations including Canada’s Vancouver, Brazil’s São Paulo, and five cities in the United States; namely, Los Angeles, New York, San Francisco, Washington, and Hawaii.

The route will also provide flights to Mongolia and the Russian Far East city of Chita.

Meanwhile, for those transferring at Chengdu, flights to Mumbai in India, Kathmandu in Nepal, Karachi in Pakistan and Frankfurt in Germany have been offered.

Currently, the city only has direct international flights to a total of eight Asian countries or regions; namely, Taiwan, Thailand, Japan, South Korea, Malaysia, the Philippines, Vietnam and Cambodia. For other international flights, such as to Europe, local travellers had to go for nearby airports, such as Hong Kong or Zhuhai prior to Air Macau’s new service.

K.L.

Aug. 11 phone conversation. What can’t be measured “is how this will affect Chinese travelers’ appetite for U.S. travel, which Chinese airlines have been expanding rapidly,” he said.

Yuan depreciation

Every 1 per cent depreciation of the yuan will negatively affect 2015 earnings by 8.2 per cent for China Eastern, 6.4 per cent for Air China Ltd. and 7.6 per cent for China Southern Airlines Co., Citigroup Inc. analysts led by Vivian Tao wrote in an Aug. 11 note.

Delta Air Lines Inc. will invest US$450 million to take a 3.6 per cent stake in China Eastern, the Shanghaibased carrier said last month. The move expands a partnership that will allow both airlines to better compete on routes across the Pacific. China Eastern also plans to sell 15 billion yuan of new domestic shares.

China Southern is scheduled to publish earnings on Aug. 28.

Bloomberg

Business Daily | 7

August 17, 2015

Macau

DSAL: 61 employees laid off from VIP clubs sought government help The Labour Affairs Bureau stresses that re-employment for former VIP gaming clubs’ workers is not difficult, with most of them getting new jobs in the gaming field Stephanie Lai

sw.lai@macaubusinessdaily.com

T

he city's Labour Affairs Bureau (DSAL) said it has so far received a total of 61 former employees of VIP gaming clubs requesting employment aid since December, of whom 17 have already arranged job matching via the government.

The figure was given by the Bureau's deputy director Lau Wai Meng to reporters on Saturday on the sidelines of an event.

The 61 individuals in question approached the Labour Affairs Bureau for help on layoff compensation, according to Mr. Lau. “The number of cases for this

issue is not a lot,” he told media.

“Since December, we’ve received complaints [regarding termination of employment by VIP gaming operators] from 61 employees involving layoff compensation.”

“The re-employment for these laid-off staff is not difficult, with most of them later hired in a related industry [of gaming],” the Bureau deputy director briefly added.

VIP slump

In response to Business Daily’s enquiries, the Labour Affairs Bureau said these 61 employees had been hired by nine VIP clubs in the city

but the Bureau did not have data on the name of the firms nor the number of VIP gaming operators’ closures or restructuring involved.

The Association of Gaming and Entertainment Promoters of Macau gave us a rough estimate in early August that the city has seen about 30 per cent less or about 60 fewer VIP gaming promoters working here compared to 2013. The continuously weak VIP play, impacted by Beijing's ongoing anti-graft policy, has caused VIP customers to sidestep Macau to avoid scrutiny.

The onset of closures or restructuring of local VIP gaming

promoters, which started last year, has resulted in about 148 junkets still operating gaming in VIP rooms, scaled down from the peak of about 213 junket firms in 2013, Association president Kwok Chi Chung said at the time.

Of Macau’s 398,000-plus employed population, some 83,800 individuals, or 21 percent, were working in the gaming sector or involved in junket activities as at the end of the second quarter, Statistics and Census Service said. The number of gaming workers has dropped by 800 quarter-on-quarter, according to the census data.

Carson Yeung freed from Hong Kong jail, granted right to appeal

C

onvicted former Birmingham International Holdings Ltd. chairman Carson Yeung Ka Sing was freed from jail on Friday when Hong Kong’s top court granted him the right to appeal against his conviction for money laundering.

Mr. Yeung, part-owner of English football club Birmingham City, was freed on bail of HK$7 million and cash sureties of HK$6 million.

Chief Justice Geoffrey Ma Tao Li said he granted Yeung leave to appeal based on legal questions raised in written submissions by barrister Clare Montgomery QC, Hong Kong's South China Morning Post reported.

Yeung's appeal hearing is slated for May 31 next year.

In March last year, Yeung was sentenced to six years in jail on five counts of money laundering. He had previously denied the charges

of laundering HK$721.3 million between January 2001 and December 2007, including cheques from a Macau casino operator and the Neptune Club.

As a condition of his release, Yeung cannot leave Hong Kong and must report to the police station on The Peak three times a week.

Yeung stepped down from his chairmanship at Birmingham City Football Club prior to his conviction in 2014 but remains the major shareholder of Birmingham International Holdings Ltd., the club’s Hong Kong-listed parent company.

Trading in the shares of Birmingham International were suspended in December.

The company has been run by receivers Ernst & Young since February, which is now in negotiations with the club’s preferred bidder.

S.L.

8 | Business Daily

August 17, 2015

Macau

MACA: Awareness of performance rights still needs strengthening The nascent local music industry is in a better business condition than before with the support of a huge gaming industry and a collective management organisation to address royalty issues. But a citywide awareness of intellectual property rights in particular, performance rights - still needs strengthening, says Ung Kuoc Iang, a founder and president of Macau Association of Composers, Authors & Publishers (MACA).

Stephanie Lai

sw.lai@macaubusinessdaily.com

What is the background of MACA’s establishment?

In 1993/1994, I sent some demos to Hong Kong record companies and eventually Polygram signed me up as an exclusive writer.

Consequently, I was signed up as a member of CASH (Composers and Authors Society of Hong Kong Ltd).

Around 2000 to 2003, I always travelled between Hong Kong and Macau and I heard many of my works played [without public performance licensing]. So I asked CASH about it and they said they could do nothing. Because the copyright law is different in Hong Kong, Macau and Mainland China. So it’s hard to execute the law cross-border and you have to have a local collective management organisation (CMO) to ensure the copyright law is executed. So, with some songwriter friends, we sent a letter to the International Confederation of Societies of Authors and Composers (CISAC) [to establish MACA]. In 2004, their regional director [for Asia Pacific] came over here to communicate with us on the subject.

After some five years, on 6th November 2009, MACA was officially established.

The first licence [for public performance licence] was signed

in MACA’s debut activity, the 23rd Macao International Music Festival.

It took us five years because CISAC had to understand if you could really be committed to the works.

CISAC can, first of all, fund you to have a working space. Second, you keep their royalties and each year you help them to collect the money. So if they found you untrustworthy, they would consider it a risk. CISAC has two meetings for Asia Pacific every year. And it’s only after some ten meetings that they decided to have us as a trusted unit and member of the confederation.

What are the criteria you have to meet in order to be a member of CISAC? The society has to be formed of music writers. In the beginning I had found some non-music writers that were willing to invest in this field but that was not accepted

by CISAC. Later, we eventually gathered some music writers that were active in Hong Kong and here to form the society, around 20 writers in total.

For CISAC, it really took them some time to analyse the local market to see if it was mature enough [for the establishment of MACA]. As early as 2000, they had already conducted research

You can see that the cultural and creative industry in Japan is self-sufficient and vibrant. But when you look at other territories in Asia, like Mainland China or Southeast Asia, the infringement of copyright issues is still serious and this is an important factor that affects how well the music industry can grow

into the subject and the conclusion they reached at the time was that Macau was not yet a mature market. That was a time before the liberalisation of the casino business. But afterwards, in 2004, they saw that music usage would increase a lot following the openings of the casinos here.

So, they decided to observe for a few more years and eventually approved us as a member.

Looking back, when MACA first approached businesses here to request the collection of a tariff [for broadcasting copyrighted music in public venues], what was that like?

For the big international brands, they had long been accustomed to following the tariff and so they were the easier parties to discuss with on the subject of public performance licensing.

But for local retail units, it was more difficult to discuss the tariff issue with them. We had one local retail unit responding in a conservative fashion; whilst they said they respected us they were not willing to apply for the public performance licence and pay royalties. So, this is what I thought was the common problem CISAC had found here before in its research prior to 2003.

Business Daily | 9

August 17, 2015

Macau Does this problem exist today?

Yes, it does. Although the case I’ve mentioned is rather extreme, I still felt that for some reason for Asia, except Japan and South Korea, its understanding of intellectual property is relatively weak compared to the mature markets of Europe, for instance.

You can see that the cultural and creative industry in Japan is self-sufficient and vibrant. But when you look at other territories in Asia, like Mainland China or Southeast Asia, the infringement of copyright issues is still serious and this is an important factor that affects how well the music industry can grow.

Aside from education, what can be done to enhance the awareness of intellectual property rights here?

Enhancing the penalties for violating the rights, just as the U.S.! Here, the common scenario is that most units will only be aware of the royalties issue after we have approached them.

In Macau, there’s an annual adjustment in the tariff for public performance of music following the changes in the composite price index (CPI). But there’s no copyright tribunal here to handle the disputes over tariff terms . . .

Macau doesn’t have many musicians and the market is a small one, but everyone still has a chance to run his or her own business.

Business conditions are much better than before: at least now you have the support of CMO and more support from the gaming industry

No, we don’t have such an organ here, the existence of which, of course, we would welcome. This is an issue that we’ve reflected to the government before, and I think they’re aware of it. But perhaps as the issue is a complex one the government need more time to figure it out.

In MACA’s experience, have there been any disputes over the tariff for public performance licensing?

Most cases are commercial units asking for a discount on the tariff, which we cannot do because we’re not selling music but collecting the royalties for artists. So, in some of the cases either the businesses have stopped playing the copyrighted music, or they ignore us and continue to play them without paying royalties.

You say only one of the six casino operators has yet to agree with MACA on the signing of music public performance rights licensing. Would you conclude that the casino operators here are supportive of MACA?

Yes, and for them it’s corporate social responsibility. Now only one casino operator is left because they have researched the local market, and they did not agree to the tariff we listed. But meanwhile, for SJM, aside from signing the public performance licensing agreement with us, they have also agreed to play songs of local artists in their venues as background music, which is a specific agreement that they have spelled out and is different from the other operators.

Five or six years is not really a long time for the casino operators to agree to signing such a licensing agreement with us because first of all, as I said, it really took us some time to prove ourselves as a valid CMO since our establishment in 2009.

Last year, the resolving of a court case [disputing public performance licensing] was really an important defining line for us. Winning the case is strong proof of our status.

Performance rights and royalties For Macau, the exercise of performance rights and royalties is regulated by copyright law No.43/99/M, which does not specify a fine for the infringement of such rights.

Being the Collective Management Organisation (CMO) of Macau that handles performance rights licensing, MACA publishes the tariff for the music to be performed live or broadcast in various business venues on its own official website – [a tariff] adjusted annually following official composite price index (CPI) fluctuations.

The tariff is also a reference for the courts to judge the violation of public performance rights and compensation involved along with other factors such as the venue where the music is played, frequency of playing, etc.

Different to performance rights or licences, a mechanical licence refers to permission granted to mechanically reproduce music in various types of media for public distribution, such as CDs. This type of licence and related disputes is usually handled by music publishers or record companies.

So when did this case take place and can you tell us more about it?

The case took place in 2013.

They had played our songs without obtaining a public performance licence. But because of a confidentiality agreement, we cannot say much about the case, including the compensation amount.

MACA currently has two ongoing lawsuits regarding the infringement of public performance rights licensing?

Yes. One of them involves a retail unit.

Can you say we now have a more established music industry in Macau?

I think we’re still at the infant stage when compared with other regions. But if we measure against ourselves, what we see now is that we’re now reaching a peak – we have been participating much more in music festivals, competitions and music productions. In terms of numbers, we have around 1,000 songs produced here by local member artists. Four or five years ago, we had an addition of only about 10 songs annually; but now, it’s over a hundred more every year. In Hong Kong, the addition is like 500 songs per year.

But the problem remains as we only have the same handful of artists producing and performing all of these songs here.

More song productions but what about the quality of local songwriters and performers?

They have also improved, especially now that there are more learning opportunities available and that there are more diverse types of musical instruments, and more accessible tools online to teach you how to make music.

More casinos are opening and they present a good opportunity for musical development here. But looking at ourselves, at a casino which pools over 10,000 songs in its database, we have only 1,000 for them to select. The issue is how much capacity we can achieve in order to have a higher gain of the local market.

With local artists, the issue is how they can find their own style. If they just copy the K-Pop model, it’s not going to work out – as you see in the case of Hong Kong’s pop music industry which now has diminishing influence compared to a decade ago. We’ve seen some local bands that have their style, and with more time and polishing they can probably stand out.

In the past few years, have more entertainment and artist management companies been established here?

For the big international brands, they had long been accustomed to following the tariff and so they were the easier parties to discuss with on the subject of public performance licensing.

But for local retail units, it was more difficult to discuss the tariff issue with them

Yes. These companies take jobs from both the government and private sector, like the casinos.

Up to now there are about 10 entertainment and artist management agencies, with the major players Chessman Macau and 100 Plus Music.

Still, it’s not easy to keep an artist. For their grooming and song production costs, you have to spend like MOP80,000MOP100,000 a month. But you only receive MOP8,000 for singing at a show and perhaps you can get three shows a month. It’s not easy to sustain the [music] business here, especially with a company that doesn’t have a special background [of resourceful financing].

So how would you comment on the outlook for the local music industry?

It’s good. Macau doesn’t have many musicians and the market is a small one, but everyone still has a chance to run his or her own business.

Business conditions are much better than before: at least now you have the support of CMO and more support from the gaming industry.

In the long term, the city is going to develop itself as an entertainment hub. And we’ve seen that at [Galaxy Entertainment Group’s] Broadway Macau musicians from Taiwan and Thailand have been invited to play there [although] I think they can actually consider using more local artists, and in a more permanent fashion.

10 | Business Daily

August 17, 2015

Greater China

IMF says yuan reforms could lead to floating rate The IMF said China should allow its economy to continue slowing over the next year as it presses forward with more market-based reforms Howard Schneider

R

ecent changes to how China manages its currency could bring the country “quite close to a float” in its exchange rate, a top International Monetary Fund official said on Friday in a review of the country’s economy.

The new system in theory could allow the currency value to move as much as 10 percent a week and be close to a rate that markets might set on their own, Markus Rodlauer, the IMF’s mission chief for China, said.

Authorities are still likely to intervene in currency markets for now, Rodlauer said, but “this lays the basis for greater flexibility. ... We don’t expect a free-floating system tomorrow. We expect some continued management. But we hope it will gradually lead to more flexibility and a float within two to three years.”

Rodlauer said that even with the decline of the yuan’s value that followed introduction of the new system, the IMF feels the Chinese currency is no longer undervalued an important acknowledgement on an issue that has roiled trade and political relations between China and the United States.

Rodlauer’s comments came as the IMF released its annual review of

China is transitioning to a new normal, with slower yet safer and more sustainable growth China’s annual review, IMF

IMF headquarters at Washington

China’s economy, a report completed before the new currency policy was announced this week.

The IMF said China should allow

its economy to continue slowing over the next year as it presses forward with more market-based reforms to its credit and financial systems.

China remains vulnerable to a financial shock, continues to run a large current account surplus, and could pose a risk to global growth if its continued transition to a marketbased economy is not managed well, the IMF wrote.

The report follows a tumultuous year in which China’s ebbing growth, plummeting demand for commodities and stock market volatility made the once roaring Asian giant seem scarily vulnerable.

Failure to continue needed financial and other reforms, the fund said,

Securities regulator says market forces to play bigger role The comments are the clearest signal yet that the government could be gradually ending its support measures for the equity market

C

hina’s securities regulator said on Friday that the government will allow market forces to play a bigger role in determining stock prices, the first official signal from Beijing that it could be moderating its efforts to prop up its equity markets.

However, the regulator also said that it would continue to intervene as necessary to maintain stability and avoid systemic risk.

“With market fluctuations gradually shifting to normal, from wild and abnormal, we should let the market exercise its function of selfadjustment,” the China Securities Regulatory Commission told a news conference in Beijing.

However, the watchdog said that China Securities Finance Corp (CSF) - the state margin lender that was tasked with buying shares during the market slump would continue to play its stabilizing role for the next few years.

The comments are the clearest signal yet that the government could be gradually ending its support

With market fluctuations gradually shifting to normal, from wild and abnormal, we should let the market exercise its function of self‑adjustment China Securities Regulatory Commission

measures for the equity market and are likely to be in focus when China’s stock exchanges open for trading today.

These measures, which have included a ban on stake sales by major shareholders and liquidity support from the central bank, were aimed at stemming a midJune market rout, but drew criticism over their bluntness.

The CSRC did not say whether it would halt any specific forms of intervention.

CSRC said on Friday that CSF has recently transferred some shares it bought during the sell-off to Central Huijin, an investment unit of sovereign wealth fund China Investment Corp, and Huijin will become a longterm holder in those stocks.

“Today, CSF transferred some listed companies’ shares

to Huijin. Huijin will strive to keep and increase the value of the assets, based on longterm investment philosophy,” Huijin said in a statement on its website.

When the market experiences abnormal fluctuations and threaten to cause systemic risks, CSF will continue to help stabilize the market using various measures, CSRC said.

Reuters

Business Daily | 11

August 17, 2015

Greater China “continues to pose the biggest risk to the outlook. If realized, it could result over the medium term in a disorderly correction,” - the “hard landing” that some analysts worry could damage the global economy or leave the country stranded at its current low level of per capita income.

The fund’s annual report gave Chinese authorities positive marks for managing the recent slowdown of their economy, beginning to liberalize the financial system, and starting to curb some of the over-investment in real estate and other assets that are considered a risk to financial stability.

“China is transitioning to a new normal, with slower yet safer and more sustainable growth,” the IMF said, noting that the country had slowed credit growth by more strictly regulating shadow banks, managed through a stock market downturn, and is gradually moving to more consumption-based growth as the IMF and others have recommended.

Over reliance on investment is considered a key risk in China, with local governments and banks investing heavily in real estate and other projects that may not be economically viable.

As the shift away from investment continues, the IMF said, the country should prepare for slower growth in the medium term. The IMF said officials should “calibrate” fiscal and other policies toward a growth rate of as little as 6 percent next year, compared with an estimated 6.8 percent this year and growth in excess of 10 percent before the 2007 global financial crisis.

Trouble in China has held down global commodity prices and posed a risk to growth in other countries, including the United States. While cheaper oil and copper helps consumers and producers, it has also bedevilled officials at the Federal Reserve and other central banks trying to forecast inflation.

Reuters

Net FX selling points to big outflows

C

hina’s central bank and commercial banks sold a net US$38.9 billion in foreign exchange in July, the biggest sales on record, official data showed, indicating big capital outflows as well as suspected intervention to prop up the exchange rate.

Any intervention may have slowed in August after a surprise devaluation, but economists warn that the weaker currency may encourage more capital flight.

The yuan held steady against the dollar on Friday after suspected intervention by the central bank to get the volatile market to settle into a range and to curb expectations the currency would fall into a depreciation cycle.

Net foreign exchange selling amounted to 249.1 billion yuan in July, according to Reuters calculations based on central bank data released on Friday.

That selling was the biggest since 1998 when central bank data first became available. It followed net sales of 93.7 billion yuan in June.

Concern over China’s economic slowdown and possible interest rate rises by the U.S. Federal Reserve had led to a wave of capital outflows, although Chinese officials said that should not be considered capital flight.

The gold reserves stood at 53.93 million troy ounces by the end of July Judy Hua and Manolo Serapio Jr

C

Billionaire George Soros’s family office sold almost all of its stake in Alibaba Group Holding Ltd. in the second quarter, as Asia’s largest Internet company saw its stock decline further because of a slowing Chinese economy. Soros Fund Management owned about US$370 million of Alibaba’s American depositary receipts at the end of the first quarter. As of June 30, it held a stake worth US$4.9 million, according to a regulatory filing Friday. Alibaba has lost about US$100 billion of its value since November’s record high.

Concern over economic slowdown and possible interest rate rises by the U.S. Federal Reserve had led to a wave of capital outflows

Gold holdings up in July in 2nd monthly update

hina’s gold reserves rose by nearly 19 tonnes in July from June, the central bank said on Friday, disclosing its holdings for the second time in two months in a move seen as a Beijing bid to increase transparency.

Before China announced its gold holdings for end-June last month, the last time it had adjusted its reserves figure was in April 2009.

The gold reserves stood at 53.93 million troy ounces by the end of July,

Soros sells most of Alibaba stocks

up from 53.32 million at end-June, the central bank said, an increase of about 610,000 troy ounces or nearly 19 tonnes. The increase is equivalent to about US$680 million at current prices.

“If they’re now reporting every month and the numbers are different then it certainly does a lot for the transparency of the gold market in China,” said Victor Thianpiriya, commodity strategist at ANZ Bank in Singapore.

Hugo Boss to boost presence in mainland Haibin Zhu, China economist at JPMorgan, estimated capital outflows totalled US$340 billion in the year spanning the third quarter of 2014 to the second quarter of 2015.

“The magnitude and the duration of capital outflows are unseen in China,” he said in a recent research report.

Recent outflows have put pressure on the central bank to cut banks’ reserve requirements to spur credit growth at a time when economic growth in 2015 is grinding towards a 25-year low.

“We may still see net foreign exchange selling in August as the yuan is depreciating and the central bank has clearly stepped in the market,” said Lin Hu, an economist at Guosen Securities in Beijing.

“The possibility of cutting reserve requirement ratios is very high.”

Reuters

KEY POINTS Reserves updates seen coming more frequently in transparency bid Holdings rise to 53.93 mln troy oz, from 53.32 mln at end-June

China had previously considered its gold holdings a state secret and did not report its holdings on a monthly basis to the International Monetary Fund as most other countries do.

But Beijing has been campaigning for the IMF to include the yuan in its special drawing rights basket, currently made up of dollars, yen, pounds and euros.

“It is possible China’s devaluation was a pre-emptive move to stem the flow of funding back into the U.S. dollar,” brokerage SP Angel said in a note.

China’s latest disclosure of its gold reserves had little impact on spot prices, currently up 0.3 percent at US$1,118.06 an ounce, and off Thursday’s three-week peak of US$1,126.31.

“The news is bullish at first glance, but the monthly volume of 19 tonnes is maybe less than some would have expected,” Commerzbank analyst Carsten Fritsch told the Reuters Global Gold Forum.

Reuters

German fashion house Hugo Boss will expand its presence in China, key shareholder Gaetano Marzotto said in an interview in newspaper Welt am Sonntag. Despite slowing growth in the world’s second-largest economy, Marzotto told the paper that he saw the potential for higher sales in China.

“Up until now China accounts for less than 10 percent of group sales, this could be ramped up,” Marzotto said in an advance extract of an interview. His family clan holds a 7.95 percent stake in Hugo Boss, making it the company’s biggest shareholder.

EU increases duties on solar glass imports The European Union on Friday increased anti-dumping duties on imports from China of glass used in solar panels, saying products were still being sold at unfairly low prices that threaten European manufacturers. The European Commission imposed duties ranging from 17.5 to 75.4 percent, according to a decision published in the Official Journal of the EU. The Commission had in 2014 imposed anti-dumping duties of between 0.4 and 36.1 percent following a complaint from a group of producers called EU ProSun, whose members account for more than a quarter of the EU’s total production of solar glass.

Taiwan growth to be slowest in six years Export-dependent economy will grow at its slowest pace in six years this year as a contraction in exports deepens, raising the odds of more policy easing to support growth. The deteriorating outlook increases the chances that Taiwan’s central bank will cut rates or borrowing costs, economists say, though many agree such moves won’t go far to counter weak global demand and eroding profit margins at technology companies. Gross domestic product is forecast to grow 1.56 percent this year, worse than the 3.28 percent growth predicted in May, the chief statistics agency said.

Hong Kong posts steady Q2 GDP The economy grew a seasonally adjusted 0.4 percent in the three months to June compared with revised 0.7 percent growth in the first quarter. From a year earlier, the economy expanded 2.8 percent in the second quarter compared with a revised 2.4 percent in the previous quarter.

The government revised up its economic growth forecast for 2015 to 2-3 percent from 1-3 percent. Economic growth for the April to June quarter was forecast to have expanded 2.1 percent, according to a Reuters survey. Exports fell 3.6 percent in the second quarter in real terms.

12 | Business Daily

August 17, 2015

Asia

Modi says not just for big business Conservative government has disappointed some who expected him to slash the red tape of India’s socialist past Rupam Jain Nair and Frank Jack Daniel

I

ndian Prime Minister Narendra Modi on Saturday sought to shed an image that he governs for big business, vowing to help the poor and create jobs in a speech aimed at bolstering popularity rather than tackling setbacks to economic reform plans.

Modi took office just over a year ago on a wave of optimism that he would quickly revive India’s economic fortunes but despite a number of victories, opposition to land and tax shake-ups has slowed his progress.

Modi’s independence day speech focused on measures his “Team India” had rolled out to include millions of poor Indians in the banking and insurance systems, policies for workers and farmers and successes in the fights against inflation and corruption.

“Farmers need protection. For 60 years very little attention was paid to their welfare. We want to change this approach,” he said in his second annual address from the ramparts of the Mughal era Red Fort in New Delhi.

But he made no mention of his flagship “Make in India” project aimed at speeding up India’s industrial revolution, and did not talk about weeks of opposition in parliament that have stalled his plans for proindustry land and tax reforms.

KEY POINTS Farmers need protection, PM says Appeals for all to get electricity in 1,000 days Comments precede tight election in rural Bihar state

Indian Prime Minister Narendra Modi addresses the nation from the Red Fort in New Delhi, India, 15 August 2015. Prime Minister Modi hoisted the national flag at the Red Fort to mark India’s 69th Independence Day and said that he is ‘determined to end the termite of corruption’

Modi first mentioned “Make in India” on independence day a year ago, when he called on investors to set up in the country. That programme has had some successes, with Taiwan’s Foxconn unveiling a US$5 billion investment last week.

But Modi’s party is facing a tightly fought election in the rural state of Bihar in a few weeks where the

opposition is seeking to paint him as a “suit, boot” politician whose policies damage the poor.

Repeatedly dabbing his face in the humid morning, Modi said he had done more for villagers than any other government.

Modi, himself from a poor family, said he was considering incentives for manufacturers to create more

jobs and promised to make hiring of blue collar workers merit-based in a culture where it often depends on personal connections.

He coined the phrase “start-up India” in a pitch for more people to get entrepreneurial opportunities and called for states to provide electricity for all within 1,000 days - a vast project given that thousands of villages are not on the grid.

The slower-than-expected reform pace since Modi stormed to office with India’s first lower house majority for a conservative government has disappointed some who expected him to slash the red tape of India’s socialist past.

Indonesia’s Widodo takes swipe at egos blocking economic progress Economic growth slipped to 4.67 percent, its slowest pace in six years, in the second quarter amid drooping domestic demand and sliding prices for coal and commodities

I

ndonesian President Joko Widodo (pictured) on Friday called on bureaucrats and politicians to set aside their egos and work together to revive an economy whose growth has slumped since he took office last October.

In a state-of-the-nation address, he took a swipe at bickering across government agencies and political parties that has hamstrung his administration and disappointed both investors and voters who had high hopes he would turn the economy around.

“To overcome the issues this country is currently facing we have to work shoulder to shoulder. We should not be divided by political or short-term interests,” he told parliament in a speech delivered ahead of the Southeast Asian nation’s 70th anniversary of independence from Dutch colonial rule.

“The erosion of a culture of mutual respect and tolerance in official institutions such as law enforcement agencies, communities, media and political parties, is causing this country to be caught in a web of egos.”

Widodo also unveiled in a separate speech his proposed budget for 2016, in which he promised 5.5 percent growth, which was seen by economists as overly optimistic.

“It’s hard to see Indonesia getting close to growth of 5.5 percent next year, given that commodity prices are likely to remain low and monetary policy relatively tight,” said Dan Martin at Capital Economics.

“The main hope is that the infrastructure drive takes off, but implementation and bureaucratic problems will inevitably stand in the way.”

Widodo, whose government has struggled to disburse funds for roads, ports and power stations, pledged an 8 percent increase to 313.5 trillion rupiah (US$22.74 billion) in

Reuters

spending in infrastructure in the hope that it would have a knock-on effect on investment and consumption growth.

After 10 months in office, many of Widodo’s economic programmes have struggled to get off the ground.

The 54-year-old president this week hit the reset button on his government, replacing two key economic ministers and installing two experienced technocrats who are expected to improve policy coordination and dispel concerns that Indonesia is taking a protectionist turn to shield its economy.

However, some analysts doubt that Widodo is willing to embrace radical reforms that could prove unpopular.

“Prospects for some economic reforms do now exist to some extent with the new cabinet ... but he’s not inclined to institutional reform because he’s still not emphasising issues such as land acquisition and civil service reform,” said political analyst Kevin O’Rourke.

Reuters

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 17, 2015

Asia Japan Post’s US$11 billion triple listing expected November 4

Vietnam steps up reform in another lender

The Finance Ministry, which owns the company, aims to retain a one-third stake once all three tranches of the sale are complete

J

apan Post Holdings is expected to list shares in its holding company and bank and insurance units on November 4, several people close to the deal said on Friday, in Japan’s biggest sale of state-owned enterprises in nearly three decades.

The government aims to sell at least 1.3 trillion yen (US$11 billion) worth of shares, the sources said, in the first tranche of a three-part sale aiming to raise around 4 trillion yen over the coming four to six years to fund reconstruction from Japan’s 2011 earthquake and tsunami disaster.

The mammoth IPO, a decade in the making, reflects Prime Minister Shinzo Abe’s push to invigorate the nation’s big public financial institutions and help lift the world’s third-biggest economy out of two decades of deflation and tepid growth.

The proportion of the offering reserved for domestic investors was boosted to 80 percent from the roughly 50-50 split initially envisaged between foreign and domestic sales, a Finance Ministry official said, after Abe pushed for greater participation by domestic investors.

The sale also helps the government exploit a doubling in Tokyo stock prices since Abe took office in December 2012 as it seeks revenue and struggles with the industrialised

Indonesian investment board sees FDI increase world’s biggest public debt burden.

Companies raised US$11.4 billion in IPOs in Japan’s stock market last year, Thomson Reuters data show, up 17 percent from 2013 and 55 percent more than the average of the previous five years. That slowed to US$2.4 billion in the first half of this year but the Japan Post listing, as well as expected IPOs from Osakabased Universal Studios Japan and messaging app creator Line Corp are set to boost the total significantly.

Mammoth IPO

The first round of share sales would be Japan’s biggest privatisation since the 2.4 trillion yen listing of Nippon Telegraph and Telephone Corp in 1987.

Singapore closer to tweaking policy after yuan drop Monetary policy is focused on the exchange rate rather than interest rates due to the trade-dependent nature of its economy Masayuki Kitano and Jongwoo Cheon

S

ingapore’s central bank may have more reason to consider adjusting monetary policy settings after China’s surprise devaluation triggered a fall in the Singapore dollar, a Reuters poll showed.

Six of 11 analysts in the survey, conducted between Tuesday and Friday, said yuan devaluation could add to the case for the Monetary Authority of Singapore (MAS) to tweak its policy settings.

To be sure, none of the 11 shifted

The State Bank of Vietnam (SBV) said on Friday it would place DongA Bank (DAB) under “special surveillance” and remove many of its key officials after finding a series of violations at the unlisted lender. The central bank is restructuring Vietnam’s fragmented and once bad-debt-laden banking sector by pushing for stricter lending and debt classification rules, takeovers of weak lenders and fraud investigations.

Investigations showed DAB’s violations before 2012 have seriously hurt its financial and operational performances, SBV said, adding it would appoint officials from BIDV to join DAB’s leadership.

their views toward monetary easing based solely on the August 11 yuan devaluation.

The three analysts who expect MAS policy easing in coming months as their base case all held such views even before China’s surprise action, which fanned concerns about the health of the world’s second-largest economy.

Hirofumi Suzuki, an economist for Sumitomo Mitsui Banking Corp, had previously expected the MAS to ease in October.

Despite the looming flood of fresh supply, market participants believe the launch will on balance be positive for the market by encouraging more people to buy stocks.

Japan Post, which runs the nation’s mail-delivery service, applied to the Tokyo Stock Exchange in June to list the parent as well as Japan Post Bank Co and Japan Post Insurance Co. Approval from the bourse is expected on Sept. 10, said the sources, who asked not to be named as the information is not public.

The group’s consolidated net asset value was 15.3 trillion yen at the end of March.

Reuters

The yuan devaluation, however, “will reinforce incentives for the MAS to ease its monetary policy in an inter-meeting period,” he said, adding that such easing may even happen this month.

The Singapore dollar closely tracks the yuan because traders think the yuan is included in the undisclosed, trade-weighted currency basket used by the MAS to manage monetary policy.

Some analysts say the Singapore dollar’s nominal effective exchange rate (NEER) probably fell to around the bottom of the policy band during the week.

Analysts at Morgan Stanley said yuan devaluation poses risks for MAS policy, adding that a case could be made for lowering the mid-point of the policy band.

The MAS eased policy in January in an off-cycle policy decision.

Its next scheduled review is in October.

Another uncertainty is whether spill over effects from a weaker yuan will add to disinflationary pressures in Singapore. Core inflation in June was 0.2 percent year-on-year, having hit a five-year low of 0.1 percent in May. Reuters

Indonesia is looking at a 14-15 percent increase in foreign direct investment next year, an official with its investment board said on Friday. Azhar Lubis, deputy head of the Indonesia Investment Coordinating Board, said 386.4 trillion rupiah (US$28.03 billion) of foreign investment was expected next year, mostly for infrastructure and manufacturing.

Malaysian PM announces panel to guide funding Prime Minister Najib Razak, under investigation for a 2.6 billion ringgit (US$671 million) donation deposited into his private bank account, on Friday announced a committee to set guidelines on political funding. The National Consultative for Political Financing Committee will be led by two ministers and will ensure any money received for the purpose of politics is done so with “integrity”.

“Now there aren’t any regulations, so there’s no benchmark as to what’s right and what’s wrong,” Najib told reporters.

“With this we can show that we are practising the best practices.”

Thai economic growth seen slowest since coup Thailand’s on-quarter economic growth in April-June is expected to be the weakest since the coup of May 2014, a Reuters poll found, as falling exports, tumbling manufacturing output and subdued domestic demand take their toll. The economists polled expected that data from the state planning agency due out on Monday would show gross domestic product (GDP) in April-June growing just 0.2 percent from January-March, seasonally adjusted, when it grew 0.3 percent.

That would be the weakest performance since a contraction in January-March 2014, when political unrest brought the economy to the verge of recession.

Japanese ministry objects to 2nd coal-fired plant Japan’s environment minister objected on Friday to plans by Chubu Electric Power Co to build a coal-fired plant due to a lack of specific plans by the power industry to cut greenhouse gas emissions. The ministry has been pushing against the growing use of coal to generate power. It has submitted objections to Chubu’s plans to build a 1.07 gigawatt (GW) plant to the industry ministry, and follows its objections in June to plans

by Electric Power Development and Osaka Gas for a 1.2 GW coal-fired plant.

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August 17, 2015

International U.S. consumer sentiment slips in August U.S. consumer sentiment eased more than expected in August, a survey released on Friday showed. The University of Michigan’s preliminary August reading on the overall consumer sentiment index came in at 92.9, down from the final reading of 93.1 in July. It was also below the median forecast of 93.5 among economists polled by Reuters. The survey’s barometer of current economic conditions was steady at 107.1 from 107.2 in July.

It was slightly above a forecast of 107.0.

The survey’s gauge of consumer expectations slipped to 83.8 from 84.1 in July.

Peru weighs interest rate hike Peru’s central bank said on Friday it was considering raising its benchmark interest rate as early as next month amid higher inflation expectations and an expected tightening of monetary policy in the United States. The central bank held the key rate at 3.25 percent for the seventh month in a row on Thursday, a level Central Bank Chief Economist Adrian Armas called “very expansive.”

But the slipping sol currency has fuelled inflation, a trend that could continue as the U.S. Federal Reserve gets closer to a possible raising of interest rates.

Mexico’s Pemex hails crude swap with U.S. A historic crude oil swap between the United States and Mexico is “great news” for both countries, and Mexican national oil company Pemex expects the permit by the end of this month, the head of its commercial arm said on Friday. Reuters reported earlier on Friday that the Obama administration will allow sales of U.S. crude to Mexico for the first time, marking another milestone in loosening a contentious ban on exporting domestic oil.

Chief executive of Pemex’s commercial arm said the crude swap could bring up to 100,000 barrels per day of light U.S. crude to Mexico’s refineries.

BNP Paribas to settle currency-rigging lawsuit BNP Paribas has agreed to pay US$115 million to settle U.S. investor lawsuits accusing 16 major banks of rigging prices in the US$5.3 trillion-a-day foreign exchange market, a person familiar with the matter said. The Paris-based bank is among nine that lawyers for the plaintiffs disclosed on Thursday had reached agreements totalling more than US$2 billion in class action litigation pending in New York. Of those banks, the plaintiffs have announced the terms for only four of their settlements, leaving unconfirmed how much BNP Paribas, HSBC, Barclays, Goldman Sachs and RBS will pay.

Libya’s oil output 350,000 to 380,000 bpd Libya’s oil production is between 350,000 and 380,000 barrels a day, the new chairman of a state oil firm based in eastern Libya said on Saturday.

That is in line with recent output figures provided by other Libyan officials. Production is less than a quarter of what the OPEC producer used to pump before an uprising toppled Muammar Gaddafi in 2011. Libya’s official government, which is based in the eastern city of Bayda since losing the capital to a rival group a year ago, earlier appointed him as head of its state oil firm NOC.

Nigerians impatient for oil sector anti-graft reforms Buhari has accused the previous administration of Goodluck Jonathan of leaving the treasury “virtually empty” Frankie Taggart

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igerian President Muhammadu Buhari’s appointment of a Harvard-educated lawyer to run the state oil company demonstrates his anti-corruption resolve -- but only marks the start of a long reform journey, analysts say.

Industry observers note the formidable challenge he faces in sanitising a sector that accounts for 70 percent of the country’s revenue, but which is notorious for mismanagement and rampant theft.

Buhari took office May 29 after being elected on an anti-graft ticket, pledging to recover “mind-boggling” amounts of stolen oil money and bring those responsible to book.

In early August he appointed Emmanuel Ibe Kachikwu, a former executive vice-chairman of ExxonMobil Africa, to head the Nigerian National Petroleum Corporation (NNPC) after sacking the entire board.

Speaking to journalists in the capital Abuja Thursday, Kachikwu fired an opening salvo, promising to uproot NNPC’s “anything goes” culture and warning underperforming employees will lose their jobs.

“At the end of the day, NNPC isn’t a public service, it is a corporation and it is going to be run like a company, generating money and profit for Nigerians,” Kachikwu vowed.

John Campbell, a senior fellow for Africa policy studies at the Council on Foreign Relations, told AFP success in combating corruption within the oil industry would require “a revolution in governance.”

He welcomed the appointment of Kachikwu, a manager with decades of private sector experience, as a clear signal of the president’s reform agenda which “fits the pattern of Buhari appointing technocrats based on merit.”

But he was less optimistic on the new leader’s chances of cleaning up the industry, asking: “Can a tiger change its stripes?”

Buhari was the oil minister responsible for the launch of the NNPC in 1977, now a joint venture with 24,000 workers between the government and multinational corporations including ExxonMobil, Chevron and Royal Dutch Shell.

The former military ruler reputed for his autocratic stance on corruption and “indiscipline” is two months into his presidency and has yet to appoint a cabinet, let alone an oil minister.

‘Baba Go Slow’

Analysts have complained that he has been vague about achieving his goals, and have voiced frustration at his slow pace.

“Buhari’s critics call him ‘Baba Go Slow’ and argue that the policy inertia was an inevitable development arising from the complexities of a young and ideologically diverse election coalition,” Ronak Golpaldas, a sovereign risk analyst at South Africa’s Rand Merchant Bank told AFP. “However, his supporters have urged patience, arguing that the delays are indicative of a deep desire

Nigerian President Muhammadu Buhari

At the end of the day, NNPC isn’t a public service, it is a corporation and it is going to be run like a company, generating money and profit for Nigerians Emmanuel Ibe Kachikwu, head of the Nigerian National Petroleum Corporation

to create the foundations for sustained economic growth via credible and technocratic appointments.”

Africa’s largest economy and most prolific oil producer churns out roughly two million barrels of crude per day, but ordinary people have not benefited. Two-thirds of the nearly 180 million population live on less than a dollar a day.

Buhari has accused the previous administration of Goodluck Jonathan of leaving the treasury “virtually empty,” and is struggling to reinvigorate an oil-dependent economy weakened by the halving of crude prices since 2014.

He has ordered a review of oilswap contracts, alleging 250,000 barrels of crude a day were stolen during the previous regime, with the profits going into individual bank accounts.

The Natural Resource Governance Institute (NRGI), a New York-based independent watchdog, said in a report earlier this month Nigeria was failing to recover the full value of oil sold by the NNPC amid poorly structured deals and unaccountable spending.

‘Shadowy deals’

“Inside NNPC Oil Sales: A Case for Reform in Nigeria” is described as the first in-depth, independent analysis of the “complicated and shadowy deals” through which NNPC sells Nigeria’s oil.

The report details how the corporation has been increasingly withholding large sums of money from the Nigerian treasury.

It retained an estimated $12.3 billion from the sale of 110 million barrels of oil over 10 years from a single block controlled by a subsidiary, NRGI claims.

Oil buyers are often unqualified intermediaries who capture margins for themselves while adding little value to deals, it said, while oilfor-fuel swap agreements and other contracts are opaque and contain unbalanced terms.

In 2013, the treasury received only 58 percent from $16.8 billion worth of oil NNPC had earmarked for its underperforming refineries, NRGI said.

“Oil sales are Nigeria’s biggest revenue stream, but management has worsened in recent years,” said Aaron Sayne, co-author of the report.

Alexandra Gillies, who also worked on the analysis, said the combination of a new government and budgetary shortfalls offered Nigeria “its best chance in years” to overhaul NNPC oil deals.

“Everyone -- from trading companies to Nigerian citizens -- is waiting to see how the new government will approach these transactions, including the allocation of new export or swap contracts,” she said.

AFP

Business Daily | 15

August 17, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Emerging markets will suffer no matter how China plays out James Saft

THE KOREA HERALD

Reuters columnist

Large South Korean companies have sent more than US$400 billion to offshore tax havens over the past eight years, with nearly 40 percent of the amount yet to be returned home, data showed yesterday. According to the data by the Bank of Korea and other government agencies, local big firms remitted a combined US$432.4 billion to tax havens abroad between 2007 and 2014. Of the total, US$158.3 billion has been repatriated so far, with the rest, or 37 percent, yet to be returned home. Only US$12.3 billion was classified as investment money.

PHILSTAR The Philippine government is pushing for the development of the local e-commerce industry in recognition of its increasing role in the discussions and decision-making among process-member-states of the Association of Southeast Asian Nations (Asean). The Department of Trade and Industry (DTI) said it recently participated in the China-Asean workshop on e-commerce held in Beijing to promote a clearer understanding of the importance of e-commerce in the context of global economic integration. DTI said it hopes to not only reinforce the industry locally, but also to strengthen e-commerce cooperation among government and businesses across the region.

BANGKOK POST The first round of free trade agreement talks between Thailand and Pakistan is due to kick off next month and expected to conclude in 2017.

Commerce Minister Chatchai Sarikulya, who just returned from a visit to Pakistan, said the third Joint Trade Committee’s meeting held from August 12-13 announced the first round of FTA negotiations would start in September.

“At the joint meeting with Pakistani Commerce Minister Khurram Dastgir Khan, we both believed the FTA between the two nations will help expand not only bilateral export opportunities but also investment,” he said.

THE TIMES OF INDIA Natural gas prices in India may, from October 1, fall below US$4.2 per unit, a rate that was used last year to devise a new pricing formula to incentivise domestic exploration. Using prevailing price in gas surplus nations like the US, Russia and Canada, the government had in October last year announced a new pricing formula that led to rates rising by about 33 per cent to USD 5.61 per million British thermal unit (mmBtu) for a period up to March 31, 2015 from the long-standing price of USD 4.2.

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lmost however China chooses to play its management of the yuan, emerging markets are going to feel negative fallout.

The yuan slid for a third straight day yesterday despite protestations from the People’s Bank of China that there was no reason for it to fall further. Starting with an initial depreciation of 2 percent and carrying on amidst conflicting talk from authorities about markets setting prices while China intervened, the situation is far from clear.

If China’s primary intention is to win its exporters a more competitive position then this looks to be the start of an extended bout of weakness for the yuan. If, instead, China is trying to lay the groundwork for a more open financial system without setting off a deluge of capital flight then it will keep a tighter hold on the currency’s movement.

Neither of those alternatives is particularly appetizing for emerging markets.

“Even before August 11, 2015, there were plenty of economic reasons for Asian and other emerging market currencies to depreciate further. Now a prospective depreciation in the yuan will add to this trend,” Stephen Jen and Joana Freire of hedge fund SLJ Macro Partners wrote to clients.

Ahead of the shock devaluation, emerging markets, particularly in Asia, were being buffeted by a complex set of forces. Firstly, China’s rate of economic growth has slowed rapidly, dampening demand for raw materials from abroad. At the same time, China’s trade surplus ballooned, implying that even at the earlier richer levels for the yuan it was hardly being outcompeted on trade.

Also at the same time, perhaps more importantly, financial markets were rapidly coming to the conclusion that U.S. interest rates will soon rise.

That’s deadly for emerging markets, not simply because many depend on flows of capital from abroad to finance themselves, but also because, as investments at the riskier end of the spectrum, emerging market instruments respond more violently to changes in the global price of money.

It’s no surprise then that emerging market currencies are at a 15-year low and that emerging market equities are in a bear market. The MSCI Emerging Market index is down just a shade less than 20 percent since April.

Cuts both ways A falling yuan will both impair Chinese purchasing power for imports, be they raw materials or consumer goods, and make Chinese products that much more competitive elsewhere, hurting exporters everywhere from Brazil to Thailand. Commodity prices have tracked lower since the initial devaluation, having already been firmly established in bear territory.

So, if China has more of the same planned, then emerging markets will suffer keenly. The obvious temptation elsewhere would be to engage in their own round of beggar-thy-neighbour currency devaluations. Even if this doesn’t happen, China, by lowering the value of the yuan, albeit in the direction it would travel if not manipulated, is exporting deflation. That deflation will hurt the global economy, but perhaps particularly emerging markets, especially those with substantial dollar-denominated liabilities.

The devaluation was likely taken at least in part as a reaction to more than a year of strong capital flows out of China, as Chinese invest abroad amid a weakening domestic economy and seek to diversify against the possibility of confiscation at home

Conditions might be slightly better if China elects to keep the yuan roughly where it is, but unless they do so because capital no longer wants out of China it won’t be of much help to emerging markets. The devaluation was likely taken at least in part as a reaction to more than a year of strong capital flows out of China, as Chinese invest abroad amid a weakening domestic economy and seek to diversify against the possibility of confiscation at home.

China will be mindful about turning a steady outflow of capital into a gusher, something it can do if it creates the impression that the yuan will weaken sharply. This implies that China will continue to make slow progress in opening financial markets, perhaps hoping for better times in which to do it later.

If China elects to hold the line, more or less, on the yuan, it is going to need to use some of its ample foreign currency reserves to supply the dollars to make that possible. The problem, however, for emerging markets, is that this flow of dollars out of China will be financed in part by selling or maturing Treasuries owned by the PBOC. Buy Treasuries, which play a disproportionate role in setting global financing conditions, and you make the world a friendlier place for borrowers. Sell them, as China will if it keeps control over the yuan, and you do the reverse. Interest rates, all being equal, will rise, and emerging markets will feel the worst of that, as they always do.

Emerging markets, already hard hit, will not have an easy run to the end of the year.

Reuters

16 | Business Daily

August 17, 2015

Closing Xiamen City begins cargo train service to Poland

Lock-up shares worth 45 bln yuan to become tradable

Xiamen City in east China’s Fujian Province, located in the Fujian free trade zone (FTZ), opened a cargo train service to Poland yesterday. The direct cargo rail line, which goes through Kazakstan, Russia and Belarus before reaching Poland, is the first linking a Chinese FTZ to Central Asia and Europe, officials said.

The service will depart Xiamen once each week and arrive in Poland within 15 days. The trains will cut transportation time by half. Fujian is a key province in China’s 21st-Century Maritime Silk Road initiative.

Lock-up shares worth around 45 billion yuan (US$7 billion) will become eligible for trade on China’s stock market next week. About 2.31 billion shares from 29 companies will become tradable on the Shanghai and Shenzhen bourses, data from Southwest Securities showed. The volume was down from 55 billion yuan of shares unlocked this week.

Under China’s market rules, major shareholders of non-tradable stocks are subject to one or two years of lock-up before they are permitted to trade.

‘Name and shame’ global firms avoiding Australian taxes Australian Treasurer Joe Hockey revealed earlier this year his government’s plans to introduce legislation targeting 30 unnamed firms

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ultinational firms shifting profits offshore to avoiding paying Australian taxes should be “named and shamed”, the chair of an Australian parliamentary inquiry into the practices said yesterday ahead of the release of a report.

The inquiry has grilled senior representatives from some of the world’s biggest firms in the technology, pharmaceutical and mining sectors on whether they were using complex corporate structures to reduce their tax burden.

The push in Australia to crack down on multinational firms has been mirrored in other countries, with Britain in March introducing a so-called “Google tax” on companies that divert profits overseas.

“The worst tax offenders should be named and shamed, they should have to justify publicly why they’re taking the stances that they’re taking,” the inquiry’s chairman Sam Dastyari told reporters in Sydney.

The inquiry’s report, to be

Google financial structure is object of a deep scrutiny in several countries

tabled in parliament today, is set to call for the disclosure of tax avoidance settlements with the Australian Taxation Office above a certain level -- such as Aus$100 million, the Sydney Morning Herald reported.

“At this point in time, you have a series of Australia’s most powerful companies fighting against any

transparency measure to actually reveal what goes on behind closed doors between them and the tax office,” Dastyari added.

“The more public exposure, the more pressure that’s brought upon these companies, the better the policy outcome.”

One of the report’s 18 recommendations will

At this point in time, you have a series of Australia’s most powerful companies fighting against any transparency measure to actually reveal what goes on behind closed doors between them and the tax office Sam Dastyari, Australian Senator

suggest that even companies with overseas headquarters should disclose their revenue, tax paid and deductions used in Australia, the Herald said.

Firms quizzed by the upper house Senate hearings, including Apple, Google, Pfizer and Johnson & Johnson, said they had abided by local and international tax laws.

Australian Treasurer Joe Hockey revealed earlier this year his government’s plans to introduce legislation targeting 30 unnamed firms for shifting profits offshore.

While the Organisation for Economic Cooperation and Development (OECD), a grouping of wealthy nations, has played a key role in international efforts to tackle tax avoidance, such concerns are also shared by developing countries.

The issue took centre stage at a global developing financing summit in Ethiopia last month. The UN’s trade and development body UNCTAD has said that such practices were costing poorer countries some US$100 billion a year.

AFP

Chinese girl held after claiming father killed in blasts

HK airport passenger throughput PBOC economist says yuan hits new record in July may move in both directions

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teenager has been detained for allegedly obtaining thousands of dollars in donations after falsely claiming her father was killed in devastating explosions in Tianjin, police said yesterday.

The woman surnamed Yang had initially claimed on micro blogging platform Sina Weibo that her father was missing as a result of the blasts, which triggered a massive fireball in the northern port city, leaving 112 people dead and hundreds more hospitalised.

The 19-year-old -- who was detained by police in Fangchenggang in the southern region of Guangxi, far from Tianjin -- saw her Weibo follower numbers shoot up as a result of the post, Fangchenggang police said on their verified Weibo account.

According to police, she then published a second post in which she claimed her father died in the explosions, spurring more than 3,000 fellow users to donate upwards of 90,000 yuan (US$14,000) via the social media platform.

Weibo has recently added a reward function, allowing users to transfer funds to others via its own platform, ostensibly to show appreciation.

Yang was unable to withdraw the funds, however, as her account was frozen.

AFP

he Hong Kong International Airport (HKIA) marked a new monthly record in passenger throughput in July, with the passenger volume rising 6.6 percent year-on-year to 6.0 million, it said yesterday.

The growth was mainly driven by transfer/ transit traffic and Hong Kong resident traffic, which registered 12 percent and 11 percent growth, respectively, the HKIA said, adding passenger traffic to/from Southeast Asia and Japan recorded the most significant increases.

Flight movements in July increased 2.7 percent to 34,185 from a year ago, while cargo throughput fell 1.9 percent to 363,000 tones, mainly caused by a 5 percent year-on-year drop in transshipments.

For the first seven months of the year, the HKIA has welcomed 39.5 million passengers, up 8.7 percent from a year earlier. Flight movements climbed 4.2 percent to 233,805, while cargo throughput added 0.2 percent to 2.46 million tones.

Vivian Cheung, Deputy Director, Airport Operations of Airport Authority Hong Kong said the HKIA will continue to improve their facilities and services in order to enhance passengers’ airport experience and to ensure traveling at the HKIA as easy as possible.

Xinhua

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he yuan will probably move in both directions in the future following last week’s devaluation as the economy stabilizes, according to Ma Jun, chief economist at China’s central bank.

A more market-oriented pricing mechanism for the yuan will help to avoid excessive deviation from the equilibrium level and significantly reduce the possibility of sudden fluctuations, Ma said in an e-mailed statement yesterday. The economy will probably grow about 7 percent this year, he said.

The yuan halted a three-day slide on August 14 following its first major devaluation since 1994 after the central bank said it will intervene to prevent excessive swings. Policy makers are trying to balance the need for financial stability with a desire for stronger exports and the yuan’s inclusion in the International Monetary Fund’s basket of reserve currencies.

“If we want to evaluate the yuan’s midterm trend, it’s more important to analyse the fundamentals of the economy, which has shown signs of stabilization and recovery,” Ma said in the statement. “Even if the central bank needs to intervene in the market in the future, it could be either way.”

Bloomberg News